Weekly Gauge #5: Emission Drop
TL;DR: Using Paladin’s latest version of the Dune Analytics Dashboard to quantify on-chain data, and the projects’ documentation to gather accurate fundamentals. This edition of the Weekly Gauge aims to cover the recent developments as well as formulate hypotheses on the future of bribes incentives.
Curve Week 103
With the celebration of Curve Finance’s 2 year anniversary also comes the yearly emission drop. This event basically puts together all the concepts previously explained in the Weekly Gauge: Dilution, “Velocity, Treasury Management and Incentives”.
CRV emissions follow a linear inflation schedule. The inflation is reduced by 2^¼ (15.9%) each year for the next 300 years. Each time the inflation reduces, a new mining epoch starts.
The initial supply of CRV was 1.273 billion tokens, which is 42% of the eventual supply of 3.03 billion tokens. All of these initial tokens are gradually vested (with every block). All of the inflation is distributed to Curve liquidity providers, according to measurements taken by the gauges.
It takes 112 years for the emissions to reach 1 $CRV a year.
Hypothesis :
Protocols have to pay veCRV / vlCVX holders for these emissions by bribing them. This means that at the end of the cash flow it is the holder that receives the value created. Less token emission means less value to capture for bribers and, therefore, we can make the following hypotheses:
New revenue streams incoming: crvUSD & more will generate new incentives to acquire governance power within the Curve DAO and the bribe market will adapt and remain in the same range of volume with a lower ceiling price for bribes;
The price of the CRV token could increase sharply to stick to the current ratios of emission/vote. Currently, 59% or CRV supply is locked for an average 3.6 years, a price of 1.96$ could be reached to maintain the current equilibrium (not financial advice, please DYOR), globally the drop should create increased price pressure;
The bribe economy will evolve accordingly and the extra money which is not efficiently used anymore will go towards other governance wars such as Balancer, Tokemak, and more.
https://dune.com/paladin/gauge-weekly
Balancer Week 16
We have witnessed extreme volatility in the weekly lock of veBAL since early May 2022. One important parameter to explain the situation is the 120,000 veBAL weekly linear drop (because of the decreasing nature of the veBAL of its year-long lock) with the Balancer incentive campaign on the bribe market, whose goal is to massively attract new lockers.
https://dune.com/paladin/balancer-weekly-gauge
Since the Cream gauge has been removed from the eligible pools, we can assume that most of their votes have been directed to the wBTC/Digg/GraviAura gauge which acquired over 30% emission shares, for as little as $7M TVL. This is still a sign of inefficiency in the incentives management of the protocol. The graviAura regulation proposal should solve this issue while continuing to maintain the dominance of Badger in the Balancer Wars. Nevertheless, the BIP-19 regarding the core pools will bring some improvement to the process.
Weekly Reminder: The best capital efficiency is made of a fixed rate. Warden Quest remains the only solution in the market that offers such a predictable experience with bribe incentives. And it is now available on Curve and Balancer. Keep an eye on Paladin’s Twitter account for more updates.