Summary
As part of launching Notional V3 on Mainnet, we propose updating NOTE incentive rates for both Mainnet and Arbitrum. Our proposal includes a phased reduction of NOTE incentives for Notional V2 mainnet, from an annual incentive rate of 10M to 0 while increasing the NOTE incentive rates for Notional V3 Mainnet to 6M NOTE annually. Additionally, we propose decreasing the NOTE incentive rates on Arbitrum from 2M to 1.5M per year.
Context and objective
Notional V3 will go live on Mainnet on March 25th. As part of the V2 to V3 migration plan, Notional V2 incentives will be progressively turned off. In the meantime, we propose increasing V3 incentives to help bootstrap liquidity on Notional V3 and incentivize V2 users to migrate their positions.
Proposal
Notional V2
We propose to decrease incentives for Notional V2 according to the following schedule:
| Currency | Current | March 25th | April 1st | May 1st |
|---|---|---|---|---|
| ETH | 2,000,000 | 1,000,000 | 200,000 | 0 |
| DAI | 2,500,000 | 1,250,000 | 500,000 | 0 |
| USDC | 5,500,000 | 2,750,000 | 1,100,000 | 0 |
| WBTC | 0 | 0 | 0 | 0 |
| Total | 10,000,000 | 5,000,000 | 1,800,000 | 0 |
This will incentivize Notional V2 users to migrate their positions to Notional V3 over the coming months. Reducing incentives for V2 is part of the plan to transition users from V2 to V3.
Notional V3
We propose allocating NOTE incentives on Notional V3 Mainnet and Arbitrum deployments according to the following schedule:
| Currency | Mainnet (Current) | Arbitrum (Current) | Mainnet (Proposed) | Arbitrum (Proposed) |
|---|---|---|---|---|
| ETH | 0 | 500,000 | 2,000,000 | 500,000 |
| DAI | 0 | 100,000 | 0 | 0 |
| USDC | 0 | 500,000 | 2,500,000 | 500,000 |
| WBTC | 0 | 100,000 | 0 | 0 |
| wstETH | 0 | 200,000 | 0 | 100,000 |
| FRAX | 0 | 100,000 | 0 | 0 |
| rETH | 0 | 200,000 | 500,000 | 100,000 |
| USDT | 0 | 100,000 | 1,000,000 | 300,000 |
| cbETH | 0 | 200,000 | 0 | 0 |
| Total | 0 | 2,000,000 | 6,000,000 | 1,500,000 |
Mainnet
We propose focussing the protocol’s incentive allocation to currencies with leveraged vault opportunities. For Notional V3 mainnet the following vaults have been approved by Notional’s governance:
- USDC
- Convex pyUSD/USDC pool
- Convex crvUSD/USDT pool
- Aura USDT/GHO/USDC pool
- USDT
- Convex crvUSD/USDT pool
- ETH
- Aura osETH/WETH pool
- rETH
- Aura rETH/weETH pool
Therefore we propose allocating 42% of incentives to USDC, 33% to ETH, 17% to USDT, and 8% to rETH.
As part of this proposal, we also propose to start experimenting with allocating some incentives directly to leveraged vault strategies. In such cases the annual incentive rates for each currency would continue to be enforced but some of the incentives currently allocated to nTokens could be redirected to leveraged vault strategies. For example, if the USDC annual incentive rate on Arbitrum is 500,000, governors could allocate 100,000 NOTE to a USDC denominated vault and would continue incentivizing nUSDC with the remaining 400,000 NOTE.
Arbitrum
We propose to reallocate incentives to currencies with positive yielding leveraged vaults opportunities. Therefore we propose continuing to incentives ETH, USDC, wstETH, rETH, and USDT.