A few back of the napkin math checks here. This is very rough, but for context of what scale the proposed impact could have:
Current Governance Period Algos locked: 3.8 billion
Current governance reward rate 7.41%
This gives us 281,580,000 Algo rewards per year to distribute.
New proposal is for 10% of governance rewards to go to some LP pools, which would be 28,158,000 Algo total.
New proposal also says that 90% of governance continues to go to existing governor model, which would be 253,422,000 Algo total.
Using DEFLY and Vestige stats for this part, currently they indicate that if we combine the TVL for the top 20 non-stable ASAs paired with Algo aggregated across all DEXes they are at just 22.296 million Algo TVL. Half of that is the ASAs and half is Algo, so around 11.148 million Algo locked in that LP subsection.
Think about that for a minute - The new rewards system the LP would give out over twice as much Algo as what is currently locked in the top 20 ASA LP’s aggregated from all the major DEX’s. If started today governance rewards for LP’s would be 100% APR agains the LP pair.
Now LP risk is added risk compared to existing governance, but that APY will bring more liquidity into the pools no doubt. A LOT more. That APR will of course go down as people move liquidity into the LPs, but even if it were to level out around 50%, that would mean TVL in the LP ecosystem would have doubled. This would be a HUGE win.
The main problem I have with this proposal is that it’s currently stated as “should we allocate 10% governance rewards to LP or should we do nothing”. It should be stated more like “do we allocate 10% governance rewards to LP or do we allocate 20%”. Even if option 2 has slightly different criteria, don’t give us another do nothing option - have the community make a decision about moving forward either way.