Apply half of the current 50% reserve rate from all governance pools to a buyback of POOL tokens which is then dripped to the POOL pool. (25% of total interest accrued by each pool)
Turn off the current POOL drip to the POOL pool as it will be replaced by the buyback.
Motivation
Since the recent successful treasury diversification we are in a good position to use some of the revenue brought in by the pools and apply it in a form of revenue sharing to POOL holders. This revenue sharing will start small and grow as the pools grow. I believe the addition of revenue sharing will add utility to the POOL token which will increase price and therefore increase the APY on all pools.
Specification
This PTIP will do the following.
Remove current POOL drip of 100 POOL per day and replace it with POOL purchased in a buyback.
Buyback to be funded with 50% of the 50% reserve rate taken from governance pools (25% of total weekly interest earned).
Overview
Community approval of this PTIP will allow Pooltogether developers to begin work on a buyback/revenue sharing program benefiting POOL holders. Once the work is complete we can submit an onchain vote to finalize the change.
Rationale
Benefits:
Adds POOL token utility as POOL holders can now essentially receive a revenue share.
Retains 36,500 POOL tokens annually that would otherwise be paid out directly from the treasury.
Based on todays numbers the USDC, DAI, COMP, and UNI pools alone would be able to buyback 1107 POOL tokens this week which is more than the current 700 per week drip. We have many more pools coming and expect to continue to grow our existing pools. As the pools grow the revenue grows, as the revenue grows the demand for POOL grows, as the demand for pool grows the APY to depositors grows as a result of price growth. Everybody wins at the Poolside bar.
Increased APY as a result of increased POOL demand will help facilitate further reductions in POOL distribution and maintain great APY.
One of the arguments I have heard against this is that depositors are somehow losing money from the cut Pooltogether takes in the 50% reserve rate.
USDC depositors are earning x 3.5 what they would earn if deposited onto Compound.
DAI depositors are earning x 2.88 what they would earn if deposited on Compound.
COMP depositors are earning x 3.39 what they would earn if deposited onto Compound.
UNI depositors are earning x 9.95 what they would earn if deposited onto Compound.
There is no loss happening here my friends.
I believe this proposal has shown strong enough support in previous polls to warrant a PTIP. Evidenced in this survey below as well as others.
Technical Specification
This change will require some work from the Pooltogether development team but shouldn’t be overly complicated. This cannot go to onchain and snapshot vote until work has been completed.
Use half of the 50% reserve rate to buyback POOL and distribute it to the POOL pool.
more utility for the Pool token is the key. I think it can be a good tool to take care of holders during the bear market, and avoid an exaggerated degradation of the treasury before another big dip.
Thanks for bringing this up @TheRealTuna I haven’t voted yet. I like the idea of nipping the revenue generating value prop of the POOL token early. These things come to my mind:
1). what is the gas cost involved? Since there’s at least 5 or 6 different currencies if applied to all pools it could be quite expensive?
2). what algorithm are we using for the buyback (from UNI v2?) Is there an open source audited contract we can use from another project that’s already done this?
3). How will this mechanism effect our behaviour lowering reserve rates in the future?
@ageless
1). I am confident that the benefit will outweigh whatever the gas cost is but am unsure myself of what that will look like. My guess is gas shouldn’t be too bad.
2). Another one that is beyond my technical expertise but I did see Leighton mention that this would be similar to how the sushi bar works so maybe some code can come from that.
3). Right now the high reserve helps level the playing field as it keeps some funds in the protocol instead of in the blowhole of a whale. In regards to future reductions of the reserve rate I think it is important that pooltogether stays fair and fun for both depositors and POOL holders. I would support lowering the reserve rate if and when it makes sense to do so and I don’t think we will be there in the near future. A market shift to back to higher interest rates combined with new high yield pools can definitely change that.
Alot of this proposal came together as a result of feedback from team and community members from previous governance posts and polls. I think this will be a great move that will benefit anyone who joins us on this fun journey.
I think we’d want to maintain some (probably reduced) POOL drip to POOLpool if buybacks were activated, at least initially, to maintain some sort of minimum in times when buybacks are low.
I’ve been wondering about ways to add utility to POOL myself. Buybacks are one option. vePOOL could be another (lock POOL to increase odds of winning while in other pools), another would be to treat POOL or vePOOL as a “universal” lottery ticket where you have some small chance of winning a prize from any pool. The ve-tokenomics pioneered by Curve is powerful and merits consideration, IMO.
Though I also (despite being a large POOL holder) wonder if now is the right time to activate the “fee switch.” It’s worth considering that maximizing the pooltogether treasury may be the best path right now to allow pooltogether to continue investing in growth and longevity. But someday, whether sooner or later, POOL absolutely needs utility.
Given my objections on the Discord channel, I have, unsurprisingly, voted against this proposal for a multitude of reasons (in addition to the questions of @ageless).
Given the current prizes I think the current reserve rate is too high (except maybe when it is solely used for perpetual growth as that means people eventually will win more). If we now implement an extra indirection from the reserve rate to revenue sharing to POOL holders, it will be a lot harder to tune the reserve rate down in the future because POOL holders will be used to getting a nice income stream. This is somewhat similar to the concern of @ageless.
The numbers you are citing are yield numbers through farming. Picking away at the no-loss lottery concept of PoolTogether in favor of yield farming is something that I dislike because it drastically changes the core of the protocol in my opinion. Furthermore, as I mentioned several times, taking away a large portion of the prize of a small fish is vastly different from taking it away from a yield-farming whale.
If we implement a high-yield drip to the POOL pool, more people will be even more inclined to join it. Given that the POOL pool currently employs a very sub-optimal voting mechanism through the multi-sig and all associated problems, I really do not like further incentivizing to join it over proper voting and vote delegation. Furthermore, I checked the last five snapshot votes and at most 30% of the current depositors actually participate in the governance process. I really do not like the idea of rewarding people who do not take part in governance and just speculatively deposit tokens in the POOL pool.
To the best of my knowledge, buy-backs (almost) never lead to stabilizing the price of a share / token or increase in price. I would be very surprised if it really is as easy as we buy back POOL, the POOL price and APY will increase and we can further tune down the drip to governance pools.
We cannot evaluate proposals like this in a vacuum without considering the other proposals like increasing the number of winners because they all change the prize one unique depositor can win at any given time.
In summary, I think we are way too early in the decentralized development of the PoolTogether protocol to implement such a drastic change. What I probably would support right now is a middle-ground proposal that combines tuning down the reserve rates to e.g. 25% and half of that reserve rate going to a POOL revenue sharing system (still don’t like the idea of dripping it into the POOL pool though).
I think it’s at least 1-2 years too early for this. Imo we should try to increase the reserve with DAI, USDC and other tokens as much as possible without caring about POOL token’s price for now.
Also, don’t forget, if you own the token, you own the reserve. If the reserve is increasing, the value of the token is increasing as well even though it might not manifest in token’s price. That time will come.
I think what would be nice though is, if we could figure out pretty early on just what our plan is for monetising the POOL token.
Cross posting from discord:
“keep the POOL pool drip, but just have a small portion of the reserve, like a few % as oppose to 25%, redirected to the POOL pool. Just establishing the intent right now might be the best thing to do.”
While I do have concerns about implementing it as stated, I would like us to figure out the monetisation route for the POOL token. I would be pro looking for ways to figure this out as oppose to being against this proposal.
I can’t imagine it is not going to happen in the POOL pool because it would just be another competing yield source then; we’d have the POOL pool, the AMM and then the POOL bar?
and 2) concerns can be alleviated by substantially reducing the reserve cut for POOL holders.
3). is a problem we are going to exacerbate with the “PTIP-21 10x” proposal by converting the POOL prize to an added drip which will massively reduce the yield variance of the pool and incentivise more deposits. It seems that the community are happy to sacrifice decentralised voting for increasing the POOL token utility… not to say I like that too much either, but it is the direction the community is moving forward with it seems.
4). I’m not too sure the buyback is the best way to even do it. Cross reference my point from discord “Another option might be to just not do the buyback but direct some of the stablecoin reserves into the POOL pool drip? Might reduce complexity and use our unique situation of being able to organically yield USD… Would save on slippage costs too”
5). Completely agree, it is getting confusing with all the moving parts at play. I cannot wait for that damn drip to move to sponsorship.
In my opinion we should have a strategy where we reward actual voting and taking part in governance rather than dripping to the POOL pool where the majority of depositors is not voting.
Regarding (3), I lost sight of all things proposed in PTIP-22, but it does only increase the APR with about 30% (200 POOL price per week approximately equals an increase of the POOL drip by 28 POOL per day), so I don’t know if that will convince many more people to join. I also don’t think that sliding a bit more towards less decentralization is necessarily the problem with the multi-sig vote (I trust the voters), but rather that it can massively influence proposals because it’s a binary vote. It does not take into account the distribution of snapshot votes and it could pass or reject proposals that otherwise would have had a different outcome. So I’m rather hesitant to incentivize growing that pool even more.
With respect to (4), maybe using part of the stablecoin reserves is a better idea, yes. Though I am still of the opinion we should make the overall APR increase of having POOL tokens rather small at this stage of the project.
Could be another way to do it, yeah. Probably does work incentivising people to delegate their votes to delegates that will always vote. It would be good if we could compile all the methods for monetising the POOL token.
Sorry, mixed that up. Was thinking it was 200 POOL / day. Much less meaningful impact yes.
As a more administrative note, this really should be an “ideas” post not a PTIP at this point. A PTIP is for things that are ready to go to vote. This is not ready to be a PTIP until there is actually a way to implement this.
Carrying over from the discord discussion I think it is still best to keep this as a buyback as if we drip other tokens a lot of users may just end up with dust they can’t trade. Give them POOL tokens and hopefully most users hang onto them.
One thing that could be changed is the split. Maybe we want to go 35/15/50 Treasury/Buyback/Prize or some other split. Even 15% going to POOL holders would keep the drip about the same as currently while saving 100 POOL per day from treasury. Please provide thoughts on what the best split would be.
There’s just a huge push for cash-flow generating tokens nowadays, and it’d be nice if we had a similar mechanic to Sushi. Just scooping up like some fair % of the reserve.
We’d have a great product, growing treasury and an attractive token.
I get focusing on protocol growth which should take priority, but it’d be a nice nudge for our token and project in my opinion.
POOL wouldn’t just be a governance token anymore.
It can be put on the back-burner for now, but it’s something to think about. @TheRealTuna thanks for starting the discussion!