Increasing Reward for SUSHI/WETH Pool

Summary

Boost SUSHI/WETH Reward from 4.8x to 12x

Abstract

Considering the drastic price drop of Sushi (25x from its peak), yielding the biggest Impermanent loss of all pools. Its risk profile is currently not adequately compensated compared to other pools where Impermanent loss is minimal.

Motivation

SUSHI/WETH pool carries the highest risk as being the main exit liquidity provider for all other pool rewarding Sushi.
Sushi’s price has declined nearly 25 times from its peak. This pool yielded the biggest impermanent loss to its liquidity providers. All other pools are less risky having minimal impermanent loss, are continually diluting sushi value.
Increasing the Reward by 2.5 times should incentivize Sushi holders to provide liquidity instead of selling out.

Specification

Change the SUSHI/WETH reward boost from 4.8x to 12x
Reduce All other pools proportionally.

Poll

https://snapshot.page/#/sushi/proposal/QmeV6iDgAmZs3H5Nkh2errBjF2Mtkw9mqSqPFqHaE8fMXb

2 Likes

Well, if we do so, we’ll end up losing a lot of liquidity in other pools, and consequently, become way less attractive as a DEX.

USDT, USDC & DAI pools are averaging 0.12% daily reward with minimal impermanent loss (IL). Sushi pool is only twice with the highest impermanent loss of all, there is definitely a discrepancy here.
I have no doubt that majority in these low IL pools will not budge as there is no other trustworthy pools giving such high rewards!
And What will be lost from other smaller pools would be gained through additional liquidity in Sushi pool thanks to fatter APY.

Feels like short-sighted recycling of benefits most likely having the opposite outcome than was intended. We’ve been through this before, such as with the $14M buyback, which significantly weakened the future for SushiSwap (we had $14M in ETH + millions of SUSHI in the treasury, now we have about $10M in SUSHI) and had none of the hoped for rise in price.

1 Like

sushi/ETH already have a large multipier and apy. I have been in the pool a long time myself, and experienced a large loss.
This however have notning to do with future allocations and multipliers.

The goal have to be to make sushiswap the best DEX, and thereby give more value to the sushitoken.
This is done by attracting a large TWL so we can have the best swap prices, which in turn brings volume and make the sushitoken more valuable.
As well as bring more utility to the platform like bentobox lending, limit orders, and presence on more blockchains.

SUSHI-WETH pool is big enough, we don’t need to make it bigger and we don’t want to make this AMM a single pair market, so I can’t see why we should boost this pool while slashing the others.
At the end of the day we earn on fees so if we reduce other pairs we actually are undermining our ecosystem

Is it possible to adjust other pools’ ratio too? We need to a better proposal for re-adjusting many pools.

  1. Ampl has highest APY in most time, with the weakening of Ampl market, we can still have big enough liquidit and volume with less rewards, so decrease it to 0.7x is better?

  2. For pools of stable coins. We actually need fiat pools(USDC, USDT, DAI) to have decent apy and have good volume with stable coins for the all pairs, so we can attract more users to trade here not only for ETH, but also for stable coins, so their current ratios are OK now, no need to decrease them.

  3. sUSD has too high ratio, it is obvious that too high APY of sUSD, if we compare the volumes with other 1x reward pools. In other words, it has less volume than other stable coins pools(USDC, USDT, DAI), but with same level of APY. Maybe 0.6x-0.8x is also ok.

  4. Remove yam v2 pool, it is already migrated to v3, so remove v2 pool or replace it with yam v3 pool, so we can take some liquidty and volume from uniswap and yam community.

Maybe that’s because some high usdc/usdt/dai pools are taking ZERO risk towards Sushi, but are receiving a disproportionately big yield, have no incentive to hold and invest… A rebalance of Risk/Reward is urgently needed.

Risk factor should be the main factor when reward is being distributed. Too much incentive is being put on rewarding new pools. In fact the reward outweighs greatly the fees received from liquidity of weekly pools.
So why should sushi holders, more so the LP of greatest IL pool, be sponsoring the rolling weekly liquidity pool?
Even after the proposed change, The reward v/s risk for the major pools(dai,usdt,usdc) will still be better than what it is offered elsewhere.

The main reason the SUSHI token has any value (certainly medium-long term), is that it generates returns in the SushiBar from actual profit of the AMM. These returns are generated from VOLUME. The more volume a pool generates in relation to the rewards paid, the more valuable that pool is.

This proposal will REDUCE the overall volume and therefore reduce the value of SUSHI tokens, leading to more IL in the SUSHI/ETH pool, vastly outweighing the benefits of the extra returns.

If you’re not happy with the risk of the SUSHI/ETH pool, anyone is free to leave that pool. As people leave the APY will go up. When new people enter the APY will go down. So the current APY represents the market determined risk/reward. And it’s plenty big, no need to grow it as the volume/rewards ratio isn’t so great.

Having said all that… there’s need for a rebalancing of the pools in general and a need to drop some badly performing pools and maybe add some well performing ones permanently, or increase the rewards… see my proposal from a month ago (which now will need updating).

What I’m saying is that if we were to optimize for the holders of SUSHI and to optimize the value of SUSHI, we should probably even decrease the SUSHI/ETH pool rewards a little, but certainly not increase them.

8 Likes

I agree with others have said in this being a short sighted proposal. Boring’s post above highlights exactly why this probably isn’t the best idea.

In regards to rebalancing all pools, this is something we should / will be looking into very soon. We currently have Nansen doing an analysis on our pools and will give us back a report shortly that we can use as the basis for pool rebalancing discussion.

So in retrospect, a larger proposal is likely to come in the following weeks that will change the allocPoints for all of the pools, and will be more beneficial to the SUSHI price then just increasing the SUSHI-ETH rewards.

5 Likes

Pardon me but SushiBar came well after,it didn’t stop sushi price from downtrending.
High APR is what attracted liquidity and TVL. Once liquidity is incentivized towards sushi pool through fatter APY, All other pools APY will increase thus bringing in more volume & fees.

I think this is the right step. This should have been done from the very beginning. fixed crypto coins turned the project to waste I stated on discord that this move should have been done at the very beginning of the project. The supply has grown enormously. hard earned crypto coins. lost sushi owners. Now it is necessary to increase the supply. otherwise these awards will not be attractive at all.

1 Like