For the purposes of both transparency and clarity, the following piece will seek to explain, in detail, the final, updated emissions strategy for the dual token model of EXC (more on EXC tokens, here) and GRAIL (more on GRAIL tokens, here).
Emissions are a thorny issue for any protocol. We are keenly aware of the impact that emissions can have, not only incentivising fresh liquidity and encouraging the loyalty of current liquidity, but also on the overall economic health of all of the systems that underpin Excalibur. Therefore, no decision outlined below is being made in a vacuum — instead, these choices are based on a multitude of different data points and crucial factors.
With the following adjustments to the emission schedule, our primary goals are:
- to introduce a more predictable, consistent strategy for users
- to create a clearer picture for time vault uses in particular, who are deciding on whether or not to lock their liquidity for increased rewards
- to retain the intrinsic value of GRAIL and its associated token model, particularly in relation to the current potential for share dilution (when additional GRAIL is released, a bit like when companies do share splits, the increased amount of GRAIL on the market will decrease the proportionate ownership of current GRAIL holders)
For the purposes of today’s discussion, it’s important to split the emission details into two categories — Year 1 and Year 2 Onwards. Let’s start with Year 1.
Year 1 Emission Schedule
The incoming changes are:
- A weekly 2% emission decrease (EXC+GRAIL/s)
- A rolling 2% GRAIL/EXC emission ratio decrease. This will result in a slight increase in overall EXC emissions over the next three months, relative to GRAIL, followed by a gradual tapering.
Decreasing emissions overall, but focusing more on diminishing the available supply of GRAIL, serves a few key functions. Primarily, it makes GRAIL more scarce even as it maintains its attractive qualities, such as potential yield and its future use in governance (and particularly, in relation to bribes and gauges — more on this, soon).
EXC emissions will be tapered more slightly less aggressively, allowing Excalibur to maintain alluring APRs for both new and existing users.
Year 2 Onwards Emission Schedule
After the first year concludes, emissions will continue to trend downwards but at a slower rate. There will be:
- Monthly 2% emission decrease (EXC+GRAIL/s) — with the decrease coming to a conclusion when the emission rate reaches 0.1/s
- Monthly 2% emission ratio decrease, concluding when the emission proportions have reached 85% EXC and 15% GRAIL.
Simply — the changes that will take place across year one and then onwards will result in the increased scarcity of GRAIL, particularly in proportion to EXC. However, it is intended to be a balanced approach, as it allows us to continue to incentivize users with EXC, even as the total amount of emissions for both tokens trends down over time, albeit at different rates.
Additional Notes on Emissions
With everything above being true, it is of course worth noting that this emission schedule does not exist in a vacuum. These are estimates, as a range of factors beyond this initial intended schedule can also impact emissions. These calculations do not take into account:
- Bonding (which we’ll go into more detail about shortly) to mint GRAIL. The amount of bonds available are managed directly, based on the current supply and total burn of GRAIL
- Minting EXC as a result of trans-fee mining (as detailed in this article, here) — it is worth noting that the additional volume that comes as a result of trans-fee mining should help to compensate for the minor inflation of EXC
- Burns, which can happen because of swap fees and the bonding process
- When users redeem GRAIL for EXC (which can come with an associated 30% penalty)
Looking to the Future
The tweaks announced here today represent our best effort, after a great deal of deep contemplation and analysis, to do what is best to protect the health of our unique dual token model of EXC and GRAIL. The information included here will be a reliable reference moving forwards. We are listening closely and will be keeping a watchful eye on the impact that these adjustments have over the following weeks and months. Furthermore, as we strive toward decentralisation, any further changes to emissions or to EXC and GRAIL more generally will be put to a vote via governance.