Migration of Incentives from USDC.axl pools to USDC pools

Proposal Discussion Liquidity Incentives
1

This proposal asks that the incentives program migrates from incentivizing USDC.axl pools to the equivalent IBC native USDC pairings.

Background

With Proposal 624, Osmosis governance has recognized IBC native USDC via Noble as the canonical version of USDC.

This status comes with the promise that the canonical status of USDC will receive higher incentives than the non-canonical version.

This proposal would cause the transfer of incentives from the currently incentivized USDC.axl pools to the equivalent newly created USDC supercharged pools over a period of at least two weeks, culminating in removing the USDC.axl pools from the incentives system.

Current Pool Pool Number Spread Factor Daily OSMO Spend New Pool Pool Number Spread Factor
OSMO / USDC.axl 1133 0.2% 5,370.63 OSMO / USDC 1221 0.2%
USDC.axl / USDT 1080 0.05% 89.22 USDT / USDC 1220 0.05%
USDC.axl / USDT 1081 0.01% 89.22 USDT / USDC 1220 0.05%

As there is no bonding period for Supercharged liquidity pools and the Transmuter is in place for users to easily transfer their position between these pools, the two-week period only applies to the OSMO/USDC.axl pool, which is still undergoing migration from the original bonded Classic pool.

This proposal, therefore, directly transfers all native incentives from the USDC.axl/USDT pools to the new USDT/USDC pairing as well as directly transferring half of the current OSMO incentives from the OSMO / USDC.axl pool to the new OSMO / USDC pool.

The remaining incentives in the OSMO / USDC.axl pool will be moved to the OSMO / USDC pool in the next routine incentives proposal, expected at the start of November.

Target on-chain Date: 3rd October 2023

Clarification: External incentives on these pools are currently loaded weekly by the SubDao created in Proposal 593. These incentives will migrate to the USDT/USDC pools over a 2-3 week period as this spend was intended to incentivize USDT liquidity rather than USDC liquidity and this should be best spent on fully native pools for the lowest eventual maintenance APR that required less security compensation.
This proposal does not directly impact this process - but if it was to fail, then the working group would reconsider the rate of this migration.

2

Yeah, no brainer.

We already recognized the USDC as native, so we also have to follow through.

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3

Planning on taking this to chain tomorrow.

Two pools now exist, the identical OSMO/USDC pool and a single USDT / USDC pool.

This proposal will move both spread factors into the single low spread factor pool until we get volume splitting of incentives or a USDT / USDC pool with a 0.05% Spread factor is created.

The other change to this proposal is that the second step of the OSMO/USDC.axl removal will occur in the November routine update unless proposed sooner.
This is since there was a delay to pool creation and the October update should not be delayed to compensate.
This slower migration also gives Noble USDC time to build liquidity and dapps time to react to a potential change in liquidity levels. Such as Mars being able to lower caps on axlUSDC and implement Noble USDC.
Of course if liquidity and usage switches faster than this then a followup proposal can do the incentive migration faster so we are not paying for obsolete liquidity as much.

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4

Is the transmutation of USDC.axl to USDC automatic when migrating from pool 678 (the original USDC.axl/OSMO) to 1221? If not then what’s the procedure for migrating from pool 678 to 1221?

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