Upon the passage of the proposal to promote Warden Finance as market rewards manager on behalf of the DAO, we wanted to share our rewards distribution plan for the upcoming year and also provide an update in regards to the first changes we have made.
We are happy to answer any question or provide further details if you need. Feel free to follow up in this thread or reach out to me directly (TG: @hboisselle, Discord: @hboisselle)
Base Rewards Distribution Plan
In order to provide better user experience, our rewards distribution model aims to be as consistent as possible through time. We will use an emission schedule with epochs of fixed duration (28 days) with a gradual increase in allocation.
Total amount: 217,500,000.00 WELL
Epochs: 13
Epoch duration: 28 days
Epoch #
% per epoch
Total per epoch
Start timestamp
Start date
1
5.000%
10,875,000.00
1691791200
Fri Aug 11 2023 22:00:00 GMT
2
5.449%
11,850,961.54
1694210400
Fri Sep 08 2023 22:00:00 GMT
3
5.897%
12,826,923.08
1696629600
Fri Oct 06 2023 22:00:00 GMT
4
6.346%
13,802,884.62
1699048800
Fri Nov 03 2023 22:00:00 GMT
5
6.795%
14,778,846.15
1701468000
Fri Dec 01 2023 22:00:00 GMT
6
7.244%
15,754,807.69
1703887200
Fri Dec 29 2023 22:00:00 GMT
7
7.692%
16,730,769.23
1706306400
Fri Jan 26 2024 22:00:00 GMT
8
8.141%
17,706,730.77
1708725600
Fri Feb 23 2024 22:00:00 GMT
9
8.590%
18,682,692.31
1711144800
Fri Mar 22 2024 22:00:00 GMT
10
9.038%
19,658,653.85
1713564000
Fri Apr 19 2024 22:00:00 GMT
11
9.487%
20,634,615.38
1715983200
Fri May 17 2024 22:00:00 GMT
12
9.936%
21,610,576.92
1718402400
Fri Jun 14 2024 22:00:00 GMT
13
10.385%
22,586,538.46
1720821600
Fri Jul 12 2024 22:00:00 GMT
Total
100.0000%
217,500,000.00
2023-09-01 Rebalancing of Base Token Liquidity Incentives
On September 1st 2023, we have rebalanced the reward rates for the ongoing epoch ending on Sept 8. (epoch #1)
Issues addressed by the update
ETH utilization is high (has spiked close to 100% and currently stands at 75%, at kink)
DAI borrow activity is non-existant even though supply is quite high
cbETH supply is non-existant. cbETH IRM and rewards are prohibitive and non-attractive.
Description of changes
Allocate supply-side rewards to cbETH market to help bootstrap liquidity. The proposed allocation has high probability to attract >$1M total cbETH supply given the aggresive yield:
16% APR supply-side rewards at $1M cbETH total supply
8% APR supply-side rewards at $2M cbETH total supply.
4% APR supply-side rewards at $4M cbETH total supply.
Maintain ETH rewards high to stimulate more supply in order to decrease ETH market utilization
Allocate supply-side rewards to DAI market to keep liquidity levels high until borrow activity is bootstrapped
Rebalancing of Base Liquidity Incentives (2023-09-14)
Hi everyone,
We’ve a made two changes to Base market reward rates since the last time we gave updates.
On September 14 2023, native USDC market was successfully launched on Moonwell Base deployment. In order to help bootstrap initial liquidity for the market, we have shifted rewards from other markets towards native USDC. We also started reducing USDbC rewards to as a soft deprecation measure for the market.
We plan on fully deprecating USDbC rewards on November 3rd (epoch #4).
Reward distribution (Sept 14 2023)
cbETH
DAI
USDbC
USDC
ETH
WELL supply (% of allocation)
20% →17.5%
20% → 17.5%
20% → 10%
0% → 20%
40% → 35%
WELL borrow (% of allocation)
0%
0%
0%
0%
0%
Reward speeds (Oct 6 2023)
cbETH
DAI
USDbC
USDC
ETH
WELL supply (WELL per second)
0.98 → 0.86
0.98 → 0.86
0.98 → 0.49
0 → 0.98
1.96 → 1.71
WELL borrow (WELL per second)
0
0
0
0
0
2023-10-06 Epoch #3 allocation updates
On October 6 2023, we applied minor tweaks in order to further encourage migration from USDbC to USDC.
Analysis
Native USDC market liquidity was successfully bootstrapped with over $1M TVL once rewards were added (~$2.8M supply / ~1.8M borrow). Market remains at healthy levels of liquidity.
Utilization for ETH market was mostly below the interest rate kink throughout epoch #2. Keeping utilization closely below the kink is ideal from a risk perspective.
Utilization for DAI, USDbC, USDC and cbETH markets were largely below kink throughout epoch #2.
We have further reduced USDbC rewards to encourage users to migrate to USDC.
We have increased supply-side rewards for ETH market, as supply activity on the market is very elastic to rates and utilization remains high.
Epoch #
% per epoch
Total per epoch
Start timestamp
Start date
3
5.897%
12,826,923.08
1696629600
Oct 06 2023 22:00:00 GMT
Reward distribution (Oct 6 2023)
cbETH
DAI
USDbC
USDC
ETH
WELL supply (% of allocation)
17.5%
17.5%
10% → 5%
20%
35% → 40%
WELL borrow (% of allocation)
0%
0%
0%
0%
0%
Reward speeds (Oct 6 2023)
cbETH
DAI
USDbC
USDC
ETH
WELL supply (WELL per second)
0.86 → 0.93
0.86 → 0.93
0.49 → 0.27
0.98 → 1.06
1.71 → 2.12
WELL borrow (WELL per second)
0
0
0
0
0
Next steps
In order to encourage users to migrate to USDC, we will fully deprecate USDbC rewards starting next epoch (Nov 3 2023) if it is safe from a liquidity risk perspective.
Rebalancing of Base Liquidity Incentives (2023-11-03)
Hi everyone,
We have applied minor allocation changes for to start epoch #4. In order to encourage users to migrate from USDbC in favor of USDC, we have now fully deprecated USDbC rewards.
Note that Base have effectively started to deprecate USDbC. The token can no longer be minted from the Base bridge UI. As a consequence, we expect on-chain liquidity for USDbC to rapidly migrate to native USDC in the months to come.
Reward distribution (Sept 14 2023)
cbETH
DAI
USDbC
USDC
ETH
WELL supply (% of allocation)
17.5%→20%
17.5%→20%
5%→0%
20%
40%
WELL borrow (% of allocation)
0%
0%
0%
0%
0%
By applying this change, we expect TVL for USDbC to significantly surpass USDC with little to no net TVL loss.
Rebalancing of Base Liquidity Incentives (2023-12-29)
We have applied two sets of updates over the last 30 days
1) Dec 01 2023 (Epoch #5)
Analysis
As rewards epoch #5 started on Dec 01 2023, we assessed that market health indicators were within optimal levels for all markets (utilization, on-chain liqudity vs market usage).
Specifications
WELL rewards emission rates have been scaled for all market. Rewards share per market were kept the same for USDC and WELL reward streams.
Epoch #
Total per epoch
Start timestamp
Start date
5
14,778,846.15 WELL (6.795% of total) 36,812.46 USDC
1701468000
Fri Dec 01 2023 22:00:00 GMT
Reward distribution (% of allocation)
cbETH
DAI
USDbC
USDC
ETH
wstETH
rETH
WELL supply
20%
20%
0%
20%
36%
2%
2%
WELL borrow
0%
0%
0%
0%
0%
0%
0%
USDC supply
20%
20%
0%
20%
36%
2%
2%
USDC borrow
0%
0%
0%
0%
0%
0%
0%
1) Dec 29 2023 (Epoch #6)
Analysis
We observed the following change in market conditions over the course of epoch #5:
Sizeable supply positions have been pulling out of USDbC market, causing utilization to often fluctuate above optimal levels during the last 28 days. Total supply for USDbC decreased from 2M to 591k from Dec 21 to Dec 29.
USDbC circulating supply has significantly increased since the launch of USDbC lending market on Seamless Protocol. USDbC can currently be bridged via Stargate bridge, but cannot be bridged via Base native UI, as it has been deprecated in favor of Native USDC. Unless the community decides otherwise, we propose to maintain the current measures that aim to deprecate USDbC in favor of Native USDC.
Demand for lending wstETH significantly increased (>3X TVL increase). On-chain liquidity levels for the token have also increased sufficiently to sustain this growth.
DAI market usage has remained high relative to the token’s circulating supply (~9.5M token circulating supply vs 5.15M total supply on Moonwell). DAI lending market growth is currently limited by this factor.
Specifications
Given these observations, we decided to shift some of the DAI supply-side rewards in favor of wstETH supply-side rewards. We also maintained deprecation measures for USDbC.
Epoch #
Total per epoch
Start timestamp
Start date
6
15,754,807.69 WELL (7.244% of total) 36,812.46 USDC
Rebalancing of Base Liquidity Incentives (2024-01-27)
Key observations
Moonwell markets utilization
rETH and cbETH markets are underutilized (15% utilization vs 45% kink). Demand for borrowing on such markets has historically been not very elastic to rates.
All markets other markets are at optimal utilization level (slightly below kink)
Moonwell markets total supply vs on-chain circulating supply
DAI and rETH have low circulating supply on Base relative to the current total supply on Moonwell Base deployment. (total supply > 50% circulating supply) Low on-chain liquidity increases the risk of accumulating bad debt when users hold very concentrated positions.
wstETH and Native USDC circulating supply have steadily increased over the last month. Increased on-chain liquidity reduces the risk of accumulating bad debt for the protocol, allowing for more growth to be sustained on lending markets.
USDbC on-chain circulating supply (75M) has been on a strong downtrend as users have started to migrate more aggressively towards Native USDC (210M).
Rebalancing of Base Liquidity Incentives (2024-02-23)
Key observations
DAI circulating supply on Base critically low vs. total market supply. In order to mitigate risks of accumulating bad debt when liquidating large collateral positions, we generally recommend lending market supply to be capped to a maximum of 50% of on-chain circulating supply. In the case of DAI, total supply on Moonwell’s market is currently standing at 110% of circulating supply.
rETH circulating supply does not allow for more growth to be sustained at the moment. Total supply for rETH lending market is currently standing at 55% of circulating supply on Base.
Utilization for USDC, DAI, WETH and wstETH is currently at optimal levels (equal or slightly below kink). rETH and cbETH are currently underutilized.
Warden has allocated 17% of epoch #9 WELL rewards towards future safety module incentives.
Goal of this allocation is to provide sufficient incentives to grow the total amount staked on the safety module to 100M WELL.
The targeted amount staked would provide a 30M WELL insurance fund (~$1M at current WELL price) to protect users against shortfall event on Base markets and provide ~20% APY to stakers given the allocated rewards.
More information about the safety module is available in Moonwell docs.
WELL rewards have been rebalanced to take into account the new USDC rewards pool allocated towards Native USDC lending market.
Specifications
Epoch #
Total per epoch
Start timestamp
Start date
9
18,682,692 WELL 50,000 USDC
1711144800
Fri Mar 22 2023 22:00:00 GMT
Liquidity incentives
83% of WELL (15,506,634 WELL) and 100% of USDC epoch rewards (50,000 USDC) allocated towards liquidity incentives.
Reward distribution (% of allocation)
cbETH
DAI
USDbC
USDC
ETH
wstETH
rETH
WELL supply
15%
5%→1%
0%
25%→10%
45%→47%
8%
2%
WELL borrow
0%
0%
0%
0%
0%
0%
0%
USDC supply
15%→0%
5%→0%
0%
25%→100%
45%→0%
8%→0%
2%→0%
USDC borrow
0%
0%
0%
0%
0%
0%
0%
Safety module incentives
17% of epoch rewards (3,176,057 WELL) allocated towards safety module incentives.
DAI and rETH on-chain liquidity situation has improved. DAI and rETH circulating supply on Base are now sufficient to ensure risk for the protocol to accumulate bad debt is within tolerance given extreme market conditions.
Utilization for major markets (ETH and USDC) slightly suboptimal (below kink).
Wormhole WELL reward streams have been deprecated in favor of Native WELL reward streams
As no WELL rewards were allocated towards safety module for this epoch, rewards have been increased across all markets. Rewards for ETH and USDC markets have been further increased due to higher elasticity to rate vs. other markets.
Specifications
Epoch #
Total per epoch
Start timestamp
Start date
10
20,045,844.22 WELL** 50,000 USDC
1713564000
Fri, 19 Apr 2024 22:00:00 GMT
** Amount includes an additional 387,190.37 WELL from unspent safety module allocation due to delayed safety module deployment.
Liquidity incentives
100% of WELL (20,045,844.22 WELL) and 100% of USDC epoch rewards (50,000 USDC) allocated towards liquidity incentives.
Reward distribution (% of allocation)
cbETH
DAI
USDbC
USDC
ETH
wstETH
rETH
WELL supply
15%
1%
0%
10%→16%
47%→55%
8%→10%
2%→3%
WELL borrow
0%
0%
0%
0%
0%
0%
0%
USDC supply
0%
0%
0%
100%
0%
0%
0%
USDC borrow
0%
0%
0%
0%
0%
0%
0%
Safety module incentives
No additionnal safety module incentives were allocated for this epoch as safety module is already funded until end of epoch #10.
Next steps
Keep monitoring safety module deposits / yield over epoch #10. Apply adjustements for epoch #11 if target safety module parameters are not reached.
Hi @WardenFinance it will be great if we could keep the Base Safety Module staking APY at or near the 21%~22% we’re seeing at Moonbeam for Epoch 11 onwards. My suggestion would be to further incentivize native Well staking on Base until there is staking volume equilibrium across Moonbeam and Base.
I would love your feedback on why it should or shouldn’t be done as I am still learning and have native Well staked on Base.
Hi @bumblebee04967, we unfortunately can’t really dictate what will be the rate for staking on each individual deployment. Even if we increase the rewards, rates may stay the same given that demand for staking is elastic to rates.
Rates are mostly driven by risk premiums for staking on each individual chain. Insolvency risk for each deployment is not the same, so users will want to receive yield that is adjusted to this risk. In other words, equilibrium is reached when staking rates are aligned with risk premium of individual deployment.
This is not a simple answer, let us know if we can help clarify better.
Thank you! Your answer was very helpful. If I understand correctly, staking rewards are a proxy for risk premium on a particular chain. Higher the risk, higher the rewards, and lower the risk, lower the rewards. This is of course my generalization, and as you mentioned it’s more complicated than that with many variables. Thank you for the response
Hi @WardenFinance, just curious when we will find out the Base staking APY starting this epoch. I see we just passed the Epoch starting time of 22:00 GMT but I did not see any post on the forum that you usually do at start of each epoch.
Total deposits: 200M WELL (above target of 30M WELL)
Current yield: 13.8% APY (below estimated 20% APY)
We are observing difference in staking yield for Moonbeam (~20%) vs Base (~14% APY), which could be explained by difference in how users are pricing insolvency risk premia on Base vs Moonbeam deployment.
Base deployment current has a $1.86M fund to cover against bad debt, which is a healthy insurance fund relative to Moonwell TVL on Base (~$77M). In-depth documentation about the safety module is available in Moonwell docs.
Rewards for LST markets have been slightly shifted towards mETH. As we generally observe much superior rate elasticity of demand for lending and borrowing ETH than LSTs, we estimate that this change will much likely yield net positive impact for the protocol.
Specifications
Epoch #
Total per epoch
Start timestamp
Start date
11
20,634,615.38 WELL 75,000 USDC
1715983200
Fri, 17 May 2024 22:00:00 GMT
Liquidity incentives
89.5% of WELL (18,466,345.66 WELL) and 100% of USDC epoch rewards (75,000 USDC) allocated towards liquidity incentives.
Reward distribution (% of allocation)
cbETH
DAI
USDbC
USDC
ETH
wstETH
rETH
AERO
WELL supply
15%→10%
1%
0%
16%
47%→60%
8%→6%
3%→2%
0%→5%
WELL borrow
0%
0%
0%
0%
0%
0%
0%
0%
USDC supply
0%
0%
0%
100%
0%
0%
0%
0%
USDC borrow
0%
0%
0%
0%
0%
0%
0%
0%
Safety module incentives
10.5% (2,168,269.72) of WELL epoch rewards allocated towards safety module. Reward allocation remains exactly equal to previous epochs,
Would like to understand the rationale for keeping reward allocations the same in spite of the fact that Base has >74% of Moonwell’s TVL yet only 40% of the total staked token and 50% of the reward rate compared to Moonbeam.
Should we not be incentivizing stakers to migrate over to Base with a higher yield? Should we not be ensuring the safety module for the largest TVL network also has proportionally majority of stake?
Would love to understand the thought here for why the Base safety module is being treated as a second class citizen despite the tailwinds we’re seeing.
I agree 100%. We need to revisit the staking reward allocation on Base. It should match or exceed the Well staking APY on Moonbeam. 90% of TVL is on base but it gets half the APY of Moonbeam
As was mentioned earlier, staking yield depends on risk premia for the given deployment. Users are willing to receive 10% yield for insuring Base deployment, vs 20% for insuring Moonbeam deployment. Given that demand for staking is elastic to yield, increasing incentives will most likely increase the total amount staked rather than increase APY (although it will temporarily increase APY)
Given that the utility of the staking module is to provide insurance for the protocol in case of bad debt, Warden optimizes staking rewards to target an insurance fund size which is line with the risk profile desired by the community (risk tolerant).
The staking module funds on Base have reached 9% of Moonwell Base TVL (or ~$8.6M), which means the protocol has a bad debt insurance fund covering 2.7% of TVL (or $2.58M). We can increase the size of this insurance fund if the community desires further protection against bad debt instead of more aggressive rewards for lending markets.
We can’t guarantee increasing staking rewards will increase APY though. APY and absolute amount of rewards are not directly related one another.
Thanks for your response - def understand increasing staking rewards is not correlated to increasing APY.
My specific point is the insurance fund on Moonbeam is larger than Base while the TVL on Moonbeam is only 1/3 of the Base.
This seems inefficient use of emissions versus increasing the size of the insurance fund on the largest chain (and using emissions to help spur that migration).
cbETH market liquidity was successfully boostrapped with over $2M supply once rewards were allocated to the market on Sept 1st.
ETH market utilization remained high throughout the epoch, even with the relatively aggressive rewards allocation.
as I am still learning and have native Well staked on Base.
