POOL to incentivize saving

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Building towards the theme of save more win more

V4 growth thus far has been focused on users. We have centered our attention on Polygon where gas fees are low and we have run NFT campaigns to attract new addresses to The Pool. We now have 20k unique addresses deposited. For comparison the V3 USDC Pool had 2,500 at the peak in 2021. Dune

At the launch of V4 we said we would reintroduce the POOL token in a way that was more effective for the protocol. What does that mean?

  • POOL widely distributed for governing the protocol
  • POOL for growth of the protocol
  • POOL for the savings and no-loss ethos of the community
  • POOL less enticing as a farm and dump

One of the many bounties for ideas to grow the protocol this week was “Time Based Rewards Bonus” (Idea #4). This idea, to incentivize depositors to stay in the pool, has been floated around for a long time and has received positive support, but the idea has not been further investigated to look at the practicality of implementation. As it turns out, we now have an easy way to encourage and reward saving already built around the core protocol.

V4 brought us a unique DeFi primitive that enables us to easily recognize an average balance over any given period of time. The TWAB. The team has recently built a rewards contract that enables distribution of any token to depositors with a TWAB balance over any specified time. TwabRewards | PoolTogether The way it works: A bulk amount of a token is put into the contract with defined time lengths (epochs). Say 1,000 POOL per week for all depositors which will be made available for claiming at the end of the week. When prize pool depositors claim their TWAB for the time period is calculated and they are able to claim their share of the rewards in relation to the entire pool. While this is a relatable approach to liquidity mining we have seen utilized across the space, the TWAB rewards presents a unique opportunity for a new methodology to distribute POOL that aligns with the ethos of PoolTogether. Another riff on POOL Seasons.

We can use the TWAB rewards contract to incentivize both new deposits AND savings behavior

We put POOL in the TWAB rewards and set the epoch to be one season (3 months). This means no POOL can be claimed until the end of the season. Depositors are thus rewarded for how much they save AND how long they save. Having redemption at the end of 3 months means no immediate sell pressure from farming and subsequently less opportunity for large scale farm and dumps. And most importantly, the token is widely distributed to participants in the protocol. This added incentive to deposit and save can also drive new users and growth to The Pool.

Added Benefits

  • A TWAB distribution of POOL enables the chance for flywheel growth. Where POOL value expresses reflexivity to deposits coupled with no immediate sell-pressure. In DeFi lingo - Deposit numba go up, POOL numba go up. With the flywheel spinning, we grow.

  • By adding TWAB rewards to the prize pool we can reduce the current prize subsidy in tandem. That means saving USDC treasury reserves and giving us a longer runway to operate. The treasury has around twice the value in POOL currently as it does USDC https://info.pooltogether.com/

  • This presents a new opportunity to revitalize the Mainnet Prize Pool. Where claiming POOL once every three months is not a significant gas cost. While the TWAB rewards is a bit heavy on gas because of the TWAB functionality (like claiming prizes), this can be minimized by a frequency of once every 3 months.

  • Gives depositors a guaranteed win

  • A whole new group of people are given ownership stake in the protocol and the power to govern is further decentralized.

Other Considerations

There is also potential to further align long-term incentives with a POOL TWAB epoch of a longer time frame for depositors that overlaps the 3 month seasons. Such as adding a one year epoch. An easy to implement complement to the seasons idea to further incentivize long-term savers.

Taking the idea one step further we can add POAPs and NFTs to recognize and award depositors XP in the prize pool. These can use TWAB or other Snapshot techniques to keep depositors engaged throughout the season.

The success will depend on the presentation and the user experience. This concept is not farming POOL, and should not be presented as such. The motivation is born from the DAO wanting to reward depositors for saving. POOL widely distributed for governance and a stake in ownership of the protocol.

Downsides

All POOL becomes available at once possibly concentrating selling pressure. This should be counteracted with a V4 pPOOL that also incentivizes depositors to grow their POOL holdings with similar timed TWAB rewards. In addition one season can be followed by the next to keep deposits growing and the flywheel in motion.

Requires POOL liquidity. In order to distribute POOL on a given chain liquidity for POOL is required. Good thing being we have 3 months to get it there. And while this may be a nogo for Avalanche it should be fine for Optimism where the current direction includes bridging POOL to rollups.

Build

The infrastructure to enable an incentives program as described above is already in place with the TWAB Reward Contracts deployed on all chains PT is active. Shall the community want to move forward, The TWG will work on a proposal to optimize results with POOL emissions relevant to current prize pool dynamics and goals for growth. The community then has unlimited potential to craft the user experience and messaging of POOL seasons, depositor XP, and other incentives, prizes and rewards for depositors. And of course let us not forget there are still PRIZES!

POLL

Do you think using the TWAB contract to incentivize depositors with POOL distribution is a good path forward for growth of the protocol?

  • YES POOL to incentivize savings
  • NO And I can explain why

0 voters

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This is much more coherent then the short version :blush: and looks great. I’t also highlights bits of the protocol i need to read up about more so thanks for that.

As a new comer i believe that something like this would be good incentive to keep money in PT (not that i’m itching to pull it out or anything).

Another option to offset the first (sell pressure) downside would be to split the rewards into smaller rewarded offset rolling windows like a 3 month holding ending in jan, feb , mar etc. this would incur more gas fees for claiming i realise while writing this its probably a worse solution. But better to have a worse idea to make your solution look better :smile:. A pPool that was offset by like a week or something would be a good solution i think.

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I would argue that the infrastructure for this is not fully in place. There is a tool for creating TWAB rewards campaigns (Still on staging on tools.pooltogether.com) but nothing for claiming TWAB rewards.

When PT Inc. developed the contracts for the rewards we also contracted out some designs for the core app. Those flows haven’t been implemented yet.

While the claiming process shouldn’t block the prep work, it’s definitely something that’s needed for when the season would begin. It’s a great opportunity for a bounty!

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I think this is a great idea overall! Encouraging long term depositors is probably one of the things that we were missing all allong. Some people had given the idea of improved chances to people that stayed longer, but that could have a negative effect on new depositors. This idea, however, perfectly aligns with the concept of prize SAVINGS ACCOUNT that PoolTogether is! Giving a base APR can also allow us to focus on bigger prizes instead of small ones (something that we will probably talk about in the future).

It’s true that there will be some uncertainty when the end of the TWAB period comes, which might result in sell pressure. However, I think that the poing here is that we will be distributing POOL to people that are using the protocol, which is exactly what we should be doing. Moreover, this can allow us to alleviate the pressure on the USDC treasury spending, which is always positive.

Regarding Dylan’s comments, I know that underthesea has been meesing with the contracts, so we can easily create TWAB rewards without the need of a UI. Also note that this would need to be approved by the DAO so that we can spend POOL from the treasury. So probably the TWAB season would have to be created through the contracts even if we had a UI. Regarding the claiming part, we need a UI to make the process as easy as possible for the users. The good thing about this, is that this UI doesn’t need to be ready until the time to claim the rewards comes. This means that we will have 3 months (assumming 3 months seasons) since the start of this program. Therefore, this will probably be easily done through bounties or any other way.

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I think this could be a great idea, but there are some aspects I’d want to look into further:

It would be particularly interesting if the manner with which POOL was distributed followed a quadratic approach rather than following a simple size of deposit & time of deposit equation. I don’t see an issue with more POOL being distributed to wallets with larger savings, but I’d love to further incentivize longer-term savings.

Regardless of how it is distributed, I can see many users receiving very small amounts of POOL at the end of a season. This can obviously add up over time, but it might be the case that a lot of POOL ends up being distributed as rewards and never claimed. I guess what I’m inferring is that we’d need to decide if essentially burning POOL (allocated to a wallet that will never claim it) is an issue, and if so design the contract in a way that returns the POOL if unclaimed for a long period of time.

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Love the idea!

It’s bothered me that we haven’t yet gotten POOL emissions back into place. I think the idea of depositors becoming owners is crucial. I would also note, if you looked at the data from our previous emissions the really were successful but the issue was there was a few actors (yearn) that aggressively yield farmed. I think using the TWAP Rewards contract will mitigate that.

I do think there is quite a bit of UI work that would be needed. Both to facilitate watching the POOL accrue and claim and also to make sure the mechanics of it are communicated properly.

One other idea – it could be fun to make the amount of POOL that is distributed after three months variable based on how much is deposited!

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I also like the approach of having a variable amount depending on the deposits. However, as underthesea told me, it would be more centralized, as we would not be setting up the TWAP rewards until the end of the period (and we would have the power to not set it up).

Still in favor of it though!