POOL incentive adjustments (Part 2)

Alright Poolers!

Thanks to all for the input on the next stage of POOL incentive adjustments. I’ve read through all the comments and I’m going to attempt to provide a more concrete proposal that integrates the feedback.

First my summary of the feedback:

  • Not a lot of support for moving POOL distribution to sponsorship (@RegisIsland @rvdeeb @TheRealTuna)
  • Not a lot of support for using pPOOL instead of POOL (@drcpu @Taliskye @RegisIsland)
  • General supportive for a small reduction in overall distribution rates – 15%-30% (@ageless @underthesea @rvdeeb)
  • General support for leaving the smaller distributions on the non-stablecoin pools unchanged (@RegisIsland @rvdeeb)
  • I’m intentionally not addressing comments on LP rewards. I think adjusting those do make sense but I think handling that separately from POOL distribution to prize pools will simplify the discussion.

Proposed Next Steps
The dripping of pPOOL and moving the POOL drip to sponsorship both fall into the category of tokenomic changes. Despite these two ideas not getting broad support, I absolutely believe continued improvement of the POOL incentive structures are needed. So I’d like to propose two next steps: 1). A modest reduction in POOL distribution 2). Begin using a percentage of weekly reserve capture to buy back POOL.

There is currently ~$4,000 in reserves generated per day. If we took 50% of the reserve capture ($2,000) per day that would mean we could buy back ~200 POOL per day which would cover the rewards currently going to POOL pool depositors. This essentially implements the POOL Bar idea that seemed to have a lot of support.

I’m proposing a total reduction of 20% by reducing both Dai and USDC by 29% each (details here). This will still keep one flagship pool that is the biggest but also will reduce the amount of POOL being sold by farmers. This coupled with beginning to buy back POOL seems a sensible change to overall tokenomics.

Some people suggested not reducing Dai, I would note our Dai pool is our worst performing both in terms of how much AUM is deposited per POOL distributed and how much yield is generated per pool distributed. It is also the POOL mostly heavily farmed so I think reducing it is important.

V4 & Other Changes
Important context here is that the new PoolTogether V4 prize pools are coming. This new prize pool design greatly improves on the current V3 design and I think making larger changes to POOL incentives at the time of those rollouts make sense.

I would also propose that we expand more aggressively on Polygon. I will write-up a secondary PTIP to bring POOL distribution to prize pools on Polygon (where yearn is not farming!) and also start doing LP rewards on Polygon as well. I wanted to keep this proposal simple but I also think it’s important context to know that is coming.

11 Likes

I’m opposed to the USDC decrease. I am for the overall changes.

I do agree the LPing rewards are better addressed in a separate post.

I’m on the fence about the buyback using reserve, only because there’s so many ideas floating out there on the right way to approach it. Haste is needed under current market conditions so let best not be the enemy of better here, so wrapping in this item is as good an idea as any and it won’t rock the floatie too much.

2 Likes

This proposed distribution change is exactly what I’d hoped for and excited about a buyback being included. I feel like UNI and COMP could use a slight reduction to but it’s not that big of a deal if they don’t. The key is reducing the most heavily farmed pools to help protect the pool price and the buyback is a great addition as well. A simple PTIP like this is exactly what we need with the limited time we have to get this in place. :slightly_smiling_face:

In a later vote I’d be interested in shifting a bit of drip out of UNI LP and applying it elsewhere (Sushi LP or Ruler partnership). The Ruler partnership could be trialed for 3 months to see how popular it is. Also very interested in using UMA Range tokens for a big buyback as I like to bet on POOL.

2 Likes

with how much disagreement there was over a buyback using debt or the treasury, i think buying back with reserves is a fair compromise and a sustainable method to return value to POOL holders.

I still don’t support reducing the USDC pool. I think we can get our reductions from the DAI pool alone.

overall I would vote for the changes you have outlined.

4 Likes

Yes on the drip reductions and an emphatic yes on the buyback.
I think there was a lot of discussion on the Discord, so I’ll leave it at that!

2 Likes

I am for the 29% reduction to USDC and DAI. A 600 POOL per day cut. I think that it is a well-thought out reduction plan.

How logistically will the buyback be executed? Will there be a price limit that we are buying up to?

What are the justifications for the buyback exactly? If we are speculating on POOL price I fail to see how that is a net positive if POOL is going out faster than we are buying it back. And I think we need a pre-determined price limit. If it is to balance sell pressure with $2k of buybacks a day I fear we would barely be balancing even Yearn’s sell pressure. They sold $15k worth of POOL today.

What if instead of a buyback of POOL with reserves we expand to Polygon using USDC and DAI. It seems like this idea is taboo, but why? I don’t understand wanting to buyback POOL to plan to send it right back out. If we use rewards like USDC and DAI then we do not need an LP position on Polygon which is a cost and complexity savings. We also delay the complications of inability to vote with POOL on Polygon. And we avoid designing a buyback. I think we can still do a lot with what we have rather than add moving parts.

Psyched for V4 and Polygon expansion!

5 Likes

I totally agree, with the smooth and progressive reduction of the APR, also with the buyback of POOL, if we take care of the value of POOL we will achieve that the rewards signa being attractive and even progressively reducing the APR, we will also be able to get better deals of diversification of our treasury in the future. And we will achieve loyalty to the POOL Holders.

4 Likes

Implement it as soon as possible.

3 Likes

We’re not necessarily trying to balance Yearn’s sell pressure. Part of the buyback is to show confidence in the future of the protocol. It isn’t always the purely fiscally conservative approach that wins out. The buyback builds some goodwill that was lost during the Yearn debacle, regardless of Yearn’s sell pressure drowning it out.

But I’m with you, stoked for V4 and the Polygon expansion as well! We’ve been stuck at 180-200M TVL and I’m just eager to see us grow! PoolTogether is probably the most fun you can have in DeFi right now.

3 Likes

The POOL buyback is one more tool that we will have available, it can always be regulated according to the effects I caused, I think it is always good to add possibilities.
With regard to the sale of Yearn I think we should find a way to make it more efficient to invest the POOL tokens within the protocol, and not just sell them on the market.
Perhaps one of the ways to lower instant selling is to achieve a sustained increase in POOL value that encourages you to retain rewards.

4 Likes

I support these changes. As soon as we reach a steady profit with the predicted burning of pool tokens, then with the growth of TVL we will also see an increase in the burning of the pool, and thus, every day the pool token will add more and more value.

1 Like