Incentives the new no loss Tether prize pool with 400 POOL per day. Split that incentive 80 / 20 between sponsorship and deposits. Reduce distribution on the UNI and COMP pools from 255 per day to 50 per day.
Motivation
This PTIP is motivated to address a few issues:
Right now a lot of POOL is going to UNI and COMP which have very low yields (less than 1%)
Whales are often winning the prizes which creates a negative perception
There is currently no Tether prize pool.
Overview
This PTIP improves on the protocol in a few key areas.
It reduces POOL being distributed to the COMP and UNI prize pools. These prize pools add a lot of TVL to our numbers but the interest the earn is tiny (less than 1% each). In contrast, Tether is both the largest stablecoin in the world and also one of the highest yielding assets on lending markets.
It tests out the idea of incentiving “sponsorship” more than “deposits”. “Sponsorship” is money that is deposited into a prize pool and contributes interest to a prize but is NOT eligible to win. By doing this, the whales that are around just to farm POOL can deposit into sponsorship but not have a chance to win. The smaller fish that want a chance for huge prizes can still earn POOL but just at a reduced rate.
Rationale
I reached the idea of 400 POOL per day simply by using the reduction of UNI and COMP POOL to fund it. I think maintaining some small UNI and COMP distribution makes sense as there is a lot of dollar value deposited in those prize pools.
The 80/20 split between sponsorship and deposits was mostly based on the idea that we want whales to be incentives to sponsor but still offer small rewards to all depositors.
Overall, I felt this is a good way to pilot a new POOL distribution method before applying changes to our larger Dai and USDC pools.
Technical Specification
Change drip rate on UNI and COMP prize pools
Implement two new drips for Tether prize pool, one for deposits and one for sponsorship
This sounds like an interesting idea. I have two questions / remarks:
As far as I can see, it is currently not possible to deposit into sponsorship, or am I missing something? Not that I am a whale, but I’m just curious.
I understand that for this system to work, the majority of the POOL drip needs to go to the sponsorship to make it interesting for whales to deposit there instead of taking part in the normal lottery. However, by reducing the POOL drip to the lottery, it also becomes a lot harder for (small) players to earn back deposit costs due to high gas fees (though they are quite low at the moment). Any ideas on that?
I do have one question about this proposal. Should we consider using AAVE as the yield source on the USDT pool instead of compound? Some juicy mining rewards available on AAVE starting today. I just don’t know what to do with the AAVE on L1. Distributing it back to depositors wouldn’t work with gas costs. We could make it part of the loot box. Or keep some for the reserve. I think this is a great opportunity to make some improvements to the core protocol. I have long wondered how we better utilize the COMP that we earn. I think it would be awesome to distribute that comp among the winners instead of it all going to one person. I also think it would be good for us to take some of it for reserves. I’m not sure how difficult these changes are in reality, but I think long term this would be a good option to have available to us.
It is possible to deposit into sponsorship right now but it’s not prominently displayed. To find it go to the bottom of the prize detail page and hit “manage pool” at that link you’ll see where you can deposit. See here.
It will be interesting to see how it plays out. My assumption would be that the effective APR would actually end up being only slightly less. Because the whales will be gone so it will be a smaller amount of POOL but shared with less people.
We should definitely implement this on either Compound or Aave. I am leaning Aave since it would be nice to spread our governance pools around on multiple platforms. It is also nice to get the UNI and COMP reduction out of the way.
So with the Tether pool being sponsored on Polygon is this still something in the works? Or should be try the 80/20 approach on some other pool on ETH mainnet?
In favour of this - and especially for doing this on mainnet.
Might be quite interesting to see how this pans out for governed pools - especially ones where we want to focus on building reserves quickly - and do so via incentivizing POOL rewards to sponsorship whales.
