I can see how it might feel this way. Hopefully I can share my point of view with you in a helpful way.
As DAO members we all have a right to our opinion on how best to move forward. So first, I’m not necessarily saying “this is the only way to think about this” ~ I’m just sharing my thought process, and if I come off like a jerk, I’m sorry, I don’t mean to.
Alright, first: My feeling is this is about “Growing the DAO fund vs over incentivizing LP/Borrowers.”
Why grow the DAO fund?
For me, I am specifically thinking about how we will reward/incentivize collateral providers in the future, especially people who are bringing in capital from other chains. Eventually we will be trying to attract users from other chains and platforms. How will we get them to bring dot/eth or whatever to Balanced? Incentives!
Why grow the DAO fund now?
To capture the high rate of BALN being minted/rewarded now, so that we, the DAO, can use those funds/rewards in the future to help grow Balanced. It is not permanent change, the next vote could change the allocations again (not saying that it will).
The sooner we make this change, the more beneficial it is for our DAO fund. From a post earlier in the thread:
Let’s say in a few years, when we get to 2% inflation, BTP connects ICON to a new chain/network. We want to add their token as a collateral option, and get users to deposit that token as collateral and mint bnUSD. Instead of changing our reward allocations from daily minted BALN, we could reward from the DAO. With just half of the rewards from 1 day now (from that extra 10%), we would be able to provide a month of 10% rewards — without having to disrupt our existing rewards.
Note: I’m not going to address the ICX/sICX LP rewards.
Are borrowing rewards over incentivized?
I believe, at this time, borrower rewards are over incentivized.
I updated this quote from above with today’s numbers. It shows how this change will effect users.
On the surface, I don’t see this change being that impactful on user numbers or activity. If you hold your loan for 13 days, you have paid off your fees on an interest free loan — that is pretty amazing to me.
Now, if the borrower puts the borrowed bnUSD into a LP, let’s say the iUSDC/bnUSD pair, then they will be getting fees and if BIP5 passes BALN rewards as well. All with very low risk.
I think it is pretty great even after reducing the rewards.
Will it stay that way?
I don’t know. I could definitely see a scenario in where we decide to boost rewards to borrowers (as daily BALN minted drops). Similarly, if the price of BALN climbs up and hovers around the $10 mark, I could see the community voting to reduce rewards for specific pools or borrowers.
Those are my thoughts.