# SIP-170: Inflation Diversion for L2 Incentives

Author Implemented Governance Optimism TBD TBD 2021-07-27

## Implementers

Justin Moses (@justinjmoses) and Yannis Stamelakos (@i-stam)

## Simple Summary

The sDAO has been paying 25K SNX in incentives per week to encourage staking on L2. This SIP proposes to divert the 25K SNX weekly incentives for L2 stakers currently being covered by the sDAO to instead come from the inflationary SNX token supply.

## Motivation & Rationale

Given that Synthetix is now live on L2 with both staking and exchanging we are proposing to update the funding source for 25K weekly SNX L2 incentives from the sDAO to the inflationary supply of SNX.

### Technical Specification

No contract changes are required as the inflation diversion has been anticipated for some time now and the functionality to divert inflation has already been implemented. The transaction flow to activate the inflation diversion is described below:

1. Add the SynthetixBridgeToOptimism contract address as a recipient to the RewardsDistribution list. That is done by calling the following: RewardsDistributions.addDistribution(SynthetixBridgeToOptimism.address, 25000e18).

2. From now and on, every time Synthetix.mint() is invoked succesfully, 25K SNX will be sent to SynthetixBridgeToOptimism via RewardsDistribution.distributeRewards() which in turn calls SynthetixBridgeToOptimism.notifyRewardAmount() that locks the SNX into SynthetixBridgeEscrow and sends a finalizeRewardDeposit message to L2.

3. When the L2 transaction is processed, SynthetixBridgeToBase.finalizeRewardDeposit() is invoked and subsequently MintableSynthetix.mintSecondaryRewards() is called, minting and distributing the rewards on L2.

### Test Cases

Prior to initiating the inflation diversion on mainnet we are testing to ensure it works on Kovan.

### Configurable Values (Via SCCP)

While this SIP proposes to change the funding source of the L2 SNX incentives for staking to the inflationary supply of SNX, the actual amount of SNX for incentives is a configurable value that is controlled by the Spartan Council. The council can approve future SCCPs to configure the amount of SNX incentives.

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Copyright and related rights waived via CC0.