PTIP-13: Treasury Diversification has wide support as evidenced by the earlier vote, so I believe it will pass. This means that PT will soon have about $6m USDC in the treasury. That’s enough runway to build for years.
I’m going to split my feedback and address the reserve rate and distribution rates separately.
Reserve Rate
The reserve is intended to do two things:
- Capture value for the protocol
- Retain funds in the pools for perpetual growth.
We will soon have a massive treasury, so #1 isn’t pressing right now. Let’s consider #2:
A reserve rate of 50% is currently capturing ~$21k per week in the USDC pool. That $21k is essentially sponsorship until it is withdrawn. Per year it’s about $1m.
Let’s say the reserve was constant throughout the year to keep the math simple. This means that the APR was boosted by the sponsorship by: $1m / $80m or 1.25%.
So an APR of 5% will effectively be (5 + 5*1.25%) or 5.0625%
The reserve’s actual contribution to perpetual growth is negligible
So that strikes point #2. This leads me to believe that we should drop the reserve rate to 0% to maximize prizes and growth.
POOL Distribution
I want to provide feedback on some of the above points:
Reduce POOL distribution to low yield non-stablecoin assets by 80%
100% agree with this. We should still have emissions, but lower them as they not very valuable.
Reduce POOL distribution to USDC prize pool by 13% and Dai by 65%
I agree with rebalancing them, but I’d like to propose something else:
- The market cap of USDC is $15b across 928k holders. USDC on etherscan
- The market cap of Dai is $4.6b across 377k holders. Dai on etherscan
This tells me that USDC is basically 3x bigger than Dai in terms of the addressable market. The APR between them is very similar, so it seems to me we should reflect the POOL distribution according to the market size.
I propose we redistribute the current emissions of USDC + Dai at a 3:1 ratio to match market size.
Currently the combined POOL emissions is 2295 + 2295 or ~4590 POOL per day. At 3:1 each pool would receive:
USDC: 3442.5 POOL / day
Dai: 1147.50 POOL / day
I think this distribution better reflects the addressable market.
split POOL distribution 80% to sponsored deposits and 20% to regular deposits
The intention here is to separate farming from prizes: in theory whales will migrate to pure farming so they won’t be eligible for prizes.
You can reduce this idea down even further: it’s a choice between consistent APR and prizes.
This is exactly what Pods introduce: a spectrum between consistent APR and prizes. More people will win.
Initially I was a proponent of surfacing the sponsorship mechanic, but now I hesitate as it adds complexity to solve something which will likely be addressed by Pods.
My inclination here is to instead surface Pods as a way for users to win more, and let all users earn the same amount of POOL.
This does have some benefits:
- there won’t be any liquidity thrashing from the farming migration, which should reduce the impact on TVL
- Promoting Pods is more sustainable long-term, as it’s core to the product. If emissions stopped completely, there would still be value in being eligible for the prize.
- Much less complexity!