Objective:
Trial $150,000(Max Payout $150,000, Min. payout $50,000) in KPI options to be used by the grants committee in the upcoming quarter. My hope is upon successful use of the KPI options by the grants committee we can expand the use of options in future grants budgets. Grants committee would attempt to pay some contributors. If the options aren’t used then they come back to treasury but it would be great to see if we can pay contributors with options even if its for a portion of the payment.
How would this work?
Maximum possible payout amount of POOL tokens is locked up in the options contract and options tokens are sent to the grants committee.
Expiration date set for 1 year from the end of the quarter.
Options set with max payout of 1.5 POOL per option which is unlocked if Pooltogether is at 1B or more TVL upon expiration. Minimum payout is technically 0.5 POOL per option but the TVL would be added on so if at expiration the TVL was 177MM then the options are redeemed for 0.677 POOL (0.5 POOL minimum + 0.177 POOL value in the TVL).
Grants committee then offers the options as a payment option to those applying for grants.
What would be the benefit of doing something like this?
Incentivizes builders to continue to grow the protocol even after work is complete.
Defers sell pressure by over 1 year which helps in our early growth phase.
First steps in an amazing partnership with UMA one of the leaders in DEFI products.
Would you support a trial of KPI options by the grants committee?
This is my favorite benefit here. Instead of a freelancer / mercenary approach to grant funding, this should hopefully incentivize longer term relationships with our builders, and gets them directly invested in the success of the protocol.
Could you walk me through the experience for someone receiving a grant? I’m curious how the specific mechanics work. Would they get a token representing this option right away? If so I assume they could sell that token right away too?
They would receive a token representing the option right away. Technically they could sell that token but would likely have to do so privately as it would otherwise require somebody to provide liquidity for it. I would think you wouldn’t want to sell it as it would have significant upside and if someone is not looking to stay invested they should be requesting USDC anyways. If the token was to launch right now it would currently be worth 0.665 POOL(0.5 POOL floor + 0.165 POOL for 165MM TVL) but have the upside potential to be worth 1.5 POOL each if we were over 1B TVL on the expiration date.
My personal experience with trading KPI options comes from being airdropped some utvl-0621 tokens which was the first trial run of KPI options by UMA. A few of us provided liquidity for a WETH-Utvl-0621 pair on sushiswap and I bought up a whole bunch of them thinking we would easily grow the TVL. This was not a successful trade as the market took a nosedive and TVL goals were not met. In our case of using these to pay some grant recipients in place of POOL, I don’t think there will be a big market to trade them and I’d expect recipients to mostly hold them.
I think it would make sense to pay them out at face value or 5-10% above face value as they come with significant upside but that is something we can decide. What the grants committee value’s them at when paying out is definitely something to discuss, but maybe they could make those decisions and it would vary based on what the grant is being paid for.
I think we should give this a trial run for sure. Did you have any specific metrics in mind when choosing the 50-150k allocation? Is that based on the current TVL of about 164m?
This is worth exploring. How easily can a grant applicant team liquidate their tokens, any special process needed or can a market be automated?
This as an option for grantees to bet on PT performance not just the price performance of POOL itself. I can see some very enthusiastic folks opting in for this KPI options token but it might be a hard sell to others. Current model is USDC,POOL or POOL+USDC.
We can’t really know how keen people would be on it until we try though
at the end of 1 year, there’s a chance we won’t payout at max target of 1.5 POOL/option. and in that case grants would just recoup any remaining funds not realized by options criteria.
DIGG has continued offering options to holders month over month that weren’t realized. lots of ways we could handle.
TVL would need to reach $500M for options to pay out 1:1 POOL/option rate. we can adjust the 0.5 POOL floor figure if we wanted to, right?
i want to make sure it’s still an actractive option, if that means less upside at end of 1 year i’d be open to that too. just trying to understand what we can control here.
echo this. grantees are mainly interested in their own projects, the one they’re asking us to fund. a lot of the time that means focusing on PT for a set amount of time, hit milestones, move onto the next.
we obviously make efforts to get them on community calls and on discord to limited effect. driving more of that kind of inclusion would be great, this would be a productive step in that direction imo.
I really like the idea to get grantees more vested in the protocol. It might be more clear if we could see it exactly as it looks from the grantees perspective as others have suggested. An example of a grantee has the choice between 10k USDC or X options and what the max value of those options in POOL is if the TVL does in fact 5x as well as the downside payout. Two parts to the equation, what is our potential added cost or savings, and what is the appeal to the grantee. Presumably a grantee taking options is forgoing a liquid asset and in the case of POOL the ability to vote/stake/LP. As was suggested elsewhere it would also be interesting to dig into the grantee addresses and see how much of the POOL paid thus far has been swapped.
These metrics were chosen with setting a goal of 1B TVL and also trying to keep things easy for recipients and the community to understand the math behind how the options work. We can very easily adjust these parameters to whatever we choose. The grant committee should still have POOL and USDC in their arsenal but try to sell builders on the options whenever possible. 50K payout is not technically possible if all the options are paid out as it would require Pooltogether TVL to be “0”. The likely payout would be between $66K and $150K if all options were used.
It would be somewhat difficult for a team to liquidate there options. They would have to find a private buyer as it is unlikely anybody would bother or be able to provide liquidity for these. Pretty much you have to wait for expiration and redeem for POOL locked in the contract.
Face value of an option based on a price of $15.00 POOL and 165MM TVL would be $9.97. Hopefully we can take a discount on work from some people in exchange for the upside that comes with the options. In exchange we also get loyalty and incentive to continue growing Pooltogether after the job is complete.
You could have a situation where someone who applied for the grant was no longer in a position to deliver/complete, so sold it to someone who wanted to take it over. Perhaps taking it so far, then selling (some of?) the options tokens on.
You could also imagine the tokens transferred rather than sold I guess, with people who apply for the grants being brokers, who put together a dev team and incentive in a mix of stables + options.
One thing I want to add is that the cost to use UMA product is very low. I was digging a bit this morning to confirm there are no hidden fees involved. Basically the only fee involved in this is what they call a “Final fee” required to send price requests to the DVM. Documented here DVM Interface | UMA Docs
Fees are approved by governance and as Pooltogether has already been added as an approved collateral we have an approved final fee of 45 POOL documented here. Approved collateral currencies | UMA Docs
I’m skeptical on if people are really willing to give a discount when receiving options with potential upside instead of an immediately liquid token. I think this runs the risk of people only valuing the option at what it is worth right now when they receive it, but if TVL does go up we end up overpaying for the grant.
There are many factors for TVL that have nothing to do with what builders are doing. Is trying to continue working on Pooltogether so that your TVL option goes up in value really a motivating factor? Maybe.
Ultimately, it depends on how people react when they are offered the option instead of POOL tokens directly and what they value it at.
We could just try it, or we could first try to gauge interest by asking current applicants “what if this was a thing, would you be interested?”.
@Torgin
Chances are it will affect the outcome to the grantee more than it will affect the cost to us. If we are paying in POOL that POOL can go up in value but it does not prevent the recepient from selling it off. The options give us loyalty and defer sell pressure. If we do overpay it will be as a result of our success.
It would be good to have the options at your disposal to find ways to use them. We can then make adjustments to improve them in the next quarter as they are fully customizable. Unused options would not be lost and still belong to us.
Lets make our own wave instead of riding the wave. Maybe other protocol grants committees will ride our wave.
Personally, I like experimenting with options to try and grow some connection between builders and PoolTogether. However, I also agree with @Torgin that a factor of 0.5 may be too low (even if we take into account that it would be 0.66 or so right now). I would also choose another option if I am presented with several grant options.
One option to explore would be to set the option at 0.9x (or 1x) to 1.5x? I know this technically means we are not saving any POOL when creating them and paying them out, but I don’t necessarily think that should be a goal when creating and paying out grants for building. On the other hand, giving people the potential to an upside may still convince them to more actively participate in PoolTogether.
Should we add the options to the overall grant request of 500k or make it part of it?
x1-x1.5 or x0.9-x1.4 with a 1B TVL could be easier to work with perhaps. I like the idea of adding it to the budget because we don’t want to limit the grants committee if they are having a hard time using them.
I think if we do this we can still do it a bit later, doesn’t need to be part of the grants committee renewal PTIP. We can send POOL from grants committee multisig to the UMA contract.
If grants committee is low on funds because of that, we can always do another PTIP then.
That sounds like a good plan and would keep things simple doing it from the multisig. We seem to have the support of the grants committee and the community as I have seen no objections so far. We just need to decide on the parameters and can then the UMA team can help from there. I like what @drcpu suggested and think x 0.9 POOL as a base with a maximum upside of x1.4 on 1B TVL would make sense. That would put the options face value at just under 1 POOL each with some good upside.
Would you support the above mentioned parameters for the grants options?
I voted as such as many of the grants I’ve seen go through thus far (as a spectator not committee member) have been to fund immediate needs. If the grant is funding immediate needs then an option with a future dated expiry isn’t going to be terribly useful. That being said if their are larger projects that come to grants that could have multiple milestones, then having these future dated options could be useful to ensure quality of work and longer dedication.
I think these might actually have a use for paying different PoolTogether Community Members or Grants Committee. It would sure incentivize the Grants to have a more measured impact on the protocol, but it may also restrain the committee from doing some of the more experimental things they have done so far that provide benefit.
A couple questions I had were:
Is there a way to make the objective tied to the multiplier more fluid; if ‘X’ new wallets join ‘Y’ Pool, or ‘Z’ deposits come from “Some Really Cool Protocol Partner”
Is there a way to actively mint them as needed, rather than getting 100 of them and use 30, with the remaining 70 just sitting until whenever.
I think the options are a good substitute in situations where the grants committee will be paying in POOL. If someone needs funds right away the payment should be in USDC to avoid adding sell pressure. Maybe in some cases a grantee can receive 50% USDC and 50% options. Good point on paying community members and grants committee with options as that would be ideal for all parties. I’m sure any long term believers in POOL would jump at a chance to be paid in options with this kind of upside.
This would be very specific and could be something to look at when the right situation comes along. Running the trial this quarter can help better everyone’s understanding of how they work to be ready for that scenario.
We would be minting them as needed on a quarterly basis if we choose to proceed after the trial run. Beyond that it is better to have extra left over and have them returned to treasury then to do small batches. Having $150,000 in POOL tied up for a year has no negative impact when our treasury POOL is intended to last for 10 years or more.
Not much opposition to trialing these KPI options for the grants committee and I believe everyone in the grants committee was not opposed (with most being in favor). Can I get in touch with UMA team to proceed with any preparations needed before funding? It seems like the parameters of 0.9 POOL as a base with 1.4 POOL max payout based on 1B TVL would work. $150,000 funding required in case of max payout. Expiration date 11/30/22(approx 1 year from the end of the next quarter). Unless there are any suggested changes to the parameters?
