Ronin, an Ethereum sidechain tailored for blockchain gaming, made an announcement on Thursday regarding the reduction of RON token rewards for liquidity providers on its Katana decentralized exchange (DEX) beginning in March. Sky Mavis, the company behind the network and its flagship game Axie Infinity, outlined its plan to gradually decrease liquidity pool token emissions in multiple stages, with each stage resulting in approximately a 50% reduction in daily token rewards. This move aims to curb the influx of tokens into the circulating supply on a daily basis.
The network highlighted that the average annual percentage rate (APR) for providing liquidity has surged from around 20% to 70% in recent months. However, despite the increase in rewards, the amount of tokens pooled has not proportionally matched this growth.
The announcement stated that the rise in reward value did not yield significant results in DEX liquidity provision and may have surpassed the optimal incentive level.
Consequently, rewards will undergo phased reductions. The initial phase, set for March 1, will decrease emissions by over 60,000 RON daily, equivalent to approximately 5.4 million RON quarterly. At the current market price, this translates to a reduction of more than $174,000 per day or $15.6 million per quarter.
Subsequent phases throughout 2024 will continue the reduction of rewards. The objective is to address the “over-incentivization” of liquidity providers and establish a more balanced equilibrium for token prices, as outlined by the network. Additionally, this move will allocate more of the RON token supply for other initiatives aimed at driving user growth.
