Gonbatfire's POOL Tokenomic Reactivation Plan

(The title it’s just a nod to Tuna’s post :rofl:)
I’m gonna start with a quote of @Andre’s post from a while back

Our DAO Is Our Greatest Strength
Seriously, I don’t think we have seen an project with such well thought and inspiring ideals, people don’t just want to use the protocol they want to become part of it! We believe in the success of the protocol there is no other way to put it.
V4 has been an amazing step ahead, its cutting edge tech will no doubt help us growth much further. However, do we have this much confidence in the POOL token? Personally I do not, because I know the market can be irrational and that the amazing progress we are making can easily be overshadowed by a declining token price, in both the eyes of investors and new depositors.

So, with that said what do I propose?:

  1. Tie token value to TVL

We want token growth to align more directly with protocol growth, I propose we distribute a portion of the yield generated by deposits to POOL holders. Could be 1%, 0,1%, the higher the % is, the stronger the tie will be.
Since stablecoins are a scarce resource, the holders would have to be paid on whatever token the interest generated, as an example:

Total yield generated: 200000 USDC, 4000 MATIC, 2000 AVAX
Funds to be distributed (1%): 2000 USDC, 40 MATIC, 20 AVAX

The distribution would be done by a staking mechanism which should be kept as simple as possible (User deposits POOL, earns a % of distributed funds).

One thing I want to note is that this would end the DAO dilemma of contributors being paid in protocol tokens, and then having to sell them in order to realize it’s value, with this they could now both hold it and still earn some form of realized value.

Note that this could enable a very interesting loop of users earning tokens and then depositing them back into the pool where the interest was generated in the first place (we can even offer an option to automate that) and also it’s a way to appeal current depositors, with point two:

  1. Reintroduce POOL drip

Tokens have to be distributed somehow, the thing is, how do we make sure they go only to the people who actually believe in the protocol? One way is thru Coordinape, which I find amazing, and I believe other way is through a locking mechanism:

Distribute POOL to depositors (based on TWAB for example), but here is the thing, we won’t actually give them the POOL :smiling_imp: (hold your horses) instead we give them the option to buy X amount of POOL, at a discount price, if they agree to lock it for a certain time:

  1. User is rewarded with the option to buy 50 POOL at 25% less than the current market price.
  2. User buys it, but he does not receive the POOL yet, tokens are locked in a smart contract and will be transferred after 6 months (for example)

If after 6 months POOL price:

  • Stayed the same / went up / did not drop over 25%: Then user would be at a substantial win

  • Had a drop of over 25%: User would be at a loss (altho less of a loss than if the user would had bought at original price and holded it for the same period)

This would effectively ensure that only users who believe in the protocol growth (remember, price is now tied to TVL) are being benefited with privileged access to POOL. It would also solve the dusting problem of users receiving too small amounts of POOL to even bother withdrawing (which results in effectively burning those tokens) since now they can just not buy them, and we could also make the options to buy expire after 240 days.

Now some points I would like to address:

Why not set an special pool to distribute in point 1?

I’m 100% onboard of making holding POOL a fun experience, however imo investments preferably have the following characteristics:

  • Be as predictable as possible (reducing risk of not making a profit)
  • As much as possible, performance has to be based on fundamentals (and not by chance)

PT pools don’t have these, they are based on probability (you could make a sizable deposit and still not earn anything) and your yield does not necessarily depend of the protocol growth and it’s fundamentals, in the end it’s by chance, not guaranteed, now these are great properties for a savings account but not for an investment necessarily. This is why put my vote on keeping the mechanism as simple and predictable as possible, and to make myself clear, I like the idea of a special pool, we can offer it as a higher risk/higher reward option, but that would be as an extra, not being the base layer.

Why not also utilize the treasury to fund point 1?

Similar to my previous answer, I aim to keep the mechanism as predictable as possible, utilizing the treasury may mean a higher return, but it can also provide uncertainty, subsides can be upped or reduced without a clear trend, treasury can also dry up, it’s very hard to predict these in the long term (especially because ideally we would also use the treasury for other purposes) so it’s better to leave it out of the equation and focus on building a robust base layer.

Alright, I wanted to make this post for quite some days after reading a lot of feedback on the discord, thank you for reading my first post :cowboy_hat_face:

What are your thoughts on my proposal?
  • I agree, let’s make it happen
  • I agree with the main ideas, not really with the execution (feel free to explain)
  • I don’t agree
  • Unsure

0 voters

2 Likes

Thank you for your contribution. I like your line of thinking and very happy to see another proposal, hoping to see many more as it’s an important issue. The one thing missing is creating enough demand to overcome existing sell pressure + newly minted tokens. The promise of future revenue share is a huge selling feature but we have to be governing a growing treasury and not a shrinking one. 1% on 100MM TVL amounts to $50,000 per year to POOL holders which is not enough to move the needle. I dont want to dump more POOL on the market until demand for owning POOL is addressed. I believe future revenue share is already priced in and we need to prove to potential investors and to our own community that POOL holders manage a sustainable and growing treasury.

4 Likes

Thank you for reading! Yeah the 1% number is really just a placeholder, we can definitely discuss what the optimal amount is, what I mainly want to address is that the success and growth of the protocol needs to be translated into a strong token, so that when the protocol is doing good (TVL growth) it gets reflected on all the charts!

2 Likes

Also something I like about this locking mechanism is that POOL emissions would be, in a way, dynamic, when demand goes down and the price is in a declining trend, fewer people would claim their discount options due to increased risk (they need to bet that it will go up) resulting in less POOL being dumped into market, it automatically decreases supply when demand is too low.

1 Like

I agree, but I think that instead of adding new protocols or use cases for the token we should first expand upon the use cases already available; voting. Right now you can only vote with POOL that is on the ethereum chain. I think giving it voting capabilities from any of the chains should be the number one priority. I think it would help out the price (maybe not as much as other things you mentioned), but also I think it would increase decentralization. Right now it only makes sense to buy pool on eth if you’re investing a lot. Compared to people who would just want to buy small amounts on say polygon.
So to summarize I think these are great ideas, but should come after pool has voting capabilities cross chain.

3 Likes

Yes! 100% agree, after all, these ideas can only do good if they work in conjunction with the main use case of the token, which is voting in governance, you can already buy POOL on Polygon, but since you are not able to vote with it, I don’t think it can bring a sense of ownership quite well, being able to vote would be a huge thing for sure.

1 Like

First of all thank you for this publication, I know it takes time and you invest it in our common good, that is very valuable.

Adding ideas, Once the vote is implemented in L2 I think we should reward the vote directly. Perhaps a trickle of POOL that is directly linked to POOL tenecias + time spent in the pool + participation in the votes, a %, not very high to avoid farmers, but something that I increased proportionally to the permanence and participation of voters, tedious for farmers who only want to squeeze and sell, but a sustained compensation for those who stay and participate.

3 Likes

Thank for this thoughtful post @Gonbatfire. I think a staking contract is very sensible. I also pitched it in a previous post, so we’re definitely on the same page.

I think your idea of options is interesting, but adds a lot of complexity. If the issue is dust, then I think we should first figure out a possible implementation and whether it necessitates a fix such as that.

With regard to the staking rewards, we diverge quite a bit. This proposal is similar to Tuna’s in that it wants to give away USDC to POOL token holders. I don’t think it’s the right approach for these reasons:

  • It’s not particularly future-proof: we may not always have USDC as our main treasury asset.
  • Dust problems (might not be worth claiming tiny amounts of a different asset)
  • Users are primarily draining the treasury
  • Users are not increasing their ownership
  • It means we don’t have a natural POOL yield source. It’s a unique dual-token model.

Both of these proposals don’t want to distribute POOL because they worry about sell pressure on the POOL token. To me, that’s an indicator that we need to address sell pressure on the POOL token. If we could do that, then we’d be able to distribute POOL and it would be seen as being valuable.

Here are some benefits of distributing POOL as staking rewards:

  • Future proof. We will always have the POOL token.
  • Users earn ownership
  • Users have the option to liquidate some of their POOL
  • No dust problems (a users share of the pot simply increases)
  • We have a natural POOL yield source
  • We retain USDC in our treasury

Now: how do we mitigate POOL sell pressure? Essentially, how do we allow (and embrace!) people selling POOL to take some profits?

Money markets.

Something that both of these proposals have overlooked is the power of money markets. Specifically, Uniswap V3.

Imagine if, in tandem with the staking contract, governance deploys a concentrated liquidity position of POOL/USDC on Uniswap V3. We’d see:

  • Users could efficiently exit from POOL if they want to
  • Governance would turn POOL into USDC as the price goes up. Governance could then reposition liquidity to capture some of the USDC for reserves.
  • Governance would earn trading fees.

I think it’s time for governance to use its reserves to strengthen the POOL token. We could benefit immensely from this.

I’m going to write up some thoughts I had this weekend. I had an idea related to this…

4 Likes

This is more or less what I imagine too. Just want to make sure there is also some incentive for users to stake (like the current rewards) besides voting gas-free. As I think this reduces sell pressure.

2 Likes

What if we would enable option of POOL vesting?

STAKING vesting tiers could be:

  • 1/2 year - 5% POOL APR

  • 1 year - 10% POOL APR

  • 2 years - 15% POOL APR

  • 3 years - 20% POOL APR

  • users could transfer or delegate their vested POOL

USDC pool:

  • prize winners will win USDC + x vested POOL

POOL pool:

  • vested or unvested POOL can join POOL pool
  • winners will be drawn daily
  • prizes could be: delegated daily winnings of PT 100k+ USDC deposit in USDC pool

Idea of vesting:

  • reward long term users
  • in time users will probably allign more with PT
  • in time PT could grow V4 and implement another features and incentives for users to hold POOL (integrations, partnerships, LP, swim points, NFT, delegation, app,…)

Also USDC pool winners will get vested POOL drip + possibility to access POOL pool to get another chance to win and gamifications

1 Like

This just means spending more POOL and doesn’t address the issue that people aren’t interested in buying POOL. It’s a supply reduction but doesn’t boost demand. We need to attract new holders and not just enrich the existing ones.
How do we make POOL more enticing? I don’t think bigger POOL returns is the answer.