RFC: Kickoff Hyperstructure with subsidized POOL pools

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With V5/Hyperstructure just around the corner we need to think about additional ways to create fun and excitement centered around the POOL token. The POOL token becomes a critical utility to the protocol as all yield earned will now be liquidated to POOL and POOL will now be awarded as the prize. Some users will sell the POOL they have won for their asset of choice while some may consider speculating on POOL and may decide to hold onto it.

I propose that the team builds a POOL vault on each chain where Hyperstructure is active and subsidizes each POOL vault with a non-POOL asset from treasury. This would sort of act as a buyback as the subsidy would be liquidated to POOL and the POOL awarded as the prize. It would also give POOL a yield source that allows POOL holders/winners to particiapte in the grand prize draw. POOL will be actively used on every chain and we now have a reliable bridge in Across that will accumulate bridging fees for the protocol.

If we applied 200K in subsidy split to 4 POOL vaults on Ethereum, Optimism, Arbitrum, and Polygon over a 1 year period we can easily maintain yield well above 5% that would contribute to the prize and help drive TVL and token price growth. Additionally, we should create a zk Sync ERA vault for another 50K in subsidy when we are ready for zk Sync launch. We would be effectively subsidizing the prize, buying back POOL, and increasing POOL demand/utility all at once. In addition we are creating cross chain POOL volume on Across where our protocol earns bridge fees from our liquidity that is provided on Across.

With roughly 5,300,000 POOL circulating that is currently valued at $3.7MM we can assume that if 50% of POOL is deposited to vaults (2.65MM POOL or $1.85MM USD) then our yield on the POOL vaults would be over 13% based on current prices. POOL can more than double in price and still be over 5% yield. Pooltogether treasury still holds 4.7MM POOL between POL and POOL holdings and focusing things around the token can greatly increase the value we can capture. Imagine being a Pooltogether depositor and depositing ETH to win POOL and then depositing POOL to earn even more.

I believe this is the best path to protocol success and would pair well with additional incentives to other participants like bots that liquidate yield. Depositor, Pool holder, Network participants can all win.

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First of all, posting a little poll here to get a temperature check ^^

Do you support this idea?
  • YES
  • NO
  • ABSTAIN
0 voters

In my opinion this sounds like a cool idea! :slight_smile:
I would be a bit careful with how we split the funds between the chains, like if yield on ETH is much higher but gas costs would still only make it worth it for whales to move the funds there, Iā€™m not sure if there are enough wales to do that to even it out again or maybe we should allocate less to ETH from the start to make the yield there in line with other chains.
In addition to the chains you mentioned, I think BASE would also be a great POOL Pool chain!
But your calc shows great that we could at current prices get some nice yield over a pretty long time frame with relatively few funds.
Even if yield would be lower, I still like the idea having even just a little win chance with my POOL funds. Holding POOL should be FUN and having a chance to win is fun in my opinion.

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Interesting suggestion! Love to see some creative approaches to the Hyperstructure launch. Launch incentives can be an important driver in bootstrapping V5.

As currently described, the proposal is still a little bit over my head. I suppose you are looking for a little bit more conversation before ironing out the structure and potential PTIP.

  • This would ask for $250K in various treasury assets, right? Which assets are you thinking here?
  • Does this proposal assume GS would do the implementation work? Or ask for funds to get the work outsourced?
  • Could V4ā€™s TWAB rewards contract potentially be turned a yield source?
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My recommended approach would be to use ETH, it could either be ETH we already have in treasury or we could convert some stable assets for more ETH, this way our incentives have potential to rise with the market. My preference would be to convert some stables to ETH to apply the yield as I am forever bullish on ETH.

My hope is that Generational Software would assume this task as I think it could be a critical piece. I would even encourage a delay in hyperstructureā€™s launch to ensure we are ready for a strong start.

Iā€™m not sure on the technicalā€™s on how to work POOL poolā€™s into the hyperstructure system but the key piece here is that we subsidize the prize while also having an avenue for POOL holderā€™s to participate in the network.

In hindsight, my original post discusses APY estimates that would not be accurate as the new prize structure will not make it easy to calculate an expected APY. That being said, POOL holders would be contributing a significant amount to the prize pool and therefore would have very good odds. I think by guaranteeing a minimum of 1 year of these incentives we can drive demand for POOL which will help boost the deposit of other assets. I also hope we can provide similar incentives for year # 2 using assets from treasury, and by year 3 I hope we can rely on our POOL holdings in treasury being high in value.

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Like I said above already I rly like the idea but have to agree that the dev work could maybe be a bit tricky.
In theory it would be some very simple ERC-4626 vault where people can just deposit and withdraw their POOL (easy part probably) and the yield would be supplied externally from someone (in this case the protocol) depositing a token of value that works as a yield to the depositors into some kind of sponsorship contract (tricky part probably).
Then we have a functioning POOL vault that would work nicely with the rest of the protocol.
I want to add that this idea/work could be applied to any token though, we could have a BRONDER token vault where someone is willing to deposit 1 ETH over one year as yield in the sponsorship contract and everyone with BRONDER token could use PT and be able to win prizes! :slight_smile:

It would basically be a template to make any token into a yield generating ERC-4626 vault (although the yield is not rly generated but supplied externally).
I also think that Generation Software is probably the best partner for the implementation work, in his ERC-4626 research Tim also looked into some other protocols like Beefy, Popcorn, SuperForm that have some experience with ERC-4626 vaults and wrappers or even the ERC-4626 alliance itself https://erc4626.info/ . Something like this could be a Bounty there too maybe!

But that are just some thoughts that came into my mind thinking about it, donā€™t wanna derail the original discussion about a single POOL Pool too much and yeah if possible GS is the best/easiest partner for it imo! :slight_smile:

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I think an incentivized launch for V5 is critical. V5 is shaping up to be compelling enough of a product that it shouldnā€™t need an incentivized launch, but this will give users the nudge to try PT again. This time, I think theyā€™ll stick around.

I know there is always a concern about mercenary capital and farmers, but this seems like an undertaking we should embark on to lure people back into the pool. As @Tjark mentioned, this is an important driver in bootstrapping V5. We need to show people the merits of the PT Hyperstructure and we need to launch with a bang :]

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I think this is great and we should do it. However, in the past when weā€™ve tried to ā€˜hireā€™ ā€˜the teamā€™ to build something via a governance post/idea, things got a little tricky.

Have you had any contact with GS or any other dev team that might take this on?

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First I want to say thanks to @TheRealTuna for putting thought into this post, and more broadly for grinding it out as part of our community. The entire crypto ecosystem is going through hard times in this bear market, and many protocols and DAOs have become ghost towns. Iā€™m proud of you and everyone that has stuck around.

Iā€™ve taken some time to think about this, because incentives are incredibly important and need to be thought out carefully.

tldr; I agree that we need to have launch incentives, but I disagree with the approach. I offer an alternative below.

Issues with a Short-Term Strategy

Tunaā€™s proposal is to create a POOL vault that has temporary artificial yield subsidized by the treasury. The intent is to increase POOL demand and price.

I see a number of issues with this proposal:

  • Lack of long-term alignment. A POOL vault with artificial yield is not sustainable and therefore will eventually end. The vault would not be long-lasting, so we would be putting energy into an effort that does not contribute to our long-term goal. We have limited resources, we have to be judicious with how we spend them.
  • Confusing user expectations. Users would need to withdraw at the end of the campaign. These kind of short-lived hard-stop campaigns are confusing to users and weā€™ll get people in our Discord asking ā€œwhatā€™s happening with the POOL vault?ā€. All of the marketing for the incentives will still be out there, so it would require very strong communication efforts to manage user expectations.
  • Unclear end-result. What happens when incentives end? My intuition is that the POOL stakers will dump their POOL prizes all at once. This is not 3,3 behaviour.

Alternative Solution: Boost Existing Yield

Incentives are powerful, and if used in the right way they could get V5 off the ground very quickly. We need to kick-start the actual V5 product experience.

We know that this community loves ETH and USDC (who doesnā€™t?), so itā€™s a given that weā€™ll be starting with those assets. How can we encourage people to deposit those assets?

Proposal: we boost existing asset yield

We know that users chase APR, so we nudge the existing APR higher by a few percent.

For example, letā€™s say we launch a USDC vault on Optimism and our TVL goal is $5m.

If we boost $5m TVL by 1% for one year, it will cost us $50,000 USDC. What does this get us?

  • The vault holders win a higher market value of POOL than they are yielding, and without inflation.
  • POOL token holders can arbitrage the boost and the yield: helping the value stay within the protocol.

Boosting with like-assets has the added benefit of extremely simple APR math. We can launch identical boosts across multiple L2s / assets by tuning the actual boost APR (i.e. boost this vault by 1% with X number of USDC).

Itā€™s important to note as well that in the above example the boost could last much longer than 1 year. If it takes time for the TVL to ramp up then the boost will last much longer.

Closing

The hyperstructure is designed to last over one hundred years. Our goal is to become the de-facto prize layer for protocols by being a solid, un-changing foundation that can be relied upon like the laws of nature. Letā€™s think long-term: every step we take should be towards achieving that goal.

Iā€™m going to start working on a launch plan that Iā€™ll present to the community, and Iā€™ll include the Boost mechanism.

I would love to hear @TheRealTuna and everyone elseā€™s thoughts on boosts. I want us all to be on the same page. Weā€™ll go far if we go together!

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I think the more than $2MM paid out in subsidies alongside OP rewards to V4 pools to maintain $45MM in TVL for 6 months has proven that incentivizing depositors directly from treasury does not work well. I agree that focusing incentives towards POOL creates an artificial growth but I believe that getting TVL to an inflection point where it can self sustain growth is key to Hyperstructureā€™s success.

I know how this goes though and even if this gets huge community support it will not be enough to convince the team to build it. I will wait for you launch plan to be published and strap in.

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We want the same thing!

  • POOL staking
  • Incentives for depositors

I think where we disagree is what we should launch with; I do think artificial yield will be useful; especially for new L2s where there is no yield source.

We will eventually have what you are asking for!

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It got blocked by the system because of a rude tone. Iā€™ve reviewed it and kind of agree to the flag. @nateisevolving

If I were you I would phrase it in another tone and give a little more background. You seem to be upset because of a denied grant request. You must understand that the grants team is a committee that takes decisions on their own behalf. @TheRealTuna is not a member and most likely has never seen your grant proposals (nor do I btw).

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Yeah, pls letā€™s all stay civil and keep our good discussion style.
If itā€™s rly about a Grant, feel free to reach out to me (Discord: Lonser).
But I donā€™t think that what Tuna is proposing could be rly done with just $7k through some Uniswap options, you may have missunderstood the proposal.