Proposal: Update KITE Incentives for HAI Minting & Staking

Summary

This proposal updates the KITE incentive framework for minting HAI and participating in staking campaigns. The goal is to move away from rigid, asset-specific emissions and toward a flexible, protocol-aligned incentive system that:

• Expands KITE incentives to all supported collateral types
• Introduces a weighted distribution model for HAI minting
• Prepares the protocol for dynamic emissions once the Stability Pool is live
• Reinforces proven liquidity venues without increasing KITE inflation

Motivation

The current HAI minting incentives are structured as fixed KITE per day emissions applied only to a limited set of partner collateral (notably alETH and msETH). While effective during early growth and partner alignment phases, this structure has several drawbacks:

• Incentives are not protocol-wide, discouraging diversification of collateral
• Fixed emissions do not respond to market conditions or peg health
• The system does not scale well with upcoming protocol components such as the Stability Pool

As HAI continues to mature, incentives should reward system health, capital efficiency, and broad participation, rather than specific historical partnerships.

Proposal Details

1. Expand HAI Minting Incentives to All Collateral

• Reduce existing fixed KITE incentives on select partner assets (alETH, msETH)
• Enable KITE incentives for minting HAI across all supported collateral types
• Incentives will no longer be hard-coded per asset

This change ensures HAI minting incentives are neutral, extensible, and fair across the protocol.

2. Introduce a Weighted Distribution System for HAI Minting

Instead of fixed emissions per collateral, this proposal introduces a weight-based allocation model.

Key mechanics:

• A global KITE emission rate is defined for HAI-related incentives
• This global rate is dynamically split between:
  • Stability Pool incentives
  • HAI minting incentives
• The split is determined by HAI’s market price relative to the peg
  • Off-peg → more KITE directed toward corrective action
  • At-peg → balanced or reduced emissions
• The portion allocated to minting is then distributed across collateral types based on predefined weights

No collateral has a guaranteed fixed emission. Rewards scale with weight and system needs.

3. Stability Pool Dependency & Transition Period

• The weighted distribution system activates once the Stability Pool is deployed
  • Development is near completion
  • Audit → deployment to follow
• Until Stability Pool deployment:
  • The proposed weights will be implemented as fixed KITE per day values
  • These values will later be reinterpreted as relative weights, not absolute emissions

This ensures continuity of incentives while enabling a smooth transition to dynamic emissions.

Proposed HAI Minting Weights

Collateral Weight Table (Initial Configuration)

Once the Stability Pool is live, these values represent relative weights, not fixed emissions.

---

Visual Weight Distribution (Relative)

haiVELO        ██████████           10
haiAERO        ██████████           10
alETH          ██████████           10
BOLD/LUSD      ██████████           10
WETH           ██████████           10
wstETH         ██████████           10
rETH           ██████████           10
tBTC           ██████████           10
msETH          █████                5
alETH/WETH     █████                5
msETH/WETH     █████                5
OP             ██                   2.5
VELO           ██                   2.5

This structure prioritizes productive, protocol-native collateral while still supporting long-tail assets.

4. LP Staking Incentives

• No change to fixed KITE per day LP staking incentives, except where noted
• HAI/BOLD Curve LP
  • Increase incentives by 100%
  • From 25 → 50 KITE per day
  • Rationale:
    • Proven effectiveness in maintaining peg stability
    • Deep liquidity directly improves redemption efficiency
• haiVELO / haiAERO LPs
  • Remain at 25 KITE per day

5. KITE Distributor Funding

• Top up the daily reward distributor with 20,000 KITE
  • Covers incentive emissions during:
    • Stability Pool completion
    • Audit period
• Repay POL safe 2,500 KITE for covering a recent top up
  • See the transaction here
• A follow-up proposal will:
  • Define the long-term global emission rate
  • Allocate additional KITE for sustained dynamic incentives

Important Clarification: No New KITE Minting

• No new KITE is minted as part of this proposal
• All incentives are funded from existing KITE held by the DAO treasury
• “Emissions” refers strictly to distribution, not supply expansion

Conclusion

This proposal modernizes KITE incentives to better align with HAI’s evolving architecture. By shifting to a weighted, dynamic framework and expanding incentives protocol-wide, HAI becomes:

• More resilient
• More capital efficient
• Better prepared for Stability Pool–driven peg management

This is a foundational step toward adaptive monetary incentives that scale with the protocol.