Ronin, a Ethereum sidechain designed for blockchain games, announced Thursday that it will reduce RON token rewards paid to liquidity providers on its Katana decentralized exchange (DEX) starting in March.
Sky Mavis, the company behind the network and its flagship game Axie Infinity, said that it plans to cut liquidity pool token emissions in multiple waves, slashing the daily token rewards by approximately 50% each time. Doing so will reduce the number of tokens being added to the circulating supply on a daily basis.
The network said that the average annual percentage rate (APR) for providing liquidity has jumped from around 20% to 70% in recent months. However, the amount of tokens pooled has not grown proportionally to match the increase in rewards.
"This means the increase in reward value did not drive meaningful outcomes in DEX liquidity provision, and may have gone past the optimal level of incentives," the announcement said.
As a result, rewards will be reduced in phases. The first phase, planned for March 1, will cut emissions by over 60,000 RON per day, or around 5.4 million RON per quarter. At the current price, that’s a cut of more than $174,000 worth per day or $15.6 million worth each quarter.
Additional phases will continue reducing rewards over the course of 2024. The reduction aims to curb "over-incentivization" of liquidity providers and lead to better equilibrium for token prices, according to the network. It will also free up more of the RON token supply for other initiatives that could drive user growth.
The market reacted positively to the news, as the price of RON jumped shortly after the announcement, according to data from CoinGecko. Ronin is up 7% on the day to a current price of $2.90, pushing the token’s 30-day gains to 56%. RON was just listed on major crypto exchange Binance earlier this month, which was cited as one of the reasons behind this rewards cut.
The network has seen a dramatic rise in active users over the last few months after the blockchain-based farming game Pixels migrated over from Polygon in October. Pixels will launch its own PIXEL token on February 19 after running a play-to-airdrop campaign.
Editor’s note: This article was written with the assistance of AI. Edited and fact-checked by Andrew Hayward.