Daily yield farming emission reduction

Temperature Check
1

Abstract:

To address inflationary pressures and ensure long-term sustainability, SundaeSwap aims to reduce daily token emissions. While yield farming was crucial for attracting liquidity during the bear market, excessive emissions have led to token dilution, reduced value, and constant selling pressure, harming both holders and potential investors. By cutting emissions, SundaeSwap seeks to stabilize token value, decrease inflationary effects, and attract long-term investors, particularly institutional players. This shift from aggressive growth to sustainable value creation will reduce market volatility, foster a stable price floor, and encourage deeper engagement from users. Ultimately, reducing emissions will create scarcity, enhance token value, and position SundaeSwap for long-term success, benefiting investors and strengthening the broader ecosystem.

Background:

While yield farming was a necessary tool to attract users and liquidity during the bear market, the current daily emissions have become inflationary. With too many tokens being distributed, the rewards are diluted, which reduces the perceived value of Sundae (SUNDAE). As more tokens enter circulation, the constant selling pressure from yield farmers results in price depreciation, which harms both current holders and potential investors.

By cutting back on daily emissions, we can reduce inflationary pressures on the token. This helps create a more attractive environment for long-term holders, investors, and stakeholders who are looking for price stability. Price stability is a key driver in attracting institutional investors and larger capital inflows.

To create a more stable, sustainable ecosystem, it is essential to reduce the emission rate of new tokens. This proposal outlines potential emission reduction scenarios (90%, 75%, 50%, and 25%) and the anticipated benefits:

  • Strong Price Stabilization: A drastic reduction in token supply will create a significant scarcity effect, leading to potential price appreciation.
  • Decreased Inflationary Pressure: By significantly reducing inflation, the protocol will retain the value of existing tokens and attract long-term investors.
  • Shift to Value-Driven Participation: With fewer tokens available, rewards become more meaningful, encouraging high-quality, engaged participation.
  • Long-Term Investor Confidence: Institutional investors and larger capital inflows are more likely to invest in a token with a limited, controlled supply.
  • Potential Risks: Risk of liquidity drop or user attrition if rewards become too low to incentivize participation.

Decision:
I propose the following vote for the DAO:

Vote YES, and decrease daily yield farming emission rates by 90%
Vote YES, and decrease daily yield farming emission rates by 75%
Vote YES, and decrease daily yield farming emission rates by 50%
Vote YES, and decrease daily yield farming emission rates by 25%
Vote No, and maintain current yield emission rates

Are you interested in voting in an on-chain governance to this effect?

  • Interested
0 voters
2

I think we just voted on lowering yield farm emission in not too long ago , I think we should keep the same to attract more liquidity .This will help the protocol grow

3

I totally agree that we should be reducing emissions. However, 90% cut sounds almost like a manipulation. I am sure projects before have done that but this seems quite abrupt to me. Considering that we previously had only max 10% reduction option, this is a bit surprising. I would suggest to stratify more towards 0%, 10%, 25% and 50% max reduction and reduce number of options to 4. 10% is in line with what we have done before while I think taking 50% rewors from yield farmers is perhaps still acceptable. The effect we do not want is LPers to leave because the price reaction might not be as straightforward (or immediate) as people might think.

1 Like
4

I agree, if the vote comes to pass I’ll the 10% option

5

Yes, but keep in mind that currently emission makes Sundae more attractive then the main dex for LPs in pools like ADA/INDY, ADA/IUSD, and others. The reduction of emissons could make Sundae less atractive for LPs in these pools and some could migrate to other dex.

2 Likes
6

We have to think from an investor perspective. They are the one providing the liquidity in exchange for Sundae rewards. Lowering emissions will not benefit them at all and the protocol could suffer from liquidity. More than ever now in a bull market we need to keep sustainable rewards to attract more investors with liquidity. And if you are too worried about Sundae token inquire more selling pressure that is also good as more people will buy it at lower prices. Lower prices could also mean strong buying pressure. The protocol already proved is trustworthiness for over 3 years, what it can do, so I’m not too worried about Sundae token, I’m sure will do good in the long run. Inflation on the token will stabilize in time as more people will have the opportunity to enter and buy the token at lower prices.
I suggest to keep the emmision as it is right now.

2 Likes
7

I like the proposal, but not entirely, I think the quarterly votes should be 10% reduction and 25% maximum (replacing the 5%), and add the option to increase 25%.