PoolTogether

PTIP-42: V4 Migration Rewards

Simple Summary

This proposal will incentivize the migration of liquidity from V3 to V4.

Abstract

This proposal will deploy identical staking contracts on Ethereum and Polygon. Users will be able to stake their V4 tickets and receive rewards while still being eligible for prizes. The contract will only allow users from V3 to stake, and will limit their deposit based on how much they deposited in V3.

Motivation

There is about $63m sitting in our two existing V3 stablecoin pools. The USDC pool holds $42.3m, and the Dai pool holds $20.8m. If we can migrate this liquidity into our V4 prize pools, we’d be well on our way to prize sustainability. We’d also be able to sunset those prize pools and reduce our operating costs.

Specification

Overview

We will deploy two V4 ticket staking contracts: one on Ethereum and the other on Polygon. Users will be able to:

  1. Stake V4 tickets
  2. Accrue tokens as rewards
  3. Retain their chance of winning

However, only users of V3 will be able to stake in this contract. We’ll take a snapshot of V3 depositors and gate the staking contract so that only they can deposit. The snapshot will be taken as of November 4th (the time of this writing).

Additionally, as suggested by @tanman, users will have a deposit cap based on their V3 deposit size. Based on the data provided by @underthesea (see post) the tiers for combined Dai and USDC pools will be:

V3 Deposit Size Eligible users V4 Staking Cap Max Total Stake For Tier
10 - 100 2673 100 USDC 267,300 USDC
100 - 500 2377 500 USDC 1,188,500 USDC
500 - 5000 1162 5000 USDC 5,810,000 USDC
5000 - 50,000 311 50,000 USDC 15,550,000 USDC
50,000+ 127 100,000 USDC 12,700,000 USDC

Max Total Stake across all tiers: $35,515,800 USDC

If we wish to offer a 5% APR over six months, we would need:

6/12 * 5% * $35,515,800 = $887,895 USD in incentives

It’s likely that not everyone will stake the max, and they won’t all stake at the same time. This means the APR will start much higher and stabilize at a higher rate than 5%. If half the maximum is staked then it’s still a healthy 10% APR.

Note that the above incentives are for each staking contract, so we’d need ~$1.8m worth of incentives.

Rationale

I like this solution because:

  • It frames the incentives as APR, which is a simple concept that everyone understands
  • It allows the user to decide whether to move to Ethereum or Polygon (or both!)
  • We have existing airdrop code we can re-use
  • We are working on a ticket staking contract already.

I believe we can knock this solution together relatively quickly.

Technical Specification

TBD

Status

Open Questions

I’d like to hear from the community how they feel about the idea, and in particular:

  • Whether to have POOL or PTaUSDC incentives
  • Whether the tiers are fair
  • Whether the APR is appropriate
  • How long to run the campaign for
  • any other feedback

Regardless of the details, do you like the migration idea?

  • Yes, I like this staking concept so let’s work out the details and proceed
  • I’m totally against any incentivized migration

0 voters

3 Likes

Thanks @Brendan

Is end goal explicitly meant to migrate v3 funds to v4, so the v3 TVL goes down?

What happens if a v3 user brings in new funds and stakes in v4 contract. In a way, its good because its new money into protocol, but this means the v3 funds are still locked in v3 and continue to be a operational expense for PT. Is this an expected outcome? EDIT: Re-reading users may not even need to bring new funds, they just can deposit their v4 ticket (if they have) and get rewards, to act as compensation for v3 migration costs

Deposit tiers are spot on for small fish and whales. If possible, i’d like to rethink middle tiers. We could maybe have a 500 - 20k tier with a cap at 20k and 20k - 50k tier with a cap at 50k. Disclaimer: Slightly selfish request based on my personal situation (so happy if this is stuck down), but i think it also makes logical sense as jump from 5k to 50k is a little huge for someone depositing $4999 or $5001 in v3

In terms of incentives, I’d look to propose POOL. We all know POOL is undervalued and we should not be giving it away cheaply, but i believe this POOL will end up with community members who are here for long haul. So this feels like a good use case

I’d actually suggest running this campaign for 3-6 months. But open to other suggestions.

4 Likes

I have not completely made up my mind yet on whether I think this is necessary or not, but I can give some thoughts already.

I would consider shortening the timeframe we offer those rewards and increase the APR. That would likely be more attractive to your average DeFi spoiled brat.

This is obviously a selfish remark, but should the snapshot not be taken when v4 launched? I migrated most of my deposits in the first days and I would be a bit sad to be “punished” for being proactive. :sweat_smile:

I don’t think our treasury can shill out another $1.8M worth of incentives in USDC without really hurting our “cash flow” in a bear market, so I’d vote for POOL incentives.

3 Likes

Well, you’ve already migrated! I don’t think you’re the intended target audience here, haha. Although, I am in the same boat as you. I think we should just focus on people that have not migrated over yet. It’s the best use of our funds.

As for the proposal, this seems like an effective way to go about the migration, as well as incentivizing it. I know the migration discussion has come up quite a bit, so it’s nice to have a definitive direction to mull over.

The length is a bit long, a 3 month campaign would probably suffice. Overall, I support the proposal and we should implement it as soon as we can.

1 Like

I think I support this but need to think on it some more overall.
For now I agree that 3 months is a better time frame. I would definitely prefer to drip PTaUSDC and utilize our existing treasury POOL to raise some more USDC instead of putting more on the market.

On another note: I beg you guys to make the votes public going forward. In the spirit of keeping things trustless. We should know if the people voting are people we recognize. :sweat_smile:

2 Likes

Thanks for writing this up!

I am in full support for this and I’ve been waiting for something like this to [fully] transition to v4. @Brendan I want some clarification to make sure pod users are captured in the v3 snapshot?

I am very much against further incentivizing using stable coin in our treasury. We went through a process earlier this year to diversify our treasury with stable coin, further incentivizing with stable coin seems to undo all that work. I agree with @tanman, dripping POOL as an incentive will, majoritively, go in the hands of long-term community members since we have the capped tiers.

For staking v4 tickets will we still need to claim the prizes in the same manner as we do now? Or will there be a auto-claim?

2 Likes

I think I’m on board with this, if it’s only going for 3 months I would think we’d want to have very clear and frequent communication for this. On the account page as a banner, next to the manage button on the account page, at the top of app.pooltogether.com, on the deposit screen for the pools and pods, on pods.pooltogether.com, etc.

I would second @TheRealTuna’s note:

I beg you guys to make the votes public going forward. In the spirit of keeping things trustless. We should know if the people voting are people we recognize. :sweat_smile:


All commentary below is intended as food for thought.

Should we include those still in v2 that want to migrate to v4?

  • v4 sets a different precedent than v2 or v3 where it was very much set it and forget it, v2 individuals should not be precluded from this imo if they are willing to move assets.

Do we want to fully deprecate v3?

  • Right now as it stands v4 has no operative way to deploy pods - that’s to say pods can be deployed, but to what end.
    • v4 Con: $10 split amongst 3000 people per day for a month is not very exciting ← a loose example only not trying to run odds or anything here.
    • v3 Pro: Pods are a good way for communities to get involved and we only just started getting some capture rate on that; Bankless, Discords, Offices.
      • Does v3 become a location to host “Pod Races”
  • How does the prize split and prize builder functionality work in a v4 environment?
    • Both of these were under utilized in the v3 environment; poor marketing, poor documentation, insane gas, whale watchers watched Yearn bring win too much - a lot of potential reasons these weren’t used but they are still valuable functions.
2 Likes

I think we should think more about setting up a lottery to encourage V3 users to migrate to V4 ,instead of continuing to grow through farms . At present, we do not have enough funds to continue to burn money, and the market performance of POOL tokens is also very poor.

For example, users who complete the migration from V3 to V4 every day can participate in a special bonus.Use this short-term incentive as much as possible instead of long-term burn money to motivate users

3 Likes

This is a well-thought out approach and I appreciate the proposal. I too would like to see those deposits migrate over to V4 and to reduce operating costs on V3.

We have a unique opportunity to limit whale farming of POOL with a registry of depositors to whitelist. Though presumably all of those depositors already have had ample opportunity to get their share of POOL tokens. For this reason I do not see this initiative as necessarily furthering the decentralization of the protocol.

With that perspective, that we are spending POOL specifically to show people how cool V4 is, I think we have to consider - will these users actually find V4 works for them? Why haven’t they moved already? Does this proposal alleviate the gas concerns for the thousands of users with less than $200 deposited?

I have had the chance to try V4 on Polygon, and think it’s great. I’m skeptical, however, that depositing on Ethereum makes sense anymore. I am also still deposited in V3 on mainnet and I do not want to move those funds to Polygon. I bet I’m not alone in that thinking. So I wonder, will users have a good experience depositing to V4 on Ethereum in any capacity? There has been 4 prize claims thus far, and the cost has averaged over $100 per. If V4 does not work on Ethereum, I feel that this proposal will not bear the fruits of it’s cost.

I think we have provided a very significant incentive for V4 from the treasury and that the rewards (prizes) for new users are more than enough. A simplified calculation of V4 prize yield currently shows 122% APY. I personally do not believe tacking on another few percentage points in governance tokens will move the needle, at least not in a sustainable way.

I think we should focus our efforts more on reaching new audiences, improving user experience, and on adding assets and chains to V4 to draw in new users and new deposits. I think we all agree that V4 is leaps and bounds more powerful than V3, we just need to harness that power.

5 Likes

I cannot agree any more . we should focus our efforts more on reaching new audiences, improving user experience, and on adding assets and chains to V4 to draw in new users and new deposits. :100:

3 Likes

I’m 100% in the same page as @underthesea. I honestly think that V4 is currently not profitable in the Mainnet, so if I had funds there I wouldn’t migrate to V4.

Regarding people that are on V3 on Polygon, they already have a good incentive to migrate to V4, as the APY there is much higher. I guess that if they don’t have migrated it is because they’re not paying much attention. So they won’t probably like the fact that you have to check daily if you won some prizes.

Unfortunately I don’t think we will ever get rid of the costs of V3 pools unless we decide to terminate the pools and leave some people “stuck” there. Because there will always be people that will remain there regardless of the incentives.

To sum up, IMHO it is not worth it to introduce more incentives to migrate to V4. The only place where it would make sense is in Ethereum mainnet. However like I said, some people will not migrate and we will still have the same operational costs.

2 Likes

so in this scenario someone that has lets say 200$ in V3 will only earn about 10 dollars? is that correct? if thats correct i dont see how that benefits anyone with less than 5 grand deposited in V3.

1 Like

@underthesea makes a very good point that V4 APY is currently 122% and another 5% isn’t going to excite people. We need to focus on growing layer 2. This plan is a no go for me.

2 Likes

Yeah, putting it in those terms and highlighting those values makes me realize that it’s not enough of an incentive. If they haven’t moved yet, then this little nudge might not make the budge.

Now, I think we’ll see some of the larger depositors move when we implement Optimism and Arbitrum. Perhaps they see that V4 on Ethereum is unsustainably expensive, but they want the security guarantees of Ethereum that Optimism and Arbitrum provide. I think we’ll see some of the larger depositors migrate then.

1 Like

After some thoughtful consideration, I’m with @underthesea on this one. Highlighting the fact that V4 is effectively offering over 100% APY and that’s still not an enough of an incentive for them to move shows that the little nudge we’ll provide with these POOL incentives is not enough. Perhaps the larger players are waiting for Arbitrum and Optimism. Polygon just doesn’t offer the same security guarantees and optimistic rollups.

We have seen so many new community entrants, V4 really resonates with people. We can easily attract new depositors, we just need to be creative in the way we do it.

1 Like

If i understood correctly, if i have v3 funds on mainnet, i can stake my rewards on v4 polygon and get rewards. So this plan still works.

Of course, my open question to Brendan was - is the end outcome explicitly to minimize v3 TVL to reduce our operational expenses (or) just to pay additional compensation to users using v4 staking, to compensate for migration costs

1 Like

This discussion is fantastic! Everyone brings different perspectives and great points.

I’m going to start by discussing the high level concerns that were raised. In particular:

  • What is the goal of this PTIP
  • What will happen to the V3 pools
  • What are the second-order effects if this PTIP passed

The Goal

This proposal is intended to encourage V3 users to migrate to V4. We want more capital in V4 so that the prizes are more sustainable. The assumption is that for most users this is a zero-sum proposition; they will move their capital rather than add more, so that’s why I see it as a “migration”.

What Happens to the V3 Pools

tldr; The V3 prize pools will continue to operate.

What happens to the V3 prize pools is a separate topic; in hindsight I think it’s confusing to include it in this conversation. We’ll have to address the V3 prize pool operation once the prize pools are no longer profitable. Currently the V3 USDC and Dai prize pools bring in approximately $16,000 USD per week, so they more than cover the cost of all operational overhead. If their TVL drops then we’ll have to make a decision.

Expected Outcomes of this Proposal

The expected outcomes of the proposal is the biggest open question in my mind. @underthesea has touched on one of these points, regarding the efficacy of the V4 pool:

  • What happens to the V4 ethereum pool after the migration program ends?
  • What happens to POOL on Polygon?

The migration to V4 Ethereum would initially be successful, without a doubt, because USDC prize pool participants currently receive 5% APR in POOL. A prize pool with a much higher APR would definitely draw them in. However, what happens after the program ends? We’ve seen significant churn in the V4 Ethereum pool. It peaked at $1.8m, and is currently sitting at $1.2m. Retention is poor. The prize structure isn’t as appealing on Ethereum. Can we fix it by tuning the prizes? Should we fix the prize incentive structure before looking at migration incentives?

Now on Polygon, what happens with the POOL that was farmed? My gut tells me the users will hold. They know that more is coming. However, what if they decide to dump as @TheRealTuna worries? On Ethereum they can stake and vote with the POOL Pool, but we don’t have one on Polygon, so there is no utility for the token. If they want to take action, their only avenue is QuickSwap or Sushi and that will crush the token price. Should we create a POOL Pool on Polygon so that utility exists there?

Summary

I think are some important questions we need to figure out before embarking on a program like this:

  1. Ethereum retention is problematic. Can we fix Ethereum prize incentives? If we can’t, should we wait for a true Ethereum L2 to migrate? As mentioned Arbitrum is right around the corner.
  2. What do we do with POOL on Polygon? Simply treat them as non-voting shares and create a POOL Pool?

In terms of the proposal itself, it does seem we have consensus around a shorter time frame, POOL token, and slightly different tiers. But I think we need to address the above questions before moving forward.

1 Like

+1 on everything @underthesea said :+1::+1:

5 Likes

Okay, so what are our options here? Time is of the essence.
Our V4 sponsorship will be over in a few weeks.
Ideally by then we have somewhat of a sustainable and attractive prize pool on V4.

We have something that is actionable here and now, but it received a lot of pushback.
Our alternative is to try something more effective…but from scratch.

I think Brendan’s current approach will be more effective when we integrate Optimism and Arbitrum.
V4 on Ethereum is too expensive, even for whales. The whales also might not feel comfortable putting so many funds on Polygon. Even without any incentives, I think we’ll see people migrate to V4 when Optimism and Arbitrum are supported.

If it comes to it, I will vote in favor of Brendan’s proposal because it is something we can do right now.

1 Like

Yes, I imagine there are some whales that don’t trust Polygon enough, as it’s a sidechain rather than an L2.
Launching on Arbitrum or Optimism would solve that problem.

4 Likes