Kava BUSD Reward Reduction
Prop #30 to reduce BUSD rewards.
Kava has a history of providing opportunities for users to earn with their cryptocurrencies. A primary way to earn on Kava is through USDX minting rewards which were extended to BUSD holders with the passing of Prop #20.
Now Prop #30 proposes to reduce the amount of KAVA distributed to BUSD, what’s the reason for this?
USDX Stability Around 1 USD
The USDX digital assets trading in a stable range around 1 USD is a key result towards the growth and usage of the Kava lending platform.
USDX trading range and price on public markets has been in a steady decline recently. A likely hypothesis to describe USDX trading below $1.00 is the sale flow afforded by the KAVA rewards presented to assets supplied in Kava, namely BUSD as its lower risk profile lends it to more leveraging (shorting USDX) with less risk.
Props #26 was passed to increase BUSD Borrow APY from 0% to 5% in an effort to potentially mitigate USDX selling flows. Little change has been observed in markets and as such Prop #30 is a first of a potential series of proposals to reduce the rewards to BUSD in an effort to potentially mitigate USDX selling flows in markets.
Implication of Prop #30 Passing
An implication of the reduction in rewards for BUSD suppliers to Kava is not that BUSD users are somehow less deserving of earnings, rather that the stability of USDX around 1 USD is seen as having greater priority by the Kava community than the benefit of users of a particular asset type in Kava.
It’s highly likely that if Prop #30 passes, BUSD rewards are reduced, and USDX trading range in markets does not meaningful recover towards 1 USD that further proposals to reduce BUSD rewards, increase BUSD Borrow APY, or some combination thereof for other supplied assets in Kava will be proposed in the future.
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