RE: SPS Governance Proposal - Reduce SPS:WETH Incentives by 50%

As discussed on Discord, there are several reasons why I do NOT believe we should change this yet, at least not at the start of a bull run.

But before I go into that, I also wanted to mention one term which has been used a LOT to confuse the community, which is "underperforming". The success or performance of a liquidity pool isn't just measured in volume, it can also be measured in the success of the underlying asset. For example, one could argue that SPS:DEC is the most "underperforming" pool since it has given us the least benefit in terms underlying asset appreciation recently. Using this metric, SPS:WETH becomes the best performing pool. Therefore, I think it is unfair to use terms like that when describing a pool to confuse people who might not be involved in DeFi as much. Simply say least utilized or least volume, which are both technically true, whereas the term "most underperforming" is entirely subjective depending on what metrics you use.

To further explain this concept, the base asset that SPS is paired against is very important. If the base asset we're paired against increases in price, so does SPS automatically without any buy/sell pressure. If we are paired against multiple pools, the best performing one will get arbitraged with SPS being sold and bought back in the worst performing pool. In our scenario, SPS is constantly getting sold on the SPS:WETH pool and being used to buyback elsewhere by arbitrage bots. In fact, since the start of the year around 78 ETH worth of SPS has been bought from ETH pools more than sold, with very minimal changes in base liquidity providers. That means the ETH pool has provided us with 78 ETH worth of buying pressure just in the past ~2 months, currently worth $283,452. Of course no one can say for certain ETH will continue to overperform, but in a bull market championed by BTC/ETH, especially with EIP4844 very soon and ETH ETF supposedly in May, I do NOT want to lose SPS exposure to ETH right now.

The DAO can provide liquidity to ETH giving SPS exposure to ETH, but that means the DAO loses some exposure to ETH itself (through imperm loss). Personally, I'd like to see the DAO provide a little liquidity (in v3 infinite range 1% fee pool) AS WELL AS the community, thus reinforcing our exposure.

Another point is that more utilized pools such as DEC:USDC has a fair bit of volume, but that is actually reason for us to REMOVE the SPS incentive, not keep it. If a pool has adequate volume already, logically people will stay even if there is no SPS incentive since they are earning decent revenue just from LP fees, especially since DECs are stable users can earn a lot from v3 pools. If we remove ETH pool incentive, there will be no more liquidity. We want as much liquidity for SPS as possible, without spending too much SPS.

I actually vote to also remove the DEC:USDC LP rewards using the exact above logic.

I am all for removing the DEC:DAI pool since DAI is stable, it does not provide any appreciation for DEC and it also does not provide us with any volume. That is a no brainer.

For now, I don't think we should change the SPS:WETH or SPS:BNB rewards. I think we should also increase the SPS:DEC pool since it is our primary pool as it is the only pool to incentivize both SPS and DEC, it just makes sense to increase the incentive there. A small portion of rewards from removal of DEC:DAI (and maybe DEC:USDC) can be used to increase SPS:DEC.

I am also all for the DAO providing liquidity, BUT the DAO needs to provide on v3 1% infinite range for both SPS:WETH and SPS:BNB pools. I can go on about why this works on the next proposal but this post is long enough.

Previously posted this via wrong account oops