AELIP-26: Staking rewards program termination

Author
StatusImplemented
ImplementorTBD
ReleaseTBD
Created2022-06-18

Simple Summary

This AELIP proposes stop the current staking rewards program on Optimism.

Abstract

Aelin Protocol is currently incentivizing AELIN stakers by distributing 29 AELIN to Pool 1 and 44 AELIN to Pool 2 every month. This AELIP proposes to end this program.

Motivation

A protocol can decide to incentivize stakers through a staking rewards program for two main reasons:

  • Increase the number of long term holders
  • Increase the liquidity

With Aelin price and liquidity drastically decreasing over the last few months it is now clear that the current reward program is not only pointless but also increasing the sell pressure by enhancing a "farm and dump" behaviour, observed in a lot of onchain transactions lately.

Specification

Overview

If this AELIP gets approved, the treasury council will immediately stop the distribution of AELIN tokens to staking contracts.

Rationale

Based on the current price of AELIN at the time of writing this AELIP, the distribution of 73 AELIN tokens per month roughly equals to $50,000. This amount is obviously too low to motivate people to continue staking their AELIN tokens during the current market conditions. The first solution to fix this issue would be to increase the amount distributed every month, but unfortunately this solution isn't sustainable for some obvious reasons. We don't know how much time the market will take to recover, and since Aelin Protocol doesn't have an inflationary supply, the rewards are distributed out of the treasury's pocket which doesn't hold an unlimited amount of tokens.

Stopping the staking rewards program seems to be the wisest solution for now. It will eventually flush out all the wallets which were only staking to farm and dump, and only people who strongly believe in the project in the long term will continue holding and buying.

Note: Aelin Protocol is also in touch with other AMMs which could potentially incentivize AELIN stakers instead of the treasury.

Technical Specification

N/A

Test Cases

TBD

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