Adjusting Shielded Set Rewards to Align with PMF Experiments

Governance Ops Proposal 🗳️
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Background
The purpose of SSR is to bootstrap a new asset pool, and it appears to have been successful! Assets like USDC, ATOM, OSMO, and TIA are regularly being shielded and paid out from Namada’s shielded pool: https://namada.world/masp-transactions

Following the broad support for @Gavin‘s recent post, “A New Phase for Namada - Product-Market Fit (PMF),” which outlines several experimental paths for Namada’s next chapter, I propose that we end Shielded Set Rewards (SSR) for all incentivized assets except for USDC.

This would eliminate incentives for the following assets:

  • ATOM
  • OSMO
  • TIA
  • stATOM
  • stOSMO
  • stTIA

This adjustment will end the majority of NAM inflation emitted from shielding rewards–today these rewards represent 3.88% annual inflation, or ~115k NAM per day (see https://rates.nam.run).

Reasoning
This proposal is largely a housekeeping step - a way to simplify the incentive landscape and ensure Namada’s resources remain focused toward current and upcoming PMF initiatives. Maintaining USDC incentives allows us to preserve a stable capital base and continue supporting what has shown to be the asset with the most organic use, while also creating room to introduce and test new assets that better fit emerging use cases.

This proposal will not impact the function of the PID controller as it relates to USDC incentives.

In short, this proposal aims to give the community a near-clean slate to support the next phase of experimentation and product alignment! :chart_increasing: :shield:

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I am on board with this proposal! Continued shielded set rewards for those initial assets has clearly done its job, and it is a good time to be economically more conservative while also leaving space for new assets to be incentivized for the purpose of bootstrapping certain integrations. Also on board with leaving USDC alone for now.

I am probably most in favor of turning off rewards for these assets immediately by setting the max_reward_rate parameter of each of these six tokens to 0 in the gov proposal.

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Exactly - sorry I didn’t specify that in the post. Manual intervention by setting the existing max_reward_rate parameters to 0 seems like not only the quickest but cleanest path.

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cross-posting my reply to the strategy-post refered. I’m skeptical of making usdc the main thing. post

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We Support this proposal .

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speaking for Knowable, you have our support and gratitude

@preto i think the idea is that beyond bootstrapping, we can use shielding rewards to ensure support for use-case specific assets like USDC

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Proposal #36 is now on-chain to adjust these rewards!

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:white_check_mark: Hashes match on both governance proposal (#36) and namada-governance-upgrades repository.

Data: Hash: 72DF5BEF3E5924A447A8085E5DAD2608E3C7A3596812B6F05F88684C5C36021A

sha256sum turn_off_shielded_inflation.wasm
72df5bef3e5924a447a8085e5dad2608e3c7a3596812b6f05f88684c5c36021a  turn_off_shielded_inflation.wasm
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I would like to ask a question to clarify the mechanics. Will all MASP pool inflation now be directed to USDC? Or, since the pool size is larger than the target, will nothing change for USDC incentive?

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Good question - it’s the latter. USDC incentives will continue to be determined by the difference between the shielded target and the current shielded amount. The incentive mechanism itself remains unchanged and will still rely on the PID controller to regulate rewards dynamically.

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totally agree with @preto here — namada’s power is in shielding anything, not just usdc.
making usdc the main narrative feels like we’re shrinking the vision instead of expanding it.
also, bit odd — i got kicked from the general discord channel after asking about this exact topic (whether st-assets would keep SSR incentives).
would really appreciate if someone from the team could clarify what rule that broke — feels strange to silence a legit governance question.

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hey @outlivehype! i see questioning decisions and criticism as ++important to our success. what’s your discord username? i can look into what happened

i agree as well, and i don’t think that this proposal suggests otherwise. can you explain a bit more about why you think that these assets should continue to be incentivized?

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appreciate you jumping in - my discord handle is the same as here. another mod already added me back to General (all good now).

why i think st-assets (stATOM, stTIA, stOSMO) shouldn’t be fully turned off:

(1) compound utility & sticky users. st-assets carry native yield and attract pos-aligned holders. incentivizing them supports stickier, less mercenary liquidity compared to pure stablecoin flows.

(2) PMF beyond USDC. namada’s edge is “privacy for anything,” not just USDC. maintaining at least minimal exposure to pos assets shows that shielded utility extends beyond stables - this is key to de-risking future integrations (polaris, private perps, collateralized credit).

(3) diversification & resilience. a USDC-only surface centralizes regulatory and depeg risk. a small, capped SSR budget for st-assets diversifies liquidity sources without material inflation.

(4) better emissions efficiency. st-holders already earn base yield; a modest SSR “top-up” nudges their economics toward Shielded, producing higher retained liquidity per emitted NAM.

a conservative yet functional approach could be:

• keep a small tail allocation (10–20% of SSR) for st-assets with per-asset caps and time-decay,

• tie rewards to real shielded activity metrics (liquidity utilization, transaction volume, retention half-life),

• use the existing PID controller to auto-throttle,

• publish a clear sunset/migration schedule and revisit after upcoming integrations.

tl;dr i support cutting inflation overall, but setting st-assets to zero removes one of the highest-signal onramps for the exact cohort likely to adopt private pos use cases next. happy to elaborate further or join a small WG on incentive design if that helps.