PoolTogether

PTIP-5: Increase Reserve Rate in Governed Pools

Simple Summary

  1. Increase the reserve rate for governed pools from 5% to 50%/ Week.
  2. Eliminate 5% Reserve Rate on community pools

Abstract

If this proposal passes then 50% of all interest earned in governed pools will be captured in the reserve. These Treasury funds are deposited into sponsorship of each respective pool. The current 5% reserve rate on community pools would also be eliminated.

Motivation

The current TVL in PoolTogether is disproportionately generated by Whales. Most of those whales joined because of the liquidity mining program introduced with the POOL token debut. if those whales take their funds elsewhere after the liquidity mining period ends then our prizes will be considerably lower. The value that PoolTogether provides to whales is greater than the value that they provide to PoolTogether. Whales are earning 30-40% APR in mining rewards and winning prizes at a high rate. The funds they supply to the interest pool are only earning 8-15% for the prize.

Community Pools spread the word about PoolTogether. They are also typically stake prize pools where the creator supplies the prize. Taking a reserve from those pools may discourage others to build their own pools if they are required to give a percentage to the protocol. they are already supplying the prizes themselves and paying gas fees associated with awarding the prizes.

Overview

Setting the reserve rate to 50% will allow us to build a sizeable sponsorship that will support high prizes into the future if whales withdraw liquidity. This will also create a perpetual growth machine.

Eliminating the reserve rate on community pools will encourage other projects or individuals to create their own pools.

Rationale

By raising the reserve rate while whales are deposited we ensure that prizes will grow over time. if the value locked drops then we still have the sponsorship reserve earning interest for the prize. This sponsorship pool increases in size every week. the opportunity to win large prizes will attract new users, and this is the simplest mechanism to ensure that prizes remain large. now is the time to implement this. it can be adjusted in the future if needed, but right now we need to take advantage of the liquidity that we have access to. Whales are here for the steady yield, the prizes are a bonus. I do not believe that this proposal will cause a whale exodus. I will also include a couple of points from @leighton post.

  • It takes winnings away from the whales and instead keeps more money in the protocol “sponsorship”. This raises the effective APR for everyone and minimizes the impact of whales leaving.
  • It begins to build a powerful and reinforcing network effect that having a deposit in PoolTogether is ALWAYS better than having a deposit in the underlying yield source.
  • It opens up the option to use reserves for a variety of things that have been mentioned in this forum

Technical Specification

The contract will need to be altered to allow for different reserve rates on different pools.

Status

Vote on PTIP5
  • For
  • Against
  • Abstain

0 voters

7 Likes

I am very excited about this proposal. With compounded interest the prizes will grow very large at no extra cost to depositors. This model will make us a supply vacuum and make us strong. This has to happen!!!

I think it’s important we keep flexibility to adjust individual pools appropriately. I’d like to allow for more trials and promotions with other communities in the future. We may need to adjust some of the language in this PTIP to reflect that we would allow governance pools to be adjusted by governance in a range of 0-50%. 0 % would only be used as a temporary rate in the case of a trial pool that has been funded via donation. I voted “For”.

3 Likes

What happens with governed staked pools?

For instance the POOL pool (likely a special case), we’d effectively be taking 100 POOL and popping it into the reserve to just hang out. Just floating this into the ether, I’m very much For this motion.

1 Like

Question about the architecture of the reserve and sponsorship. In the interface, it separates them currently so I assumed these were two separate contracts, but in actual fact the reserve that is collected goes to the same place as someone depositing sponsorship altruistically right now? Is that correct?

For example, see screenshot

I’m asking because I posted another thread about moving the drip entirely to sponsorship, just wonder can we distinguish between user deposits into the sponsorship contract and what is there collected by the reserve?

2 Likes

If you had to separate contracts wouldn’t that increase the gas costs to the protocol. You’d have to make more deposits into compound. It’s a good point though. Not sure how that actually would work

Yes we can. It would be possible to setup a new drip that goes ONLY to people who sponsor.

1 Like

Perhaps staked pools could be excluded. Maybe change the language to say eliminate the reserve in all stake prize pools instead of governed pools?

1 Like

Thanks for getting this discussion going @RegisIsland I wanted to offer a few points of analysis to help.

  1. It’s very important to realize the reserve ONLY applies to the interest accrued on the prize pools NOT the additional COMP.

  2. I’ve put together an analysis on how a 50% reserve rate would have impacted the last four prizes for each prize pool. What you can see is that a 50% reserve is effectively a ~35% reserve rate for Dai, USDC, and UNI, and effectively about a 15% reserve rate for COMP. This is because so much of the prize value is in the COMP. It also shows a 50% reserve rate over the last 4 weeks would have led to ~$273,000 in reserve growth.

4 Likes

Great proposal. I strongly support this change. The only thing I would add here is that I would recommend going a step further and adding POOL rewards to the Sponsorship deposits, which would be even more effective at preventing whales from winning prizes. Getting the whales into their own non-eligible pool while having them contribute to long-term reserves for the protocol would be a huge win for everyone.

3 Likes

I’d like to get some feedback on where we stand with this. I have seen a couple issues raised that I want to address in an attempt to move forward.

  1. Pool pool reserve rate. I saw some suggestions to take 50% of the pPool prize. I do not think we should. The prize is meant to be distributed to Pool holders. It would not earn any yield in the reserve and would just be sitting there doing nothing. I think that all stake prize pools should be exempt from reserves.

  2. It was mentioned before that at that time we did not have ability to set custom reserve rates on a pool by pool basis. Are there any updates on building this? I think it is an essential feature that will prove useful in the future.

  3. I saw a question about the deposit contract for the reserve and sponsorship being the same. Do we need an additional deposit contract to keep the two separate?

I’d like to to get these things ironed out soon so we can start building the reserve. This is one proposal that is time sensitive due to the liquidity mining program. It will be reduced in a couple months.

3 Likes
  • I think item 1 is spot on couldn’t agree more.
  • Item 2 is mission critical to PTIP-4, if item 1 isn’t enacted. I can’t imagine Badger jumping on board with a reserve on their pool. I also think being able to turn reserve off on partnership pools would be beneficial for negotiating said partnerships.
  • I’m not sure I have the depth of understanding on what to do with item 3.

If these aren’t commented on I think we should bring it to the Friday meeting, and I’ll have it mentioned in the Swim Meet.

1 Like
  1. Reserve rates will be able to be set per pool, so yes, I agree, keeping the POOL pool at 0% makes sense

  2. Sorta answered that above. It’s a very simple update to make reserve rates customizable per pool, so a proposal can go up for voting this week.

  3. No, no additional contract is needed.

One open question is: what will the reserve rate for the Badger pool be? (assuming it gets accepted as a governance pool).
I think something up to 5% could make sense, since we are “donating” a lot of POOL to Badger holders by incentivizing it with POOL liquidity mining.

2 Likes

i believe Tuna mentioned it would 5%. We have the ability to set custom rates on pools. @TheRealTuna can you make this part of the PTIP4 vote?

I would agree with that! I think we want the protocol to be long term holders of Badger!

2 Likes

I am good with the 5% reserve on the Badger pool as is the current standard with governed pools. I was against it at first but have a better understanding of the benefits of the reserve now.

I can include it in the snapshot poll if necessary but won’t be able to update until this evening when I can access my wallet.

1 Like

unfortunately you cannot edit a snapshot proposal. i tried last night to edit mine. it must be deleted and started over. it doesnt cost any money to do so, would just have to start the vote over again. the only downside is lost time.

Ah okay, in that case I will just leave it. 5% in the standard currently for governance pools and the info is in the PTIP. The snapshot links to the forum post so I think we are good.

Could we clarify this in the first post of this topic?

I was gonna vote against this proposal cause I thought any community pools would have a 0% reserve rate.

But now you’re telling me that the reserve rate on Badger pool is gonna be 5%?
Kinda lost here. Badger pool is a community pool right?

@Pierrick
Badger pool is being voted in as a trial governance pool. If vote passes Badger will be contributing 2400 Badger to the 12 week trial.
More info:
https://gov.pooltogether.com/t/ptip-4-implement-badger-pool-as-trial-governance-pool/753/19
Link to snapshot.
https://snapshot.org/#/pooltogether.eth/proposal/QmcnXbDGRnk4Jmt244qmckzpoV3EyQR7kDPZzpZyaxZh9D