KIP Draft: Adaptive LP Emissions to Market Conditions

Background

Currently, liquidity providers are getting emissions for this quarter equating to 13,720 Rook . These emissions are in line with what has previously been outlined in the KeeperDAO whitepaper. With the upcoming buyback and burn model and reduction in hiding vault Rook emissions, I propose that we revise the current emission model for liquidity providers.

Proposal

This proposal is centered around putting the steps in place to maintain positive price action for the token. I propose that if the Rook price can be maintained at $400 or more for 1 week, then emission be cut by 25% to Liquidity providers. Additional targets for emission cuts can also be set at $800, $1600, and $3200 with the same cuts and conditions. The reasoning behind the proactive implementation of these cuts is to ensure that we have the mechanisms in place to maintain token scarcity in the event of price appreciation by not giving outsized returns to LPs. The tokens that are not emitted during times of positive price action can then be held in a vault and subsequently emitted in times of negative price action to maintain protocol apy’s and incentivize liquidity to stay and be used by Keepers. The targets for these emissions to begin from the vaults would be identical to the targets that reduce emissions. If the price never goes to the lower targets, tokens in the vault could then be used to increase the runway the project has in being able to provide meaningful rewards. Governance is also able to decide if another purpose is ideal for the tokens in these vaults.

Limitations

The main limitation of this proposal in my eyes is that emission would be increasing in times of negative price action which could lead to more depreciation in token price forming a feedback loop of increased emissions. This is not that much of an issue in my opinion due to there being a cap on the number of increased emissions, that being Rook that was not given due to trying to maintain scarcity and that rook was already going to be emitted regardless. It is also important to consider the state of that market in times of price depreciation and the additional emission might allow the protocol to maintain its TVL while other projects have their liquidity evaporate.

Feel free to correct me if my number is wrong for current Rook emisisons.