Governance Prop 19: A Plan to Impact Inflation By Controlling Excess Emissions
Although the entire cryptocurrency space is facing unprecedented market volatility, ApeSwap continues to hold a duty to our community to keep building for the greater good. Part of those efforts include ensuring sustainable growth for BANANA, the DAO’s utility token.
While ApeSwap has built and maintained several features to push BANANA towards a more sustainable model, the DAO must continually find novel ways to achieve that goal. As a result, ApeSwap is submitting Proposal 19 through our governance protocol for consideration.
Building Towards a Stronger Protocol With an “Excess” Farm
Over the past several months, ApeSwap has worked closely with Gauntlet to get a better understanding of how the protocol can optimize BANANA emissions across farms on BNB Chain, including weekly recommendations regarding changes to Yield Farm multipliers. To collect data, Gauntlet performed several model tests and analyzed the results.
These tests showed that there are certain farming pairs that are more “elastic” than others — in other words, the protocol may be overspending BANANA emissions on certain liquidity provider token pairs compared to others. As a result, there is the possibility that these emissions are resulting in diminishing returns despite our best efforts to properly adjust farm multipliers and deprecate underperforming farms.
With Governance Proposal 19, ApeSwap is asking to coordinate with Gauntlet to introduce an “excess” BANANA farm, which would remain in custody of the protocol behind a multisig wallet. Any BANANA token emissions deemed unnecessary — or in excess — would not enter circulation and would instead enter the excess BANANA farm. The amount of BANANA deposited into this farm would remain behind a secure Multisig wallet, out of circulation and would require a successful governance proposal with a clear intent on usage and allocation to release the tokens.
The multiplier applied to the excess BANANA farm would be determined on a weekly basis in collaboration with Gauntlet’s machine learning and elasticity models. Ideally, ApeSwap would send the necessary amount of input BANANA to retain the same amount of output revenue.
The goal is to ensure that we are continually driving value and never compromising our key performance indicators, including our total value locked and generated volume.
Why ApeSwap Supports the Excess Farm Approach
Over the past year, ApeSwap has learned valuable lessons about running a decentralized finance hub, including how to make smarter decisions to ensure the continued viability of our platform. Instead of reducing (or pausing) BANANA emissions immediately, creating an excess BANANA farm allows the protocol to more quickly address inflation pressures with minimized risk of damaging our core service offerings.
Here’s how it works:
Let’s say we have 2 farms with the exact same stats. Farm A & Farm B. Those stats are:
- Each farm is allocated $100 in daily BANANA incentives
- Each farm generates $50 in daily trading volume revenue
Gauntlet has determined that Farm A is more sensitive to incentive changes than Farm B. Specifically:
- If we change Farm A to $75 in daily incentives, it would drop to $10 in daily revenue.
- If we change Farm B to $75 in daily incentives, it would stay at $50 in daily revenue.
Naturally, we DO NOT want to adjust Farm A, because that will negatively impact ApeSwap DAO revenue. We DO want to adjust Farm B because that will save us from emitting BANANA without impacting revenue.
Creating an excess BANANA farm also allows ApeSwap to better understand the role of emissions reductions towards our greater goals. Utilizing a dynamic farm allows our tokenomics team the liberty to experiment with and gather more information on reductions in an experimental situation without directly changing our emissions. This information will give ApeSwap the information necessary to determine the best path forward on recommending further emissions changes in the future.
Details on Voting for Governance Proposal 19
As with all governance proposals, voting is open to Golden Banana holders (GNANA) as of the time of snapshot on June 24, 2022 at 22:00 UTC. Voting will remain open through June 27, 2022 at 22:00 UTC.
Voting to approve the proposal gives ApeSwap permission to work with Gauntlet to set up an Excess Farm and work with them to optimize the multiplier assigned to it on a weekly basis.
Voting to reject the proposal would result in ApeSwap not moving forward with plans to set up an Excess Farm in collaboration with Gauntlet, and emissions would remain unchanged.
If you’d like to join the discussion about Governance Proposal 19, feel free to visit the thread in the official ApeSwap subreddit here.