$POOL staking pool: an economically sustainable proposal

In light of the last events I’d like to propose a draft to discuss a possible form a $POOL staking pool that tries to be a compromise between all the views about the matter that I read and discussed with you guys.

Why this post:
It is being voted right now the roadmap for PT, and in that roadmap we talk about a staking pool for POOL but we don’t go deep in the analisys.
It was also one of the many points in the recently failed PTBR.

Why I believe a staking pool is necessary now:
I strongly believe that a staking pool is not a necessity per sé at the moment.

I instead think it is important to send a signal and that signal can be the turning point to bring back visibility and users to PT.

If we create an economically sustainable staking pool plan we will give $POOL token more value, because it will have some future revenues.
Just by this consideration the risk of owning it will get slighly lower and we may see some volumes. Once we have a group of people onboard that have a small revenue (more or less) proportional to the TVL and the prizes of PT we will have that same group of people that will work to create more TVL. They will talk bout PT, create content, tweet about it, etc. It will be a snowball effect.

More again later on the side effects that we will have creating it.

How I would make it:
The idea I’m drafting is to act on the prize liquidations and capture part of the prize. In this example I say 10% but it is just an example.
If a wallet wins 100 $POOL we give the winner 90 and we diverge 10 to the staking pool. The staking pool can be a POOL/xPOOL on the like of xSUSHI or just a contract that redistributes the received $POOL among all the depositors, that does not matter.
And that’s it. As simple as possible but this opens to a lot of possibilities.

Main community concerns: taking a fee lowers the prize:
This is the biggest concern I receive, my answer is that while it is true that we are giving 90% of the prize instead of 100%, we should also consider the real amount of the prize other than the percentage.

If the staking pool creates a snowball effect that brings us more visibility and more TVL (because now stakers works with us to achieve that) it is true that the winner is taxed 10% but it is also true that the starting prize can be much much bigger! I’d want much more 90% of $1000,00 than 100% of $200.

Main community concerns: we don’t want to give free revenue to stakers just because they are stakers:
This is another view I encounter often.
I see it this way: instead of paying a grow team from the treasury to shill PT, we are paying stakers to work for the success of the protocol. It is their interest to make the prizes as rich as possible, as many as possible, because they are taking a cut of them. No prizes → no staking pool revenues.

The cool part is they only get paid proportionally to the success of the protocol!

Main community concerns: we don’t care about depositors, only stakers:
Who said we can’t give some earnings also to them?
We can take 5% of the prizes for the staking pool and 5% for TVL incentives! I don’t like this solution but it is not out of the table with this implementation of the staking pool.

Main community concerns: if we extract fees we will be forked by a more efficient fork with no fees:
This makes me smile often because we have the answer right in front of us:
we are spending so much money to develop and to maintain PT that we are on the road to deplete all resources this very year; many of those money came from the fees from V3 and yet we are afraid that a competitor can fork us and live with no revenues whatsoever eating our market spot.

What is happening in reality is the exact opposite: we created a working V3 engine that was sustainable and was creating revenues and we dismissed it, while others took it and are utilizing it right in this moment, with more success, more fees, more TVL, more revenues than us!
Because we left empty that very market spot that we ourselves created and it has been filled by an economical sustainable projects. With fees.

And why this? Because people in crypto work for their bag!

Every protocol that had succeeded was forked. From Uniswap to AAVE to all of them.
The first comer has never failed due to the forks, on the contrary the forks usually have a short life if they are not totally scammy.
Make it in the roadmap 100% sure that we will be forked if we succeed, but we cannot avoid to succeed in order to avoid forks!

Why I think this will work:
The main reason is that we are extracting $POOL from the prizes, this is not creating inflation as those are freshly swapped $POOL from other tokens.
We are bringing new money in the system.

This solution opens the possibility to the governance to refill the treasury just by staking protocol owned $POOL in the staking pool.
We can have the protocol own (for example) 30% of the staking pool, and we know that the $POOL farmed in this way can be spent (dumped) with no problem since they are coming from $POOL bought on the market.

Once the governance think we are good with the fee extraction we can remove some protocol owned $POOL from the staking to capture less revenues, or add some more if we need more.

If we adopt this solution I would go with a bigger fee, like 20%, bootstrap the staking pool with 100% protocol owned $POOL and take all the revenues for us (us is PT treasury).
If someone want some of the revenues he will deposit his $POOL and start to work to make his money worth an APR.

Again we have to be responsible as individuals, since many of early member of the governance have a big bag of $POOL, if they deposit too many tokens in the pool they will make it not appealable for new people to stake, since they would have a big percentage and the snow ball effect would not begin.


Do you want to make it even more pooly?

Create a $POOL vault and use the fees as source of revenue for this vault.

Bang! Now I can use $POOL to win a prize.

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Thanks for putting your thoughts here in an organized and direct fashion while keeping it civil! Appreciate you getting the conversation started.

I hope some of the more abled than me participants chime in. For now my main point is that no matter what, we find a way for stakers to continue to be able to vote in governance proposals while POOL is staked.

We have done this previously and although it wasn’t the cleanest way it worked.


Just wanna add some info here and add a quick comment.

Generally, I rly like the idea of a POOL staking POOL. I even created a first experiment one myself:
People there can deposit and withdraw POOL and it’s possible to contribute POOL on behalf of the Vault to the Prize Pool and so make the Vault and its depositors eligible to win! (Deposit on your own risk though, I made the ERC4626 Vault myself and I’m not a real Dev, although the logic is pretty simple and it’s all open source).
A Vault with a real yield source is though ofc preferable and I would support the development of such.
I’m not a big fan of taking away yield from depositors, having some Vaults (maybe even the main Vaults on the front ends) with a fee is probably fine but I think it should be possible to use PT with a Vault without a fee.

The topic of voting that Andy mentions is important and I wanna add that “and although it wasn’t the cleanest way it worked.” is a bit glossed over. The way it worked was that the votes were controlled by a multi sig and then a snapshot decided if the votes should be all in favour or against the proposal, there was some minimum threshhold but even the against voters then had to vote yes if the majority says so. The PPOOL was very centralized and prone to abuse. Voter fatigue and not reaching the needed threshold was also a problem. Just wanna add this here, so it’s clear that the topic of voting with your POOL and being deposited into some kind of POOL Vault is not trivial.
But we are currently only on deployed on Optimism and POOL on L2 can’t vote anyway, so I don’t see it as a big problem. With some coordination and enough prepare time so people can bridge back to ETH to vote before a proposal goes on chain that can be solved I think.

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The voting issue can be solved in many ways if we need to.

We cannot have the counterfactual to understand which way is better.
I explained in the OP why I think we will have counterintuitive positive side effects if we begin to extract fees.

If we tax the frontend vaults only we expose PT to a vampire attack from a cheaper vaults: that’s why by technically it can only be either no fees or fees equal for all the vaults at protocol level.

I don’t see a problem to make people pay a fee on the yield: that’s how almost all protocols works, yield aggregators but also dex and … almost all of them!

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You have my support on the topic of a POOL staking POOL but I am against the implementation of a fee going to POOL holders at the “protocol level” (What you mean is the Prize POOL contract from where we distribute the prizes, the Vaults and everything are technically also the protocol but I know what you mean).

The decision of implementing one or not warrants a separate thread in my opinion. You are right that people then would rather choose a vault without a fee but the same is true at the protocol level, if someone forks PT, then I would rather use the protocol without a fee. With the saved fees I could then make a donation to a protocol or public good I wanna support myself.

Uniswap does not take a fee, the fee goes to LPs.
The comparison is more accurate when you look at Uniswap and Sushiswap, Sushi does take a fee going to Sushi holders and I’m not a fan of it.

Where you do have my support is about voting on it, if the majority of POOL holders want it, then it should happen.

We don’t have a counterfactual A/B test to see if the snowball effect starts.

We can see where we are and compare to other protocols and where they are.

My idea is that we are focusing on the piece of the pie that we remove (the fees), without considering that the pie would get much bigger that it is now (more visibility, more people involved).

If the majority wants POOL just as a governance token we have to give prizes in ETH and don’t use it as prize and tool of the protocol: this solves the liquidity problem and many more.

If we already voted to have POOL as governance and prize token we need liquidity and we need to face the reality that it has to have a value of some sort (fee, dividends…).

Same for the grants: if we decided that we pay grants in stables and POOL we have to give it some value or granters will sell it to zero or keep it and obtain too much voting power.

I’m sorry if I appear hostile, I am just explaining what I see from a logic point of view.
I may be wrong but I tried to explain deeply the reasons of every point I made.

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