This proposal would increase the tapering factor in use by the Osmosis internal incentives calculations from 10% to 25%, increasing the potential rate of change of incentives going to pools.

Background

The current incentives system was implemented in Proposal 578 and aimed to set target liquidity based on:

• Maximum Slippage of 0.25% for 95% of trades
• Maximum Slippage of 2.5% for outlier trades
• TWAP manipulation resilience

The full methodology can be found here.

The initial implementation recommended a tapering factor parameter to be set to 10%, which limits the monthly change in incentives a pool can have. This is then inherited by the incentives allocated to the relevant Volume Splitting Group.

As the incentives system has been in place for six months, this proposal asks that the tapering factor be increased to increase the rate at which incentives are adjusted to reach their target liquidity levels.

Incentives will adjust more rapidly monthly and further increase the efficiency of the Osmosis incentive spend.

This adjustment rate is still slower than the original adjustment mechanism in use by the old incentives system, which enabled a 25% adjustment in incentives on a weekly rather than monthly basis.

This adjustment rate would go into effect at the next routine incentives proposal in early March.

Forum Thread:https://forum.osmosis.zone/t/increase-tapering-factor-on-incentives-system/2454