The TWG will draft a formal response after all members review, but I have some preliminary, personal thoughts to share.
Governance
If we are to shut down the Ethereum deployment, then does that mean we have a cross-network governance solution? Because if that’s not the case, we’re completely divorcing the governance experience from the prize pool network. This will create friction if most of our users are on Polygon, Optimism, Arbitrum, etc. and hold no POOL balance on mainnet. Because governance becomes crucial in the new tokenomics, barriers to participation will have significant conquences.
I know that you’ve spoken about an EIP for this solution, @Brendan. Is there a governance solution that allows the community to participate across the prize pool network?
Networks to Deploy On
I’d vote for:
*Optimism
- Abritrum
- Starkware and/or zkSync
- Polygon
I’d advocate for closing down Avalanche, as yields there have compressed a bit since last summer. I’d only advocate for closing down the Ethereum deployment if there’s a governance fix for cross-network participation.
If we’re changing the cadence of prizes, an Ethereum deployment could likely make sense if we have larger prizes. Small daily prizes have been killing the experience on mainnet but larger prizes that justify any gas cost will improve the experience.
Which Asset to Add
After a lot of thought, I’m not a fan of using POOL as the prize. Because POOL is a volatile asset, it makes the user journey much more confusing and the POL aspect across networks becomes a cumbersome burden for the DAO. I also don’t think that swapping assets for something like USDC as the prize would make much sense either. Considering there’s a fee split going to POOL stakers, this means that we’re essentially directing reserves to POOL stakers, while (at current) the protocol is not profitable.
Due to the considerable unintended consequences of using POOL as prizes, this is likely not the best way forward. Of course, we can still distribute POOL through the TWAB contract to bootstrap certain prize pools on networks where governance is present. Such an approach would perhaps lead to greater participation in the protocol and POOL staking.
Instead, I’ve thought that a new token might be a better approach–one that doesn’t come with the limitations an existing token like POOL has. You’ll likely point out the flaws in this early thought, but is there a possibility we can issue a stablecoin that is backed by deposits and can be redeemable for interest generated? If we can somehow allow a user to delegate the chance to win to an address before deploying into a platform like Aave v3 or Curve, or separate the PTUSD token from the chance to win, which could function like debt in Aave but with the ability to delegate to someone else, then we can explore more composable solutions for PTUSD.
Potential benefits:
- Issuance can be controlled through prizes, with PTUSD being redeemable for interest accrued; upon redemption, PTUSD would be burned
- If we can separate the chance to win from the token itself, we can make PTUSD more composable and allow people to borrow against their PTUSD or use it in other yield sources. This would make deposits more sticky, as people can always retain the chance to win while leveraging their deposits elsewhere in DeFi.
- Since liquidity would be maintained within the protocol, the issue of POL across networks wouldn’t be an issue either
- With greater deposits and interest generated kept in the prize pool network for longer, we can help grow TVL and the prize pool network faster by essentially compounding assets since PTUSD would represent the underlying interest
- This use would likely create more interest in POOL and we can always create a redemption mechanism that allows people to always be able to redeem 1 PTUSD for $1.05 worth of POOL. Doing this would allow us to buy back the underlying interest while distributing more POOL to those who are actively participating within the protocol
I’m sure there is more overhead that would go into this approach, but it would likely have a better outcome that trying to make a volatile asset like POOL the unifying token. Distributing a volatile asset as a prize goes further away from the “No Loss” ethos the protocol was built upon, imo. I’d also love to clear the composability hurdle, as that will allow for more sticky deposits.
Prize Distribution
Without specifics on the composition of assets or yield sources, I believe it would be difficult to postulate potential prize tiering. Depending on the blended interest from the various assets in the prize pool network, it’s likely worthwhile to shift back to weekly prizes. However, if we can have multiple cadences such as weekly AND monthly prizes, that would make a big difference in how anyone will run some game theory on the prize pool network.
Note on Communication
I’d like to note that I’m always thankful for all the hardwork the PT Inc. development team does. You all ensure the PT community can deposit and enjoy a gamified savings account.
That being said, I feel as though the initial discussion about the new tokenomics was presented in a way where POOL holders would have a say on whether they wanted to pursue this approach. Instead, I’m under the impression from this post that the new tokenomics is moving forward and POOL holders will be able to vote on the features present within the new tokenomics at launch.
Now that we’re in a bear market, any choices that compromise the user journey within the protocol may cost us significantly in the long run. I’m sharing this opinion out of an abundance of caution, as I don’t want us to take the left-hand path at such an important juncture.
Conclusion
Looking forward to more discussion and hearing your feedback, @Brendan. I have deep respect for all the hardwork you and every engineer on the team has put into your work in the last six months. I’ll always try to maintain an honest, open dialogue as a passionate contributor. That being said: I’m always happy to be proven wrong 