Scaling the PoolTogether Network

1

The V4 PoolTogether protocol is designed to be a true network that can scale across blockchains, yield sources, and tokens without fragmenting capital. This is an incredibly powerful thing! The end state is a prize savings network that is available on every EVM blockchain, with every yield source and every token integrated (assuming governance approves them). :exploding_head:

However, today, the V4 PoolTogether protocol is only available with USDC using Aave for yield on Polygon and Ethereum. A lot of work needs to be done to expand!

This posts explains how the protocol can expand and what needs to be considered when expanding.

:ballot_box: Governance approval :ballot_box:

First off, any expansion decision will ultimately be up to POOL token holders. Votes will be conducted on any new blockchains deployed, new yield sources added or new tokens supported.

For purposes of this post, assume POOL holders vote in favor of expansion, what are the other considerations?

:chess_pawn: Strategy considerations :chess_pawn:

If our goal is to grow the protocol as fast as possible, we should be looking for the ways to expand that generate the most new deposits and new users while requiring the least amount of work.

For example, it likely that expanding the network onto Avalanche would likely generate more new deposits than adding an option to deposit with Dai on Polygon. Why? Because the network is already available on Polygon with USDC, so just adding Dai is a relatively smaller improvement than making the network available on a whole new blockchain.

An additional factor to consider here is also any incentives that might be offered. For example, if MakerDAO offered $1 million in bonus Dai incentives for PoolTogether to add the network, then it would become more worthwhile.

:nerd_face: Technical considerations :nerd_face:

There are three main scaling options:

  • New blockchains
  • New deposit tokens
  • New yield sources

The simplest way to scale is to add new blockchains while keeping the same deposit token and the same yield source. Right now the protocol supports USDC for deposit token and Aave for yield. That means the simplest scaling option is adding more blockchains that have Aave deployed with USDC. This is simple because it does not require auditing a new yield source integration (keeps risk very low) and keeping the deposit token the same means prizes can be distributed in a uniform token.

Right now, the only blockchain Aave is on that PoolTogether is not is Avalanche. Some blockchains (like CELO) have a fork of Aave V2 which matches the technical requirement but forks needed to be evaluated for overall safety. In addition, there are a few other dependencies for the protocol to deploy. Specifically:

  • A “bridge” to Ethereum making it possible to transfer assets
  • Gnosis Safe making it possible for secure multi-signature wallets
  • Support for the Subgraph and Defender are nice to have

:chart_with_upwards_trend:The Future :chart_with_upwards_trend:

Given the above considerations, our most likely scaling path will be to:

  1. Add all blockchains Aave supports with USDC
  2. Begin adding more yield sources using USDC
  3. Begin adding more tokens than just USDC

Right now, the blockchain most easily added is Avalanche with Arbitrum and Celo the most likely next best options.

15 Likes
2

Arbitrum will be very important.
I think there are a lot of people with big money that trust Arbitrum more than alternative L1s or sidechains like Polygon.

6 Likes
3

I’m a fan of all Optimistic Rollups, but why has Arbitrum become the go-to L2 and not Optimism recently? Is it just a matter of TVL? Arbitrum having almost 6x more? (488M vs. 2.82B)

The majority of the community, including @Brendan, seem to be keen on launching on Arbitrum first.
Is Arbitrum technically better? With Optimism’s recent EVM Equivalence, I thought we’d opt to launch there first. Anyway, just curious about the sentiment shift from overwhelming Optimism to now mostly Arbitrum.

@Leighton I like the plan! The more blockchains the better. As you said, V4 is primed to take advantage of the burgeoning L1 and L2 space. We of course need to be cautious about new yield sources, but I’m sure we’ll do our due diligence on the front as a community. Adding more tokens would be nice as well! $POOL, please? :]

I have POOL on Polygon and it’d be nice to use that to get V4 tickets. It’s not a stable of course, although debatable @0xSiam ha, but could we use it to get tickets in V4? Not sure if that’s technically viable?

I think I heard @Leighton say we could deposit other tokens eventually, or possibly receiving other tokens as prizes instead of just USDC? In the post you touch on expanding beyond USDC, is that just expanding to other stables like Dai and Fei @Leighton ? Not quite sure! I do vaguely remember something of that nature during the V4 launch Community Call.

Thanks for outlining this Leighton! I think we’re all in favor of this approach.

4

Optimism for sure will happen but my understanding is Aave will be deploying on Arbitrum first. So that’s the reason I was pushing it.

2 Likes
5

Oh okay, I wasn’t aware that Aave is deploying on Arbitrum first.
Thank you, Leighton!

6

Optimism had a guarded launch, with only teams and contracts approved by them that could launch on their chain. On the other hand, Arbitrum didn’t have any restrictions and anybody could deploy on it. I thinks that’s why TVL is higher on Artbitrum than Optimism.

About the expansion towards other stables or non stable tokens, it is something we can envision for the future but it comes with some technical challenges. For example, if we decide to have stable and non stable tokens in the same prize pools network, it would be complicated to weight how much interest has been contributed to the prize by each pool since assets wouldn’t have the same value over time.
We wouldn’t have this problem if we only add stable tokens like DAI and FEI.

I like the plan Leighton outlined, expanding to other chains will bring different users and more deposits, especially if we can incentivize these pools with tokens native to the chain, AVAX for example.

Then we can start implementing other yield sources, since we already have some contracts for several yield sources.

Finally, we can start to add other stable tokens to join the pools and establish a plan for non stable ones.

2 Likes
7

Yeah, I do remember that being pretty controversial. Especially the whole Sushiswap debacle. Makes sense that Arbitrum took over (at least in a TVL perspective). I think sticking with stables for now is the best option to avoid those technical challenges while we grow V4.

Thanks Pierrick!

8

Amazing thread overall, very thought-provoking. I loved the point before that as well; That one can capture only so much capital through different tokens on a blockchain.

If we look at the endgame, prize savings, [PT] if left to the current lottery mechanism, will saturate itself out. Assuming that yield would decrease on the borrowing market due to an increasingly larger supply of USDC. Capital-efficient alternatives could provide higher returns for the prizes than interest rates alone.
Web 3.0 components attached to the protocol itself would be able to generate value for its participants, especially if we find new ways of rewarding them.

POOL token is a great way of doing that. There are a couple of ways that come to mind:

  • Bonus incentives for holders. I thought about the POOL pool that already has the drip component that gives investors an edge.
  • Adoption in POOL would increase treasury balance
  • New DAO participants come in and bring new contributions and improvements
  • Gamify pools and the POOL token experience, in ways both fun and rewarding
  • Treasury utilization. What happened to the word DeFi? NFTS are overshadowing them, but the potential of DeFi has only yet begun it’s discovery phase.

Imo, the goal is to make PoolTogether an exciting activity, too. As far as the protocol itself, it’s already a #1 Dapp in my eyes. Battle-tested for years already, responsible for more and more capital. This is enough to sensibly attract adoption from everyone. If competitors should arise and since the protocol does not sustain itself due to the no-fee mechanism thinking about generating value becomes truly important for its life and success.

1 Like
9

Aave is also doing work on their tokenomics, for everyone interested: Can we introduce some incentives/utility for holding AAVE token? - #26 by Emilio - Governance - Aave