The Circle of Tokens is proposing that liquidity mining rewards be updated in order to stabilize the $SOV token price, reduce the overall inflation rate of the $SOV token & incentivize increased protocol revenue.
Sovryn’s new Circle, the Circle of Tokens, was officially launched on Fri 29 April 2022. It was formed with the overarching mission of analysing Sovryn’s token ecosystem, on an ongoing basis, and presenting these findings to the Exchequer, Bitocracy and the wider community.
To promote and achieve clarity and transparency around tokenomics within the Sovryn community, the Circle of Tokens has laid out the following goals:
The Circle of Tokens first proposal is to optimize liquidity mining rewards. This would entail changing reward amounts for various pools, based on trading activity.
In total, this will have a net effect of reducing the weekly SOV rewards by 25,000.
Our largest revenue-generating pool, XUSD/BTC, which has a low cost of liquidity and strong volume, will have a sizable 10,000 SOV rewards added to it, to bring it more in-line with the SOV/BTC pool.
On the one hand, with this proposal, the biggest revenue-generating pools will be strengthened, while $SOV rewards will be saved on unprofitable pools.
When assessing these changes, there were three key questions that we asked ourselves:
Ultimately, the changes as laid out in the proposal are not set in stone but are necessary experiments to optimize the protocol. The Circle of Tokens will be closely monitoring the AMM pools and analysing how the proposed measures affect them.
Based on these insights, further adjustments may indeed be made in the coming weeks and we’ll be keeping Bitocracy updated with our data findings.
We are cognizant of the fact that the inflation rate of the $SOV token will only be impacted by these measures in the long term, due to the ten month vesting period and all the outstanding rewards. Nevertheless, we think this is an important first step.
In the future, we do expect to reallocate tokens to areas which we feel could optimize and incentivize platform usage. That could include removing or reducing vesting timelines, or making targeted airdrops to wallets that are actually using and generating revenue for the platform.
In the meantime, please check out the proposal as set out on the Sovryn forum. We particularly encourage feedback from active liquidity providers but all feedback and suggestions are welcome!