[RFC] PTBR-26 Incentivize Moonwell WSTETH on OP for remaining OP Grant

Simple Summary

We aim to reach $6 million in LST Prize Vault TVL on Optimism by EOY to unlock an additional 92K in OP incentives to distribute how the community wishes.

Currently, the $3 million TVL WSTETH/ETH Prize Vault is offering negligible underlying APR to the prize pool, with no signs of improvement.

To address this, we will capitalize on Moonwell’s incentives (OP and WELL) to drive higher APRs, significantly outperforming the Beefy/Velodrome vault’s 0.12% APR. Moonwell offers 0.8% APR and this will increase as the TVL increases, making it a better solution for incentivizing growth to Prize Pool on Optimism. This is the Moonwell Vault we should incentivize. Moonwell plans to continue to incentivize this vault as TVL grows.


Abstract

This proposal allocates 45,000 POOL over three months to incentivize the Moonwell vault on Optimism. This allocation provides a 20% APR for $1.5 million in TVL.

Month Dec Jan Feb Total Request
TVL $500,000 $1,000,000 $1,500,000
apr 20.00% 20.00% 20.00%
to distribute in USD $8,333 $16,667 $25,000 $50,000
in POOL 7,246 14,493 21,739 43,478

Motivation

Building on the success of our partnership with Moonwell on Base, this initiative extends our collaboration to Optimism. This approach not only aligns with our goals of increasing TVL but also unlocks substantial OP rewards for the community to deploy strategically.


Specification

  • Allocate 45,000 POOL to a Watchman Labs multisig.
  • Distribute POOL to the Moonwell vault over 90 days.
  • Collaborate closely with Moonwell to launch a comprehensive promotional campaign.

Status

This proposal is time-sensitive and requires immediate action. Moving it on-chain this week ensures we meet our target TVL by EOY.

2 Likes

It makes sense to incentivize a more productive yield source. Moonwell is a good choice for this; they have a solid security stance and are using Aave and Morpho for their infrastructure.

I think the a three week timeline to reach $4m for this is unrealistic given our past growth. It takes time for deposits to accrue. The existing vault took 3 months to grow to where it is.

I’d rather have longer term incentives so that people have more time to discover it and they can rely on it lasting. Additionally, it means fewer proposals for us to vote on.

I like our current incentives; how they ramp up in 2 month segments. I’d be in favour of that over a six month period.

You also need to adjust the POOL amount; it’s up to $1 now! :slight_smile:

2 Likes

Ok here’s a new spread for the next three months. Total request 45K POOL with a goal of hitting 3 million TVL in 6 months. I’ll update the proposal above and move the proposal to Tally asap

Month Dec Jan Feb Total Request
TVL $500,000 $1,000,000 $1,500,000
apr 20.00% 20.00% 20.00%
to distribute in USD $8,333 $16,667 $25,000 $50,000
in POOL 7,246 14,493 21,739 43,478
1.15 43,478
1 Like

It’s the unfortunate reality that this OP grant has gone through a myriad of hurdles along it’s sprint to $6m in LSTs. The original plan of using it for a novel rETH prize vault was promising, but had too many implementation issues (and exploits) that made it impractical. The pivot to using the WSTETH/ETH yield source was good at the time as the yield was solid, but there was an flaw in the logic: since we provided OP incentives to a velodrome LP pair, we diluted the market to the point that bribing participants moved elsewhere and the yield plummeted. This would likely have worked a lot better on an LP market that does not rely on bribes for trading fees, but no such compatible market exists on Optimism at the moment.

Now, as a last-ditch effort, we are looking at the wstETH market on Moonwell, which had a 0.8% APR 3 days ago (0.5% as of now) to try and reach the $6m TVL goal with the remaining OP rewards and additional POOL rewards by the end of the next month.

I have a few questions about this:

  1. How often does Moonwell rebase rewards for this vault? It seems to have varied quite significantly over the past few days, so how can we be sure it won’t continue to vary while we pump TVL into it via the prize vault? Is this distribution linear to TVL or based on other factors?
  2. Has the Optimism foundation acknowledged the wstETH market as eligible for the original grant agreement? It seems to provide little value to the ecosystem given that they already provided incentives to Moonwell and the wstETH that will be added to the market from the prize vault won’t be used as collateral for any borrowing purposes.
  3. Is is worth moving the remaining 3 weeks of OP incentives to a new market for a 0.3% APR increase? Current depositors expect reward to continue for 3 more weeks and it will take significant time for that value to move over to the new vault in addition to any new value coming in. If we are going to throw POOL at something, why not throw it at the existing prize vault?

Taking this at face value, adding POOL to a new prize vault to reach the grant goal and receive more OP is objectively worth it from a protocol rewards perspective, but does the action of using alternative rewards to boost the numbers disqualify the grant eligibility? Will it even reach the $6m in time? Will the rewards on the new vault qualify as something valuable to the Optimism ecosystem?

There are too many unknowns for this to make any sense to me as of now. If we throw 45k POOL at a new vault and still don’t meet the unlock requirements then we are in the same position, but with 45k less POOL.

1 Like

Thanks for this @trmid !

As the vault TVL grows Moonwell has said that they will increase incentives over the next six months.

Optimism has asked that we try our best to get to 6 million TVL. This is a way to show that we REALLY tried our best. Our hope is that they will see this effort and reward us with even part of the remaining OP

I’m fine with incentivizing the Beefy vault for the next three weeks, and then shifting over the
POOL incentives (plus the new OP that we might get) over to the Moonwell vault.

Again, I think this is us showing that we really tried to grow LST adoption. This is a great way to show that we did.

We can always move the 45K to a different vault if things aren’t working out re: the OP grant.

1 Like

Thanks for answering my questions, @tim.

I appreciate the effort in finding a way to reach the goal for the grant. While curating a POOL incentive program to try and reach the grant milestone can be viewed as good effort, it still remains an uncertain effort.

Based on the distribution proposed, we would not reach the $6m goal by the EOY ($500k in new TVL plus $3m in existing TVL would still fall short of $6m considerably):

If we had a more stable LST yield source that was available for a prize vault, I would support POOL rewards regardless of the state of the grant, but given the prize vault we are looking to support is (at best) 0.8% prize APR and we are relying on the slim chance that we unlock the next OP rewards, I can’t see this distribution as anything more than a gamble.

2 Likes

Thanks @trmid! It looks like the APR of the two prize vaults is nearly equal so I won’t be pursuing this further. Thanks to @Brendan and @trmid for the input!

1 Like