This proposal will add a perpetual 2.5% APR annual inflation of SNX starting on September 6, 2023, the 235th week on the SNX inflation schedule.
This SIP is the formal spec successor of deltatiger's Draft SIP Proposal #36, specifically pertaining to terminal inflation.
- Terminal inflation is an important mechanism to keep the SNX protocol stable in perpetuity
- With the original inflation schedule, weekly inflation drops from 90.1K to 0 on March 13, 2024
- With inflation smoothing as described in SIP-23, weekly inflation drops below 2.5% on August 30, 2023
Perpetual weekly inflation serves as a mechanism to keep the protocol stable for the long term
Adjust SupplySchedule.sol to account for the following changes:
- Starting on August 30, 2023, the weekly issuance of SNX tokens will adjust to 2.5% on an annualized basis.
- This final model, which is based on the origional proposed model, will stay in place until it is stopped or adjusted.
With Inflation Smoothing and 2.5% annual Terminal Inflation:
Perpetual weekly inflation serves as a mechanism to avoid scenarios that would adversely impact the protocol like:
- Minters packing up at the same time due to a lack of rewards
- Synth supply shrinking
- SNX unlocking to be sold down
- SNX price dropping
- sETH LPs getting their income halved and also now dropping in value
- sETH LPs exiting by withdrawing and converting sETH to ETH
- sETH getting smashed out of peg
- Arb pool being unattractive as SNX drops relative to ETH
Standard test cases for Solidity contract compling and deploying onto Ethereum testnets before updating the contract on mainnet.
- Update and deploy SupplySchedule.sol to Ropsten, Rinkby, and Kovan
- Update and deploy changes to proxy contracts that reference SupplySchedule.sol on Ethereum testnets
- Update and deploy SupplySchedule.sol to Ethereum mainnet
- Update and deploy changes to Ethereum mainnet proxy contracts that reference SupplySchedule.sol
As weekly supply is compounded weekly using a compound formula with a terminal rate of 2.5% APR, the effective rate of inflation compounded weekly over a year is 2.53% APY.
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