I support setting an initial cap, but I think it should be higher. Specifically, I'd suggest that the fixed rewards rate be set slightly above the current rewards rate for Kintsugi to encourage capital to migrate to iBTC vaults to kick off that market's liquidity. If the reward rate is below Kintsugi's, people won't move as much, making it difficult to generate iBTC liquidity and launch defi pairs for iBTC.
I calculate 7200blocks/day * 0.34 INTR/iBTC * $0.11/INTR = $271.7/day/BTC in an Interlay vault.
It looks like we're earning about 121.2 KINT/day/kBTC right now in a Kintsugi vault, so $470.2/day/BTC. (over June 5-29th)
Our Kintsugi network currently has 24.6 BTC, much lower than the 135.5 iBTC target, so we might be in this capped rewards scenario for a little while.

I read the comments and thought, and although I voted - yes, now I think around 0.43 as proposed below would indeed seem to be more adequate

Don't understand why it is a problem to have fixe a distribution like Kintsugi.

I'm not agree with problems :

1- Missing incentive to lock more collateral: INTR/block reward is not tied to BTC TVL, which can lead to skewed incentives during early stages of growth. Until a competitive Vault market kicks off, individual Vaults may lack incentive to add more collateral to enable additional iBTC minting to users.

=> Of course but many vaults are ready to jump in Interlay. So skewed incentives will be only in the first couple of hours. I think many vault take mote time to come in if we limit this game.

2-Flooding INTR to the market: Vaults might sell INTR tokens to recover some of their costs and generate profit. However, if the amount of INTR is completely disproportionate to the iBTC TVL and the maturity and scale of the network, this can lead to too much INTR entering the market early on - which in turn reduces the effectiveness of INTR block rewards as incentive mechanism.

=> Like response 1, I think many vaults take place in the first hours to take high incentive profit, this profit could be sell but I think it could be used for increase collateral so it is a good thing to open the raod for high BTC TVL.

So I think it is not necessary to add new distribution rule regarding Kintsugi. It works fine with kintsugi, no need to change that.

I propose linear INTR distribution https://interlay.subsquare.io/post/6

This proposal merits further robust discussion about the concerns/goals highlighted above, and the balance of risks/incentives among vault operators, INTR holders and iBTC users. Considerations that should be addressed:

(1) early vault operators should receive higher rewards for each $DOT risked as collateral than later-arriving vault operators given the higher risks (as were experienced with Kintsugi);
(2) If a parameter is added that restricts the rewards until a given threshold, then the proposal should address the proposed re-allocation of those withheld rewards throughout Year 1;
(3) APY assumptions used in calculating “appropriate” levels need incorporate that vault operators are assuming delta price risks on both $DOT and $INTR and
(4) every effort should be made to release the vaults with compelling use cases for iBTC.

We would suggest a nonlinear fee structure to reward early entrants and to create incentives to add further liquidity to maintain share of overall rewards.

As an example, start with 23 INTR per block until 45 iBTC is reached then increase to 31 INTR per block till 90 iBTC is reached and then 45.66 once the 135.57 is reached. [These numbers are open to discussion but the concept we believe aligns incentives]