This proposal would reduce the incentive emissions allocated to ETH.

Current Liquidity

ETH Liquidity on Osmosis is currently limited. The main ETH/USDC pool has 20k in liquidity, while ETH/BTC has only 8k. Both are incentivized but are failing to attract additional liquidity.

The current emissions to the Volume Splitting Group (VSG) of ETH/BTC and ETH/USDC are 1,956 OSMO per day, a 200%+ subsidy to the swap fees. This is currently the only volatile VSG to which Osmosis emits incentives to at a greater rate than the protocol revenue generated by the grouping.

The lack of ETH liquidity on Osmosis has a subsequent impact on liquidity only connected to ETH, such as the protocol-owned ERC-20 token liquidity, established in Proposal 802, and wstETH liquidity, a premium collateral asset which is currently at cap on Mars.

Requested Incentive Adjustment

Incentives will remain on ETH pairings at a reduced rate of 500/day, an LP fee subsidy level similar to BTC/STABLE of 50%. This will make this Volume Splitting Group break even regarding Protocol Fees generated compared to emissions. Forum Thread:https://forum.osmosis.zone/t/deploy-eth-btc-liquidity-and-reduce-incentives-on-eth/3391