PoolTogether

PTIP-35: Polygon Incentives!

PTIP-35

Simple Summary

Grow prize pools on Polygon by starting to provide POOL incentives.

Motivation

The prize pools on Polygon are more accessible than the ones on Ethereum because of lower transaction fees. Incentiving their growth with POOL tokens will lead to faster growth in unique users than Ethereum. Additionally, with proper incentives we can see large prizes for the first time on a low transaction fee network.

Specification

  • Begin 100 POOL per day sponsorship drip to USDT on Polygon
  • Begin 100 POOL per day sponsorship drip to USDC on Polygon

Rationale

The prize pools on Polygon have been quite successful due to the low transaction fees. The prize pools on Polygon are actually growing the fastest of any prize pools (in terms of unique deposits). Up until now, Polygon prize pool have not been promoted with any POOL token distribution. Beginning POOL token distribution is a next step in growing the protocol on Polygon.

The rate of 100 POOL per day roughly matches the current dollar value of incentives being provided to the USDT prize pool. Current daily POOL emissions are 2,150 across all networks and prize pools. Increasing this by 200 represents a total increase of ~8% per day.

Putting the POOL distribution towards sponsorship will enable normal depositors to have a much higher chance of winning.

Final this will help build our presence on Polygon in anticipation of the V4 prize pool launch!

Edit

Based on feedback, an additional 5,000 POOL is being added to this PTIP to go directly to the Polygon Operations team. This will give the operation teams flexibility to manage more incentives and growth on Polygon without needing another vote.

Technical Specification

Technically this proposal would transfer enough POOL to fund both incentives campaigns for 6 weeks. This will align the Polygon incentives with the ones on Ethereum. The POOL will be transferred to the Polygon operations team who will disburse it.

  • Transfer 5,000 POOL to the Polygon Operations team Multsig: 0xfaA08668FD52f74c09D4D3091E463ff736c5f269 (confirm address here)
  • Fund the USDC sponsorship faucet with 4,200 POOL (100 POOL per day for 6 weeks)
  • Fund the USDT sponsorship faucet with 4,200 POOL (100 POOL per day for 6 weeks)

Status

Do you support providing 200 POOL per day in incentives to Polygon?

  • Support
  • Oppose

0 voters

6 Likes

Total support, nice writeup, hopefully we can get put this fast in action :smiley:

5 Likes

I 100% support the decision to drip 100 POOL per day to the USDC pool on Polygon.

I’m not so sure about dripping 100 POOL per day to USDT though. USDT seems like it is not very widely used on Polygon(in comparison to DAI and USDC) and growth of this pool peaked at 6MM. I would be more interested in dripping to DAI than to USDT. Those who are loyal can cheaply swap to USDC or DAI and we can retain that TVL and probably gain even more. Somebody on Discord recently mentioned DAI being the currency used for casino games on Decentraland and users wanting a safe place to park their funds when they are not playing, I found that to be a really interesting point.

USDC market size on Aave: 1.15B
DAI market size on Aave: 894MM
USDT market size on Aave: 192MM

5 Likes

Good points, one counter point though is that USDT has always had the highest interest rate on Aave by a pretty good margin. So we are getting better ROI. Plus we already have $5.7 million deposited there. We’d be starting from scratch with Dai.

If we didn’t want to incentive USDT I’d probably be more inclined to just double up on USDC.

6 Likes

Yes, we need to do this if only to see what the potential pool growth is on a low-fee network. I want to see just how many users we can gather with an incentivized pool with damn near non-existent transaction fees. I dont even care about total deposit growth, i want to see unique user growth.

6 weeks is 8400 POOL or $133,300 value at current POOL prices. Fairly modest considering the potential pool growth, mindshare and expansion to another network.

I get the feeling the whole ecosystem is on the cusp of explosive L2 and sidechain growth. I could be totally wrong. But if it happens, PT needs to be perfectly positioned to capture it.

5 Likes

I would probably prefer not to drip to USDT at this point.

A couple other things to consider.

  • Creating a Matic pool with no drip but using our treasury Matic as reserve to grow the prize would bring in no cost revenue for the protocol and maybe some users have Matic just sitting around so figure they might as well go for a prize. Since we will also be accruing MATIC we can keep topping it up.

  • I would be interested in a treasury sponsored prize to help generate some buzz around the USDC Polygon pool. Could be $5K or $10K for a set time frame.

6 Likes

I think it is a great idea to supply pool to participating members on Polygon. However, I am concerned that providing POOL only to sponsorship might set precedence which does not align with previous sentiment. We used to say we wanted to supply POOL to reward people for participating in the protocol. If we were to only supply it to the people who provide sponsorship, then there are other participants who are missing out.

Also, I think there could be an argument to suggest that people with smaller wallets are drawn towards the price while people with larger wallets are drawn towards the yield (we need to support this with data of course). If this were the case, then we would be dripping POOL to the larger wallets which may not be healthy to diversify ownership of the protocol.

I haven’t voted above because I support dripping POOL on Polyon, but I am conflicted on only dripping to sponsorship.

3 Likes

I agree with @Hook and I had missed that detail. I prefer not to have the drip to sponsorship.

2 Likes

I would love to eventually test out the idea of dripping just to sponsorship, so why not now? Whales will still join (APR of a high quality undervalued asset = great investment), and fish will join because of prizes. That will result in more deposits. Finally, more fish will win in general - isn’t it one of PT’s main goals? Of course, maybe none of this is true actually but we won’t know without testing it out.

I also really don’t like USDT at all. I would drip all to USDC.

3 Likes

Thanks for the write-up @leighton!

I would probably be in favor of scrapping USDT drip and double the USDC one, but that’s partially because I’m not a fan of USDT. The current deposit APY of USDT is 3.05% [1] vs 2.92% for USDC [2], which seems a very small difference. Granted, the deposit APY for USDT does fluctuate a lot, so a USDT prize would likely be higher over time. If we attract a similar amount deposits as on Ethereum, we’d likely influence the size of the smallish USDT market and the APY could drop below USDC (if the usage of USDT on Polygon does not increase). If we want to really grow on Polygon, I think the smarter move is to go all-in on USDC since that seems to be much more widely used.

@Hook and @tt_1 Note that dripping to sponsorship would technically not be a test-run as we already did that on the Polygon USDT pool (albeit with MATIC). A great analysis of the results was performed by @underthesea [3]. It shows data supporting the thesis that whales go for the yield in sponsorship and small players go for the prizes. Furthermore, I interpret those results as a big advantage for smaller players to win. Given that Polygon caters to small players and we want small players to win more often, I’d say it is a no-brainer to implement at least a 20/80 APY/sponsorship split.

[1] Aavescan USDT
[2] Aavescan USDC
[3] Sponsorship split analysis

6 Likes

Thanks @leighton! Glad to see this moving forward. Glad to see a new pool being incentivized. To the two primary topics:

Sponsorship Split?
I really do not see a good argument against the sponsorship split in a nearly feeless environment like Polygon. The 100% split gives depositors the freedom to straddle the two pools in any allocation they want. We are talking 3x better odds for prize goers. With a side of better APR for drip lovers. And the opportunity to create any strategy in-between. Same prize generation and same TVL.

I encourage anyone who has not experienced the sponsor split firsthand by using Polygon to experiment with this spreadsheet that models the split odds and APR returns for you. You can save a local copy and edit the parameters to see different outcomes.

Continue USDT?
I have seen a lot of support for being done with USDT. I think there is pretty unanimous sentiment that USDT is the least liked stablecoin available on Aave Polygon. As Tuna points out the market size shows that. While volatility brings higher rates to USDT it also benefits from less competition in lending on Aave because it cannot be used as collateral. I agree with Aave here, USDT has higher risk as an asset than DAI or USDC. @drcpu has linked to Aavescan which is really helpful for seeing historical rates. The rate is higher on USDT both in interest and MATIC rewards. However I think we can expect that this means the expectation for returns is also higher. With this assumption I expect that USDC will bring more liquidity per POOL. Thus it may generate the same returns in prizes and farmed MATIC.
Perhaps this is a good opportunity to test the hypothesis side by side. I do think that new assets means new audiences and we are limiting ourselves by only adding USDC.

Liquidity rewards?
Are we at all concerned about incentivizing a LP with this move of 200 POOL per day to Polygon? I know the QUICK rewards are good now, but if it goes to volume based it could be pretty low liquidity. Do the arb bots keep the market in order, or will having a low liquidity market with POOL dumping be a problem for our greater operations. If we do incentivize an LP I think 25 POOL per day would be plenty for a 200 POOL a day incentives program (approximating the ratio of LP rewards to total emissions on Ethereum). I thought we had some potential partnership with Sushi LP on Poly and was excited to see what that might bring.

TLDR: Go with it as proposed, and let’s build from there as I think Polygon’s share of the action still represents opportunity beyond 200 POOL per day.

4 Likes

One thing to note is that although the base interest rates are often within 1% the APR based on Matic rewards also has always been a lot higher with USDT.

On your second point, I’d be particularly interested in starting at 100% incentives to sponsorship because that’s something we haven’t tested. We switched incentives with USDT but I think starting with a new prize pool will have a much different impact.

3 Likes

I think the V4 launch will give us an opportunity to deprecate rewards on USDT. But for now, we have over 4,000 unique depositors an $6.5 million and it’s the highest yielding asset on Aave. I don’t think it makes sense to cut that all right away.

4 Likes

On idea one, we really don’t currently have many matic tokens has they have been used for the matic drip.

I really like idea two though and I think that could be a great thing to pilot!

2 Likes

Sure, I’d go for a 100/0 allocation too, the 80/20 was more of a compromise towards people that want to have both prize winning odds and a yield. Though as @underthesea points out, if you want that, you can allocate your deposits in a certain ratio into sponsorship/prize pool accordingly (though AFAIK there is an opportunity cost).

3 Likes

A carryover from today’s Polygon discussion on discord. I want to see a big Polygon launch happen and these are my proposed parameters.

Stablecoins
USDC 100 POOL per day
USDT 100 POOL per day
DAI 100 POOL per day

I propose we drip these 3 equally and let the deposits do the talking. If one of them runs away or is stagnant we can make adjustments accordingly. DAI and USDC are huge markets and should not be ignored. USDT has the best Aave rates and is already established with 6MM TVL.

Edit: I want to add that I would also support going heavier on USDC as that aligns with our plan on ETH to have a headliner USDC pool. In this case we could maybe go with 150-200 POOL per day to USDC and 50 POOL per day each to USDT and DAI.

Matic
MATIC 50 POOL per day

I would like to see a MATIC pool launched as a non-stable option. The treasury will be accruing MATIC from all pools on Polygon and we can place that accrued MATIC as sponsorship reserve and be an attractive place for users to earn yield on their MATIC.

POOL pool/LP rewards
POOL pool (25-50 POOL per day) and perhaps some sponsored prizes as there is no yield source.

It is important that we attract loyalty on Polygon and having a POOL pool on Polygon is about attracting buyers and retaining farmers. I don’t want to add drip to have our POOL be just farmed and dumped.
Kyber LP incentives 25 POOL per day
Quickswap LP incentives 25 POOL per day
I would like to see 25 POOL per day to Kyber LP and/or Quickswap LP. @underthesea has spoken with Kyber who is interested in adding incentives for this LP as well and they would make a great partner. @RegisIsland has also negotiated with Quickswap and they are currently providing incentives, it would be good to also maintain that relationship.

LFG!!!
  • Yes
  • No

0 voters

3 Likes

Good initiative to make big TVL in Polygon.

1 Like

Good to see this proposal fleshed out fully in a nice long-form post. Its been a hot-topic of discussion for at least the last few weeks and I think more than a few folks just want to see it finally happen!

We have progress on the pools themselves going live on polygon, now governance needs to do its part and vote on the proposals.

I was initially against doing the Polygon incentives for my own dumb and misguided reasons, until i seen the light and realized that we need to have presence everywhere we can. Polygon is probably the best alternative to Ethereum mainnet until one of the L2s gains traction and becomes competitive in terms of liquidity.

I remember someone said (@Torgin ?) that it may even be worth-while drawing down the mainnet drips a bit. Especially the DAI one. Its APR is insanely high which is good for depositors, but relatively expensive for the protocol and probably indicates that from a treasury and governance point of view, we are overpaying for those deposit incentives. I dunno if we tackle this in the same PTIP or just wait and see how the Polygon incentives pan out as they may have some effects on the mainnet pools, i.e potentially cannibalize their deposits. (dont think thats likely, but you never know :man_shrugging:)

1 Like