AIP - 90: Revamp ANGLE token emissions

Hello,

This is a proposal to revamp the way ANGLE tokens are being issued by the protocol in order to improve the efficiency of emissions while reducing the total amount of tokens issued by the protocol.

Context

Right now ANGLE emissions are voted by veANGLE holders following a pre-determined schedule to whitelisted gauges. The inflation rate is such that ANGLE emissions are decreasing every week at a rate such that they are divided by 1.5 every year.
To check how many ANGLE tokens have been issued since launch, you can check this spreadsheet.

While this makes the ANGLE emissions fully trustless and transparent, this emission schedule results in emissions being sent for the vast majority towards liquidity pools where the cost of capital is high (more than 20%).

Proposal

Here we propose to change the system so that emissions are run by the guardian multisig of the protocol following an inflation schedule that is no higher than the current inflation schedule currently in place with the gauge controller system.

Rationale

The sense of the proposale here is to adopt a fully rationalized approach and focus on incentivizing places where the protocol can get the best ROI (=TVL and/or liquidity concentration per $ of incentives sent).

If ANGLE emissions are delegated to the guardian multisig of the protocol, it is in order to ensure that only what’s needed is invested.

This multisig will never issue more tokens than the planned ANGLE emission schedule. If there is no need to issue ANGLE tokens on a given week (because for instance OP and ARB emissions from grants obtained are covering everything pretty well), then no ANGLE tokens will be issued.

In fact, gauges and votes to direct ANGLE emissions worked really well, but maximizing efficiency implies some nimbleness that an inflexible onchain system can hardly guarantee.

Goal here is to get down the line to a state where the ANGLE token is deflationary and where, if the incentivization scheme for veANGLE holders is buybacks, the emissions are compensated by revenue from FX market making, a % of the yield earned by the protocol on its reserves, and the potential future other token airdrops the protocol is eligible to (see Pyth airdrop).

This new system putting agility at its core will ensure:

  • the increase in the efficiency of the ANGLE incentives
  • while also guaranteeing that ANGLE emissions will be in all circumstances reduced from the base emission schedule which is also automatically decreasing over time
    In short it’ll ensure that ANGLE inflation is strictly and rationally controlled and get in the short term to a state where the $ amount of ANGLE issued gets far inferior to the revenue generated by the protocol.

Another advantage of this system is that it’ll enable to commit to longer co-incentive programs (e.g on Morpho markets) which wouldn’t have been possible with the previous system.

Emissions by the guardian multisig will be announced and trackable directly on the spreadsheet above.

Implementation

To implement this proposal, the governor multisig simply has to set the inflation rate with the AngleDistributor contract to 0 and recover the ANGLE tokens from the contract.

4 Likes

I think this is a good idea as the old gauge system is no longer appropriate for the way the transmuter handles trades between EURA and USDA. However, I think leaving some amount of discretion among veANGLE holders about where incentives are allocated is still appropriate, but with the choice of pools being decided by the team to ensure good capital efficiency. This way, the initial promised use case of veANGLE is retained. Removing any ability to vote for where to allocate ANGLE inflation IMO should be accompanied by the ability for veANGLE holders to exit, as the agreed utility of the ve system would be changed.

1 Like

Agreed that this change removes some utility to the veANGLE system.

In terms of where incentives are allocated, the way this could be structured here could be through electing a committee that handles incentives and is accountable with respect to veANGLE holders of what it does with the budget. Here the committee starts as the members of the guardian msig but we could add more members/revoke some along the way.
Or as you say have it vote on where it goes for a part. Here my take for the first incentives post launch of this system if this is voted positively would be to commit to 3 month incentive programs rewarding USDA lenders on Morpho across several markets (wstETH-USDA, ezETH-USDA, rsETH-USDA, Pendle PT weETH-USDA) in a single sided way.

I also agree that this brings the question of the future of the veANGLE system, and I’m personally open to any ideas on how to improve the system.
I do think that before removing the lock we could put some form of reward for all those who were locked during the period for which no rewards were given to veANGLE holders (post Euler hack).

1 Like

I believe that this proposal increases the level of centralisation of the DAO, which I am never a big fan of. Also, I think that the issues raised around current inflation allocation are mainly coming from the bad utilisation of the veANGLE mechanism, and could easily be solved by an active management of gauges, and simply by voting on gauge votes (big sdANGLE holders don’t even vote for gauges, so I don’t understand why complaining that others would vote for inefficient gauges). It could also be very easily solved by depositing small bribes for targetted gauges. Merkle could easily be plugged in the gauge system, and useless pools taken away. Also, there could be a “return to DAO” gauge to reduce inflation.
I am also surprised that the proposal is passed in such a hurry, with a short voting time and over the week end.

That being said, it is vain to go against the team in such a centralised environment. The team has shown its ability to deliver strong products, and good innovation. Our best bet is probably to trust them instead of going against their plan to deprecate a system they are not comfortable with.

All this taken into account, and given the impact of such a proposal on sdANGLE holders, Stake DAO’s delegation will not vote on this proposal and will let users who delegated to it decide for themselves what is the best option.
We have repushed a Stake DAO replication vote to give another shot to any holders willing to vote on this proposal, until 5pm UTC today.

2 Likes

Thanks for raising the point here.
Indeed, I probably shouldn’t have created the vote on a Friday afternoon like this. That being said on the vote created in a hurry, the proposal had been open more than 5 days before the vote was created.

In terms of centralization, this indeed centralizes a bit more the issuance of ANGLE tokens, but as put in the vote, the shape it takes here is that of a committee where members can be added/revoked. So happy to involve anyone on the process.

I do get the idea of adding new gauges/killing the inefficient gauges, but overall this system comes at a high cost to maintain week over week, and so far Angle Labs has been paying the cost to create the new Merkl campaigns every week. In the short term, idea is to stream rewards towards Morpho markets where to be able to get co-incentives, we need to commit to 3 month programs.

In any case, the core team has accumulated spare tokens from the 5% of the emissions being put aside, and regardless of the outcome of the vote, we’ll be able to tap into this to run co-incentive programs.

1 Like

Makes a lot of sense indeed. Wasn’t aware of the 3 months requirement on morpho.

Hello,

The vote is over: Snapshot

VeAngle will not anymore vote for gauges for angle rewards.

What is next ? What will happen on the 18th April 2024 ? The gauges currently in vote are already ignored ? none of the current LP will received rewards ? or still depending of the decision of “guardian multisg” ? How many days before implementation the change of emissions will be announced ?

Best regards,

This should normally go into effect starting this Thursday

Merkl will still be used ? Boost based on VeAngle will still work ? What will be the reduction of angle rewards in total from Thursday (for next week) ?

Ok sorry had forgotten to answer all your questions. Idea is to discontinue the incentives to USDC-EURA, ETH-EURA and EURA-ANGLE liquidity pools, and only focus towards single sided incentive mechanisms, typically incentivize USDA lenders on Morpho markets.

With this, the total estimated reduction of ANGLE rewards is 80% (in the sense that rewards will be divided by 5)