Two upcoming events give us an opportunity to re-think POOL distribution:
- POOL distribution for all V3 prize pools is set to end in ~35 days (end of October)
- The launch of V4 prize pools
I want to kick off a discussion on some radical changes to POOL distribution and get input from the community. My proposal is:
- Allow POOL distribution to end for all V3 prize pools
- Start V4 prize pools without any POOL distribution (use POOL incentives later)
- Incentive V4 usage solely through adding additional USDC to the prizes (starting at $50,000 per week)
- Continue POOL distribution only for LP program and POOL pool depositors
POOL distribution with V3 has had mixed results. It’s been successful in growing TVL and creating large prizes but in a fairly inefficient way (i.e. the value being disbursed is less than the value yield farmers are contributing to the prizes). It’s also been successful in distributing control of the protocol but as more POOL has been distributed that goal because less important (because the protocol control already is decentralized).
The distribution of POOL is an important additional incentive that drives protocol usage. However, it works best when it is an additional incentive that accelerates growth. NOT when it becomes the primary reason to use the protocol. To state it plainly, if people are ONLY using the protocol to get POOL tokens and sell them, the distribution is not working. It is simply covering over more core product / market fit issues.
For these reasons, I’m proposing it’s best to start V4 off with no additional incentives. It will be much harder to grow this way but it will allow us to make sure we have true organic traction and can then accelerate that with incentives. An overview of what I see as pros and cons.
- Stops all farming and token inflation, allows us to gauge true organic traction
- Allows us to focus on the core value proposition of no loss prizes
- (hopefully) builds a tighter community among long term holders
- Enables us to more aggressively distribute POOL to active contributors (via things like Coordinape, etc.)
- Enables us to re-introduce POOL incentives in a more impactful way
- Will see a large drop in TVL as short term minded farmers leave (could be psychologically hard for the community)
- Hard to compete for deposits when other protocols are aggressively incentivizing deposits
V3 vs. V4 incentive differences
V4 gives us way more flexibility in how to disburse incentives. V3 incentives worked in a very simple way, you accrued POOL in real time proportional to your deposit. With V4 we can do more interesting things like awarding POOL on a weekly or monthly basis depending on your total deposits over that period of time. That will enable us to use the incentives more effectively.
This is meant to kick off a discussion rather than be a formal proposal. I welcome all feedback! I’ve included a few polls to gauge high level sentiment:
- Allow Incentives to expire on V3 prize pools (end of October)
- Continue incentives on V3 prize pools (Past end of October)
- Launch V4 with no POOL deposit incentives
- Launch V4 with POOL deposit incentives