This proposal asks that the pools comprising the ATOM/USDT Supercharged pairings created in Proposal 579 be added to the Osmosis incentives program.
Pools following the pattern of MAJOR/STABLE category have received no incentives since the category model was introduced in Proposal 233. The Osmosis community had previously chosen to minimize incentives to non-OSMO pools to prevent excessive value leakage.
The MAJOR/STABLE incentives category itself was removed in Proposal 389. This was driven by the multihop mechanism being implemented, which led to the most optimal routing for trades being via OSMO rather than a direct route.
Proposal 530 proposed adding a Taker Fee of 0.15% to all swaps, including each hop, drastically reducing the impact of the multihop discount and making direct routes competitive again.
When a taker fee is introduced in a future software upgrade, establishing non-OSMO pools increases the value capture of the protocol in non-OSMO assets. This has the potential to exceed the value of OSMO spent on incentivizing liquidity to cater to trading. Each OSMO of incentives currently generates around 0.4 OSMO in swap fee value. With Supercharged pools expected to increase the efficiency of fee generation significantly, each OSMO emitted to these pools as incentives may lead to a net positive gain for the protocol and increase the yield for stakers.
This proposal asks for a limited incentivization of these pools, capped to no more than 1% of OSMO incentives in total, at a 1:1 daily swap fee to daily OSMO spend only, similar to how the Stable/Stable category is currently structured.
This would limit the OSMO spend on the pool if the fee generation is lower than expected while preventing the category from taking a large portion of OSMO incentives in this trial period.
The two ATOM/USDT Supercharged pools created in Proposal 579 would then be added to the incentives system at the next routine incentives proposal as part of this category.
Both pools are added to the incentives system to allow the optimal spread factor to be used from the two options of 0.05% and 0.01%. The pools will therefore be incentivized based on their performance. As there is no bonding period for normal Supercharged liquidity, this should encourage the movement of liquidity between the two pools as required to provide optimal trading liquidity. This represents a movement towards the incentivization of pairs rather than pools.
Target On-chain date: No earlier than 14th August 2023