404 voted FOR the USDS/sUSDS co-incentive Snapshot proposal. Given the need to accelerate adoption of Unichain and our belief that Sky is well-positioned to support that growth, we are generally supportive at this stage. However, we believe the proposal requires additional clarity before advancing to a Tally vote.
Specifically, the current incentive structure lacks detail around how rewards will be allocated, leaving too much uncertainty. For instance, if incentives are used to boost sUSDS yield, then net of operating costs, the structure guarantees a minimum 4% APR on the first $20M in TVL on top of sUSDS base yields. This yield declines to 3.2% for the first $50M and 2.4% for first $100M in TVL. We would like to see more explicit modeling and documentation on how these rewards would be distributed under various scenarios.
Additionally, we do not believe governance should be asked to vote on incentive allocations on a monthly basis. Delegates often lack the resources and bandwidth to oversee and manage dynamic incentive programs effectively. We would prefer this responsibility be delegated to existing incentive managers or committees.
To benchmark expectations, we reviewed Gauntlet’s reporting on the current Unichain incentive program, which has achieved approximately $59 in TVL per $1 spent. For the USDC/USDT0 pool, which is currently the only incentivized stablepair pool, TVL per $1 spent is $53. With $800K in incentives, this would result in $42.4M in TVL and if the full $3.2M proposed here were deployed at similar efficiency, it could drive ~$170M in TVL.
Based on these reference points, we suggest tying KPI unlocks to targets that reflect a 50% increase over the current proposed KPIs. Specifically, we recommend a performance-based structure of 37.5M / 75M / 150M TVL targets per $1M additional incentive unlock.