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• By voting YES on this proposal, OSMO stakers voice their support in modifying the incentives structure as below to facilitate Stableswap pools.

• By voting NO on this proposal, OSMO stakers voice their dissent in modifying the incentives structure as below to facilitate Stableswap pools.

About StableSwap

Stableswaps are pools that offer low slippage for two assets that are intended to be tightly correlated. There is a price ratio they are expected to be at, and the AMM offers low slippage around this price. Stableswaps are the most popular pools across DeFi, providing deep liquidity in an ecosystem with no impermanent loss and sustainable yield from maintaining the peg between the two assets. These are therefore important for Osmosis to implement and will be implemented in v13.

Incentives Category

A new incentives category is proposed: Stable/Stable This category would include pools consisting of two, or more tokens which have been authorised as Stable assets and are pegged to the same currency. i.e. EEUR/USDC would not be not a qualifying pool

Incentives Allocation

Shares of incentives are currently allocated to each category up to its cap. Stableswap pools are strategically important to Osmosis' growth, as can be seen from the dominant pairs on alternative exchanges, and so the allocation of incentives should be higher than typical for a non-OSMO pool.

With multiple new dollar stablecoins emerging recently and pending, allocating a fixed % of incentives to the category will hugely benefit those with existing liquidity to draw on, and penalise those taking a more measured approach to slowly build their market-cap, encouraging excessive levels of risk taking.

To incentivise these pools this proposal puts forward a new set of rules for the Stable/Stable category only.

• The Stable/Stable category shall be allocated a maximum share of 4% of LP emissions.
  • Any unused incentive allocation will be proportionately shared between alternative categories rather than being normalised into Stable/Stable.
• Pools will be automatically accepted for the external incentive matching program based on the following criteria:
  • Using the Stableswap curve.
  • Less than or equal to 0.05% fees.
  • Composed entirely of governance-authorised Stablecoins, or GAMM derivatives of other pools meeting these criteria.
  • All assets are intended by their minting process to be at minimum soft-pegged to the same denomination.
  • Receiving external incentives,
    • of at least 100 OSMO in equivalent value per day.
    • for an epoch length of at least 7 around the date of OSMO incentive allocation.
• Pools receiving native incentives must meet the following criteria:
  • Using the Stableswap curve.
  • Less than or equal to 0.05% fees.
  • Composed of two or more governance-authorised Stablecoins.
  • All assets are intended by their minting process to be at minimum soft-pegged to the same denomination.
  • Passed by Governance as a core stableswap pool.
  • This proposal recommends that the number of core stableswap pools is kept low to prevent duplication of liquidity locations but allows for multiple to exist.
• Stable/Stable pools will have no maturity rating.
  • Incentive matching changes will therefore follow at a lag of 5-12 days depending on the time of addition/removal compared to the routine incentives proposal.
  • This allows Osmosis incentives to adapt to external incentive and volume changes as rapidly as possible.
• Incentives will be allocated as a fee subsidy in line with the current model, however as there is no normalisation this will be a direct value matching until the cap is reached.
  • Pools with external incentives auto-matching will receive a target allocation of $1 to $1 in external incentives, capped at $1 per $1 fees generated.
  • The Pool with native incentives will receive a target allocation of $2 per $1 generated and cease to have any external incentives matched while receiving native incentives.

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