Discussion: Tapering ANC-UST LP rewards

Following Astroport’s liquidity migration proposal, community members have expressed being in favor of a reduction/suppression of ANC incentives granted to ANC/UST LPs on Terraswap. This thread is intended to centralize arguments for and against the tapering, and to keep Astroport’s thread focused on the migration discussion.

To ensure deep liquidity for its native token, ANC, Anchor protocol has been rewarding Terraswap LPs with additional tokens (earned on top of TS trading fees). In the earliest stages of the protocol, this contributed to curbing excessive volatility and enabling large trades with constrained slippage.
According to the documentation, 50,000,000 ANC/year (5% of total supply) are currently earmarked as LP incentives.

Current liquidity
Over 50% of ANC’s trading volume happens on Terraswap, according to Coinmarketcap. This is unsurprising and desirable, as deep liquidity should be available locally. Currently, there are approximately 360M$ worth of liquidity for the ANC-UST pair, for daily trading volume of approximately 7M$, with 3M$ lows and spikes reaching towards the 40M$ mark:

Current liquidity:
Anc-ust liquidity

Trading volume:
Anc-ust volume

ANC-USDT pairs are also available on centralized exchange such as Bitmart (20% of the daily volume), Kucoin (6%), LBank (13%) and others.

Discussion topics:
On the one hand, tapering or ending the current incentive program should curb ANC dilution, potentially setting the token up for a period of price appreciation, and preserving token reserves which could later be deployed, for instance as Borrow incentives.
On the other hand, such reduction could lead to substantial withdrawals of liquidity, from LPs and auto-compounders (e.g. Spectrum & Apollo), which could lead to increased volatility and slippage.

Astroport’s ASTRO incentives should also be considered, as the protocol is offering 1.425% of its own supply in ANC-UST LP rewards, should Anchor migrate from TerraSwap to Astroport pools.

Should emissions be curbed? To what extent? On which metrics should the emissions schedule be based going forward?