RFC: PoolTogether Growth Plan

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RFC: PoolTogether Growth Plan

PoolTogether’s core value proposition is no-loss prizes: you have a chance to win big without risking your capital. We saw this value proposition find traction several years ago in the PoolTogether V3 OHM prize pool, which at its peak offered a grand prize of $700k USD. This prize attracted deposits by virtue of its size.

Since then, prizes haven’t been anywhere near as large. This is for many reasons; new versions, technical limitations, minimal incentives, redeploys. Several years have passed since the last version; we took time to redesign the protocol so that it could scale safely and easily.

PoolTogether V5 is now ready. The team has deployed V5 to Optimism, Base, Arbitrum, and soon Ethereum. We’ve been relying on yield to grow prizes, but it’s been growing slowly.

We have about one year of runway left at our current burn rate. Our burn rate is shorter than the time it will take for yield to accrue large prizes.

We should inject cash directly into prizes.

Using cash will shorten our runway, but it will allow us to validate our product before our runway expires.

Goals

The goal of this plan is to boost the grand prize in order to draw in more depositors.

Strategy

We need to boost the grand prize in a way that is efficient and not gameable. We want to maximize prizes and growth without exposing our users to manipulation. We can do so using the Grand Prize Booster contract.

The GP Booster contract allows us to contribute prizes in a way that isn’t gameable. We contribute prizes on behalf of the GP Booster, and if the booster wins it contributes the winnings back into the prize pool. In this way booster recycles liquidity to ensure as much goes into the grand prize as possible. Vaults are competing fairly with the booster; their contributions are proportional to their expected value so the approach isn’t gameable.

However, the Booster wins all of the prizes. To make sure users feel whole we can also run a small POOL distribution to allow users to take advantage of the high POOL staking APR and earn a share in the protocol.

Deliverables

GP Boost All Chains

Each chain would receive a $50k USD GP Boost over 60 days:

  • Optimism
  • Base
  • Arbitrum
  • Ethereum

These boosts would be spread over two months.

POOL Liquidity Mine

The GP Boost will win most of the prizes for the boost duration. We can distribute POOL to depositors so that users have a base APR and feel rewarded.

This would have additional benefits:

  • We bridge POOL liquidity to each chain
  • By receiving POOL, we onboard people to POOL staking

We can distribute 200,000 POOL across the four chains over 60 days, and adjust the distribution each week to ensure that the distribution is proportional to prize pool contributions.

Projections

The POOL GP Boost and Mining projections shows projections of how the above program would play out. Note that these are estimates! The spreadsheet is a simple projection. The spreadsheet combines all chains into one sheet.

The projection makes the following assumptions:

  • TVL across all chains is $4m
  • Average APR is 10%

We can see that $200k over 60 days will:

  • End with $94k+ USD in grand prizes alone. For four chains that’s a $23.5k grand prize per chain.
  • Sustain a 40%+ APR for POOL staking during the boost period; including mined POOL

We can see that 200k POOL over 60 days will:

  • Will offer a 15% base APR for depositors
  • Will minimally diminish the POOL staking APR from 54% to 42%.

Liquidity Mining is a Yield Multiplier

The liquidity mining is interesting: if we distribute POOL according to the prize pool contributions from each vault, then the LM essentially becomes a yield multiplier. POOL is distributed based on how much yield is brought in. This is helpful because it’s an easy narrative to describe: we also offer a yield multiplier in POOL.

Potential Timeline

July 1st - August 31st

Ideally the growth plan can launch alongside Ethereum; allowing us to bootstrap all the chains at once. A unified program also ensures a simple narrative to push out to users: we are boosting prizes. No need to specify which chain.

Recommended Budget

$200k USD in total is quite reasonable, given that we have about $1.3m left in the bank. We can bootstrap our prize pools and have plenty left in the tank.

200k POOL in total won’t dilute holders significantly, but will still offer our depositors 15% base APR.

Request for Comment

I believe this is a relatively conservative approach that would allow us to validate our product while retaining enough capital to pivot at the end of Q3. It will grow all of our chains.

Please leave your thoughts, questions and feedback!

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Please don’t leave POOL stakers out of the distrubution: drop POOL also to POOL vaults.

And consider to bootstrap V2 project owned liquidity on all chains (V2 beacuse it is price agnostic: it will be a forever liquidity no matter what for the next centuries)

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First off - I love what you’re bringing to the table recently. I’m very happy we’re able to have some fun together now! Just wanted to mention this ahead - so please don’t get me wrong when I disagree with you on this point.
POOL Stakers already have a great incentive - they are winning prizes. From what it looks like they are taking home quite a good amount of juice already.
Dripping additional POOL feels like a double dip.
POOL Stakers will benefit when the other prize vaults grow and drive more yield toward the prize pool.

Agree that liquidity can become an interesting factor here. Will the free market be able to provide this? Can POOL LP prize vault on each chain do the trick? With POL on L2s we’re running in the famous custody issue again.
Governance is on L1, POOL is getting a lot more compelling to utilize on L2s, and to set up POL we’d need a secure multi-sig with people who would have to get paid. Tricky situation. I don’t have a clever solution, but I’m with you that liquidity could become a bottleneck.

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I want to highlight something in case you didn’t catch it:

$200k over 60 days will sustain a 40%+ APR for POOL staking during that period

The POOL stakers will have very high effective APRs, paid out in Ether, due to the prize boosts. This is a huge reward; I’m not convinced that we need to give the stakers POOL as well.

POOL Liquidity

In my opinion, AMM LPs are best managed by the market. I think our funds would be better put to use by adding to prizes and funding builders.

When we did the POOL airdrop three years ago, we didn’t do any market making. The market did this by itself; that’s why I believe the most valuable thing we can do is bridge large amounts of POOL to these chains and distribute it to the depositors. They will figure out what needs to be done.

I also think that locking ourselves into a single AMM isn’t future proof; we can’t predict where POOL liquidity should live in the future (Uniswap V4 is coming, for example). It’s best to leave that to the market.

IMO, the biggest help we can provide right now is to bridge large quantities of POOL to the chains we are deployed to and distribute to depositors.

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I was having fun even earlier, but being muted was boooring :sleeping:

I’d like to see more use and APR for the token, but I understand your point of view.

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Couldn’t other GP Boosters be deployed at user by user level in a similar fashion with the benefit of cutting out the yield liquidators or someone could create a 10x twab product yield farming at many levels with delegation tools already deployed?

I do note that a 10x twab product would be gaming at a level beyond the the GP Booster. I honestly feel like the GP booster acts to slow down or holding back prizes from the end user. Other than the statement of “a way that is not gameable”, I do think that a large prize pool is a good idea and would bring people in.

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I feel the same way; but it’s time for us to definitively prove it! It’s time to pump the prizes.

Vaults can be fully customized by the user; in fact they don’t even have to be “vaults”! All the Prize Pool cares about is how much was contributed by an address and what are the twab balances for that address.

For that reason, it’s important for the prizes not to be gameable. If we added prizes purely as donations (so odds weren’t affected), then a malicious user could take advantage.

For example:

  1. $2000 was donated to prizes, and now daily prizes are $500.
  2. Total yield contributed per day is $50. Say $10 goes to daily.
  3. Someone makes a custom vault that adds $150 in direct contributions. Say $40 goes to daily.

In this situation, the total daily prizes would be $550. The person in step 3 would have 150/200 of the chance to win, so they would have an expected return of (150/200) * $550 or $412.50. They would drain the prizes pretty quickly and unfairly.

We already saw this attempted when deploying to Optimism, so doing it on a much larger scale would definitely be problematic.

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Snapshot vote is live

POOL and przPOOL all active

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I’ve held the majority of my POOL for multiple years.
Compared to the likes of ParaFi Capital I purchased mine at a 90%+ discount.
I’m currently down 50-60% for a loss of >$15K
I’m among the largest POOL stakers on Optimism
I’m currently averaging maybe $8 a week in prizes.

*added for context.

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We need to load up on non-POOL incentives and start distributing POOL at a steady pace that shows that we mean to grow the token alongside the protocol. Opening up the floodgates for POOL will further harm POOL holders and does not give anyone the confidence to invest. Teasing these ideas of distributing POOL really quickly is why I currently hold almost no POOL. I want to hold POOL, but won’t do so when the only plans I see taking shape is the bulk of treasury being reserved for future salaries. If treasury dumps POOL at sub 50 cents then there is no avenue to $1B TVL. The only path we have left is for POOL token price to rise alongside TVL. We need to get some traction and doing so will mean more value can be unlocked from treasuries biggest holding, the POOL token. The team has built better vaults and the code has always been safe, but in 2 1/2 years you have not figured out how to manage the token, nor been open to any community ideas surrounding the token.

  • Coding out the reserve rate with the launch of V4, not a community decision.
  • Turning off POOL drip with the launch of V4, not a community decision.
  • Winding down governance, not a community decision. We have no power to stop this. The path should have been you build the community a system that can accrue value to treasury and the community/governance manages the treasury to benefit the system.
  • I could list more, but trying to get out more these days.

@Brendan You’ve taken the salary you wanted, now please deliver by putting it all on the table to sort out the economics of this system. We are tired of losing.

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That’s exactly what this proposal intends to do. Pump prizes with assets, and drip out POOL to depositors.

I’d like to put in a lot more; say $500k, but the snapshot signalled that people want to start with a conservative amount.

With respect to your list:

  • It was still possible to capture reserve in V4, but it wasn’t an explicit mechanism. V4 was entirely manual. You can ask the executive team about what happened with the liquidity when it wound down last month.
  • POOL was never dripped with V4; so it was never “stopped”.
  • There is no “switch” to flip to wind down governance; rather it’s about recognizing the diminishing value of governance.
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There have been a lot of conversations in Discord and the council calls around whether we boost one chain or multiple chains.

The RFC defines all four chains, but it’s worth prompting for more input here to make sure people are on board.

I’m going to present the merits of:

  • Multi-chain boost vs single chain boost
  • Each of the chains we could deploy to

This additional context should make it easier to make a decision.

Multi-chain vs Single-chain

Let’s look at the pros and cons of multi and single boost setups. The multi-chain setup will assume all four chains, so that we can analyze either end of the spectrum.

Multi-chain

A multi-chain boost would distribute the $200k in prize boost across all four chains.

The projected grand prize boost for each chain at the end of the duration would be about $12k USD. That is to say each chain’s GP would be $12k larger.

Pros

  • Hedge our bets. Certain chains may grow faster than others; by boosting all chains we cast a wide net.
  • Bootstraps the Ethereum deployment. We estimate the Ethereum deployment needs minimum $500k TVL to function properly. We need to kick-start it’s growth

Cons

  • The boosts may be too thinly spread, and so the grand prize might not be big enough to attract depositors. If we don’t attract depositors, we still don’t have a clear conclusion. Perhaps the minimum threshold is $100k to attract depositors?

Single-chain

A single-chain boost would use the $200k to boost the prizes on a single chain.

The projected grand prize boost at the end of the boost duration would be $48k USD.

Pros

  • 4x larger grand prize, which gives us more certainty in the quality of the test.
  • Provides more conclusive results, as we can compare growth against chains with alternate incentives, or no incentives at all. We are A/B testing, in a way.

Cons

  • Forces us to pick a chain. Do we expect the same results across all chains?

Merits of Each Chain

Optimism

  • We already have traction on Optimism
  • We have additional OP incentives that we can stack to bootstrap further and maximize the boost.
  • TVL is a healthy ~$700m.

Arbitrum

  • We are applying for ARB incentives, so we may be able to bootstrap further.
  • Arbitrum is a heavily Defi chain with over $2.7b TVL

Base

  • Base has rapidly caught up to or surpassed other chains in TVL, and now holds almost $1.6b.
  • It’s a consumer oriented chain, which is our target market.
  • Has an upcoming Onchain Summer campaign, which we could lean into.

Ethereum

  • King of liquidity; has a TVL of $58b. This is a massive addressable market
  • Has high gas costs, and therefore is more whale and institution-oriented.
  • An Ethereum prize pool requires a fairly high minimum TVL in order to function. Without a growth plan, we may wish to delay our launch.

Call to Action

Let’s discuss. Any feedback is worthwhile, but here are some prompts:

  • Are there other qualities of each chain we should discuss?
  • Is it worth considering 2 or 3 chains?
  • Should we launch on Ethereum only if we have a growth plan?
  • What would your intuitive choice be?
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Ethereum gas costs are quite low nowadays, wouldn’t be a blocker. What’s the gas required at 5 gwei, 10 gwei, 20 gwei, and the estimated $ cost for approval and deposit? On the flipside, if it’s whale orientated - that’s where the broader liquidity is, so not a bad thing? Just takes a few whales to get things rolling. Hitting $500k TVL, even without a boost, should be feasible?

Intuitively, go all in Ethereum.

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Given the initial prize boost amount of $200k, I think it would be best used on a single-chain. I think a single grand prize of $48k is enough to attract depositors. The chain that I propose is Optimism. Like you said, we already have traction on Optimism, we have additional OP incentives that’ll add to the existing incentives. Plus the grand prize we already have isn’t too shabby.

As for the TVL on other chains, I don’t think it takes any effort for that money tied up in other chains to bridge to other networks like Optimism. The opportunity just has to be compelling enough. The $200k is already small enough, no point in diluting it further. It defeats the purpose of the test. A meager $12k prize boost across all chains is insufficient. It doesn’t make a splash. I have a suspicion that a boost like that would be ineffective.

That’s just my opinion as a regular user of the protocol. I am not a whale and can’t speak to the growth potential on deploying on Ethereum. I think we can delay that launch if we’re speaking candidly. I don’t think anything would make me deposit on Ethereum over any L2 apart from a large grand prize. I understand that with Ethereum, we’re targeting another audience altogether, still, I say go all-in on Optimism. They’ve given us the most goodwill with their incentives, I vibe with their values (and I think PT does as well) and we initially launched with them. Optimism is the easiest and most intuitive choice here. Let’s build on what is already successful.

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I think we go where we don’t have incentives so either base or Ethereum or scroll. Minimize the amount of chains without incentives.

OP has a drip

Arb may get a drip if we get approved

So.
Eth markets will probably have the best return and base is proving super successful so maybe split between base and eth so choosing between chains is a difficult decision in a good way

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Good to see you around again! @DaBoom That approach has merit, it’s an approach that aligns with what @underthesea has been advocating for. My proposal was pretty much the opposite. Incentivize a chain that’s already successful. We already have $3.3M in Optimism, OP incentives set to double on July 16th. My thought is we laser-focus on Optimism and drive deposits and prizes up there. I would rather have 1 meaningful prize now than a couple of lukewarm ones? We’ll be able to see a grand prize we probably haven’t seen in years and its effects on organic deposits. Just my 2 cents. I just want this boost to be as impactful as possible! Excited to hear what everybody else has to say. Thanks, @DaBoom!

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I’ve been around but with governance gone it’s hard to voice an opinion. This seems like a good step for a last hoorah so here I am.

I like the idea of a grand prize that makes headlines. I think 46k gets us there (using 100k boost for two chains).

I would be open to throwing it all at optimism if we didn’t spend so much of the Treasury being arbitrum, base (and now) Ethereum on board. If we don’t think 46k is effective, we should go bigger but with as many chains as makes sense. So if 46k is not enough to make a headline, let’s go bigger.

Honestly, I think the rest of the funds can be spent towards boosting the prizes, incentivizing vaults and maintaining UIs.

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It doesn’t look like the injection gets evenly distributed to the grand prize. It’s only a $200k boost for a single chain that would yield a $46k prize. Distributing $200k across four chains divides that more or less proportionally and the grand prize for each chains grows by only about $12k. If we do this, we might as well not be frugal and just go with $400k or $500k if we’re going the multi-chain route.

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Thanks, Brendan! I’ll follow along using your prompts:

Are there other qualities of each chain we should discuss?
Optimism has shown a strong support for PoolTogether since it first deployed. Optimism Grants helped us out with user incentives and audits.
I feel targeting Optimism or the wider Superchain would be a logical step. If not Optimism, I see a big benefit from growing prizes on Base. They’re a Superchain as well and stand for consumer focus. I can see great apps being built on top of PoolTogether over on that chain.

Is it worth considering 2 or 3 chains?
Optimism and/or Base. We shouldn’t split ourselves too thin with this boost.

Should we launch on Ethereum only if we have a growth plan?
Yes - deploy!

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Thanks for reintroducing this discussion here @Brendan

TLDR: I believe we can maximize growth by conducting a deliberate study phase, and then using the insight we gain to launch a growth phase. The study phase would emphasize separating out variables so we can clarify what actually determines user behavior, and the growth phase would go all-in on what we learned. Each phase can be completed in 3 months or less, and we can complete this by EOY.

— Study Phase —

The key principle of the study phase is to stop mixing our signals and isolate each growth mechanism empirically. The cool thing is that this is feasible now that we’re on multiple chains. I see 3 primary mechanisms, and 3 complimentary mechanisms.

The primary would be:

  1. Grand Prize - the size of the GP
  2. Fixed Rewards - things like OP or ARB incentives
  3. POOL Drip - the opportunity to gain stake in the protocol’s value generation cycle

The complimentary would be (something like):

  1. PoolTogether UX - how do users find, use, earn, and WIN with the PT protocol?
  2. User Engagement (Marketing & Community) - how do users discover what’s possible and learn how to make the possible a reality?
  3. Builder Engagement (Partners & Devs) - who else is advocating for, building with, and enabling PT?

I’m going to focus on the primary mechanisms, and note the complimentary mechanisms that need to be in place to maximize a given primary. I propose the following experiments concerning each of the primary mechanisms:

1 - Grand Prize

Hypothesis: large GPs draw smaller depositors relative to the prize size. The psychology of a “big win” is relative to the bigness of the chance versus the opportunity cost to participate.

According to this hypothesis, anyone depositing more than the value of the GP likely isn’t doing it (primary) for the GP. Before the GP really impacts engagement, then, it has to be large enough to cross the “no brainer” threshold for a given deposit amount. It’s a decision spectrum, but - at least in crypto - 10x likely isn’t it. Every memecoin pitches 10x-100x returns. So let’s say (as a starting point) that it’s 1000x. Given 1000x as the “no brainer” ratio, a $50k prize merits a YOLO deposit of $50. That means, for GP alone to drive 10M in TVL on a chain, PT would need 200,000 users.

Action: WE DON’T KNOW THE ANSWER TO THE RATIO QUESTION… so let’s figure it out. First, it doesn’t make any sense (by this hypothesis) to split GP boosting across multiple chains, as that would greatly reduce the ratio range we’ll get to assess.

I propose boosting the GP to the max possible on a single chain, ideally Base (since it is the “cleanest” chain with the fewest noisy secondary incentives). Since Base is already more consumer focused, it seems like the ideal place to test the ratio that would apply to newer / normie users.

The critical secondary enablers for the Grand Prize experiment on Base would be (1) UX and (2) User Engagement: If people don’t know about PT, they won’t use it. And if it is difficult to use or understand, people who know about it will be less likely to try it or keep using it.

Endstate of the experiment is that we’ve either validated or invalidated that GP alone moves the needle, and - if it does move the needle - what we can expect users to do at a given GP size alone.

2 - Fixed Rewards

Hypothesis: fixed rewards (like OP incentives) draw larger depositors until the % is diluted to a certain threshold. It seems to be between 15-40%, depending on the risk and accessibility of the underlying asset. That means this mechanisms is, ultimately, unsustainable - but it can be useful to drive the GP to the level that the GP alone incentivizes engagement.

I propose that the existing OP incentives already provide strong signal here, and we have enough data to act on the growth plan when it is time to initiate. But we should be disciplined about our expectations. I don’t think it is likely that the Fixed Rewards incentive ratio will change much - it is simply a slider. We must be honest about what it can bring to the protocol, and for how long.

Action: We already have good data about this mechanism. I recommend making no additional commitments until we get data back from the other two experiments. We also should NOT mix our signals during the study phase by overlaying additional incentives on Optimism.

I view (3) Builder Engagement as the critical secondary enabler for Fixed Rewards. By building and extending partner relationships, earning grants, etc., we extend our ability to fund Fixed Rewards mechanisms.

Finally, I estimate there is a BIG gap between when large depositors are no longer incentivized to add TVL and when the GP “no brainer” ratio kicks in. If we complete the Base experiment, we’ll know more definitively. Should we need to fill this gap, there will need to be a bridging mechanism…

3 - POOL Drip

Hypothesis: I… don’t know. I think we need to test this in as clean an environment as possible and observe user behavior. I do believe that POOL distribution will be critical to bridging the gap I described above, and we won’t know how best to use it until we have better data.

Action: Conduct a POOL drip experiment on Arbitrum that assess the ratio of POOL value required to increase TVL, as well as the impact on POOL dynamics across the ecosystem. There is likely a threshold. We want to distribute enough POOL to increase PPC and (consequently) staking value for POOL holders, but NOT distribute so fast that it results in decreased relative PPC because the utility of the drip can’t match the economic impact of dumping. The purpose of the experiment should be to find the max PPC per dripped POOL threshold.

(1) UX is the critical enabler here. Users must understand the utility of POOL in order to value the drip and consider staking in the protocol (the best case destination for dripped POOL).

— Growth Phase —

Once the study phase is complete, we’ll have enough data to know how best to allocate resources to achieve the the longterm, sustainable growth v5 deserves. We should follow the data, not our hunches, and execute one final “all-in” with remaining resources to launch PT into the stratosphere.

~ Thanks for reading through the long post! ~

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