Blockchain GameFi developer Sky Mavis will cut liquidity provider (LP) rewards provided by its Ronin blockchain-based Katana decentralized exchange (DEX) by 50%. According to the February 15 announcement, starting March 1, premiums will be cut by 50% in Phase 1 and a further 50% in Phase 2, for a total reduction of 75% from current emissions levels.
“Average APR over the last few months [annual percentage rate] in the Katana liquidity pools has increased from ~20% to 70%,” Ronin wrote in justifying the reward cut, noting that the total number of pooled tokens in the Ronin liquidity pools has not increased in proportion to the Ronin price (RON). equalize the effective annual interest rate. Since the beginning of the year, the value of RON tokens has increased by 59%.
“This means that the increase in reward value did not produce meaningful results in providing DEX liquidity and may have exceeded the optimal incentive level,” Ronin employees concluded. Due to the planned LP cuts, Ronin expects to save RON 2 million (US$5.72 million) in expenses in the first quarter of 2024 alone. “Fewer emissions means less inflation in the circulating supply,” Ronin said, noting that the supply of fixed tokens is pegged at 1 billion.
Currently, the Katana DEX represents over 99% of Ronin’s $200 million in total value (TVL). Although the RON token has since regained its 2022 highs, its TVL has yet to recover to the $1 billion level seen before a devastating North Korean hacker attack two years earlier. Nevertheless, the ecosystem has since recovered with the highly anticipated Binance listing earlier this month.
Related: Binance offers $5 million bounty after RON token listing sparks “heated” debate
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