Tuna's POOL Stimulus Plan

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This is a continuation of the discussion we’ve been having on discord regarding improving the POOL tokenomics. I think we need to get ourselves in a position where the demand for the POOL token outweighs the number of tokens being produced. Our POOL tokens in treasury are currently worth roughly $16MM but like many of you I believe the POOL token is very undervalued and it would be a shame to have to sell tokens or overspend at these levels. This is my personal view on a course of action to steer the ship in the right direction.

Part 1 Growing the POOL Token
The POOL token is our most valuable asset and is a tool to help decentralize and to help grow the usage of our product. I propose we introduce a V4 POOL pool that is supplemented with $2,500 per day in USDC prizes. This plan amounts to a cost of $1MM dollars per year but is easily offset when you consider that every dollar the POOL token rises our treasury valuation increases by $4MM. A POOL price of $10 gives our treasury POOL a value of $40MM. Given that current POOL market cap is around $11MM and not every POOL holder will deposit into this pool the returns will be extremely high and it would likely take a 3-4 times increase in prices for the return to be below 5% APR.

I believe many believers in Pooltogether will increase there investment to get in on this prize pool and would also convert the USDC they win into POOL tokens. This will allow POOL holders to share in both the fun and the returns that our product can offer. This move can change the sentiment and open the door to a new type of investor. That new type of investor is someone like myself who didn’t come to crypto to play it safe and sit in stable coins but to have a share in a platform that has potential for exponential growth. I believe Pooltogether has a place for both types of investor as well as those who want a diversified portfolio with a portion being low risk with some return and a portion being high risk high return. Some may have the opinion that we can’t afford the 1 million dollar cost but I think we can’t afford not to take this course of action that will grow our treasury and change the narrative around our token.

Part 2 Reintroducing POOL Drip to the USDC Pool
Once we have taken appropriate action to stimulate the POOL token I think it makes sense to shift our focus on growing the USDC pool to 1B TVL and beyond. In the past our returns on USDC were the best on the market which unfortunately attracted those who were here to capitalize in order to pass that return to their own investors instead of sticking around to be a part of what we can offer. If we introduce a POOL drip to the USDC pool that is closer to 2-3% but will also have an additional prize yield associated then our depositors will get a great return but we won’t attract the types of users that are just here to feed from our pools. Liquidity mining is widely used in the crypto space to attract growth and just because we didn’t have it quite right before doesn’t mean we can’t use it to grow now.

Simple Summary:

  • Supplement the new V4 POOL pool with $2,500 per day to help stimulate growth for the POOL token. This will greatly increase the value of our treasury giving us room to do more creative things with the POOL token in the future.
  • Continue supplementing USDC prizes and add some POOL drip to give a guaranteed return and allow for the growth needed to have a sustainable platform. 300 POOL per day is the suggested amount.
Do you support this plan to stimulate Pooltogether’s growth?
  • Yes
  • No
  • Unsure

0 voters

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i think it is time to try, if we do not take any action nothing indicates that POOL changed if trend, it is a good start and we can always correct the course. I’d rather lose battles in action than be defeated by inaction.
Perhaps we could add a wallet of $ 10,000 delegable weekly, for deposits of xxx amount of POOL, that could add appeal.

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I’m opposed to these changes.

Issues with Part 1

Part 1 proposes to give $1m USDC per year to token holders.

  • $1m USDC per year going to POOL holders doesn’t grow the protocol. It just drains the treasury so that current token holders have exit liquidity.
  • Once the treasury is depleted the token will tank again as the incentives disappear.

Issues with Part 2

Part 2 proposes to drop 300 POOL / day in liquidity mining incentives to USDC ticket holders.

  • We’ve seen that liquidity mining attracts mercenary capital that dumps the token then leaves.
  • For many users, liquidity mining results in them accumulating dust. It’s not worth withdrawing for many users, so it effectively burns POOL.

What We Really Need to Do

We need to grow our core product. It’s too early to divide the treasury among the POOL token holders.

We need:

  • to be integrated into wallets
  • to be integrated into neobanks
  • develop partnerships with other protocols. drop tokens thru PT, or perhaps create their own pools

Yes these things are much harder to do than give money away, but they will grow the protocol in a sustainable way.

I’m convinced that the token price will follow the success of our core product. Let’s keep pushing.

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I believe that this move will attract buyers of POOL in the short term and that boost in buyers will allow us to better utilize our treasury POOL. A $1MM annual cost even if we did this for 5 years would be worth the resulting benefits. As mentioned before every $1.00 that POOL goes up makes our treasury $4MM more valuable. If we need to raise $5MM in stablecoins next year it would cost us 1/3rd of our treasury with the current market cap and now we’ve flooded the market with even more POOL. POOL holders would be having fun winning prizes which would increase retention and grow the protocol.

300 POOL per day is an annual cost of 109,000 POOL per year or the equivalent of 40 days of liquidity mining when we were dripping 2500 POOL/day not to long ago.
In regards to some users receiving dust that they cannot withdraw: If a user deposits $100 to Pooltogether on an L2 and earns $2.00 (0.5 POOL) per year + gets lucky and wins a prize on top of that then they are doing better than if they deposited that $100 to a bank. In addition, a few years down the road maybe POOL is $100 and now they have achieved huge return on their deposit.

I am excited for all these goals you’ve outlined and look forward to seeing these things happen, but I believe there are steps we can take right now to have a healthy happy community that all can do their part and chip in to govern this protocol. With the right steps taken, the POOL token and the Pooltogether product will grow exponentially together. These steps will also allow us to get the most value for our treasury POOL.

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I love it when a protocol’s core team is truly focused on developing the product (integrations, features etc), than focus on noise (such as token price, exchange listings etc). It’s one of the reasons why i love this protocol and this team.

But 2 things don’t sit right for me here - (1)The incentives/success criterion for a POOL token holder being completely different from a protocol ticket holder. (2) POOL token holders are here to govern protocol only, with no other meaningful purpose.

Part 1 of Tuna’s proposal addresses (1) and (2), so I am fully supportive of it.

Part 2: I am in-different. Even during whole v4 small fish narrative, I actively said its important to attract large deposits from whales by providing LM incentives (even if some of it is mercenary capital), for protocol to continue the growth momentum. There’s only so much multiple small depositors can do to grow the protocol in short-term until external ecosystem matures in next 2-3 years. So i don’t really care if we vote yes/no to part 2.

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I’m pretty torn here. I’m straddling the middle of action and inaction.
Everybody that has posted so far has fair points.

@TheRealTuna stimulus plan is kind of a temporary life raft to breathe some life into the token (and hopefully increase the value of our depleting treasury).
@Brendan main gripe is that it’s giving money away and not growing the protocol.

I definitely see the appeal of the stimulus plan, increasing POOL by just $1 gives our treasure $4 million dollars. That can be used to pay out grants and help the protocol grow. It seems unintuitive and irrational, but I get it. It can be something that turns the tide for POOL.

If it doesn’t work out then we’ve lost a million dollars and that is not a non-trivial amount. It might be a risk too large to bear at the moment.

I’m fine with both ideas, stimulus or no stimulus.
I mean we’ve probably bottomed out here?
Famous last words.

This is water under the bridge now, but I wish we had gone with @Brendan’s V3 to V4 migration plan. That would have helped us quite a bit here in achieving sustainability. I mean there’s no guarantee that that capital would have stayed after the migration rewards tapered off, but it would have been at least nice to have brought the proposal to a vote, given the work that went into it. It was all done and that merited a vote in my opinion.

Moving to Arbitrum and Optimism will be critical. I think we’ll get a lot of depositors who would have deposited on Ethereum if it wasn’t for the fees. We’ll also capture the deposits of people who are just experimenting with L2s.

I still need more convincing one way or another.

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What I like
I think this is a solid idea. First I want to talk about why I like the structure of it.

This proposal does two things at the same time 1) improves utility of holding POOL and 2) distributes POOL to all depositors. It’s crucial that BOTH these things happen together. Independently, these ideas are bad but together they make sense.

If we were just distributing $1 million to POOL holders, I agree, that makes little sense. It wouldn’t actually grow the protocol.

If we were just starting to distribute POOL to USDC depositors, I agree, that makes little sense. Most likely it would just be farmed.

But by simultaneously increasing the incentive to hold POOL and beginning to distribute it to depositors, we have a good shot at growing the protocol in a positive feedback loop. More people deposit to get POOL because they have more desire to hold POOL → the protocol grows.

What I would improve:
I think we can make this even better. Instead of voting $1 million to POOL holders prizes, I think we should enable deposits of the POOL token to have an equivalent weighting in USDC (i.e. a 1 POOL deposit = $10 USDC) and then vote $1 million to this combined POOL. Then everyone benefits, POOL depositors and USDC depositors.

What I don’t like:
The one thing I don’t like about this proposal is that it doesn’t help us grow USDC reserves. Long term, I believe that is still crucial to ensure we can have sustainably large prizes and can offer the best place to save money. Ideally, we want to be distributing the POOL token in ways that grow the the USDC reserve (perpetual growth machine!).

Next Steps:
Overall, I think we have a few more ideas in this same format. How can we grow the protocol by improving the utility to hold POOL and then leveraging that to distribute POOL to drive deposits? I’d love to see more of those.

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Having a hard time understanding this @Leighton. Can you explain this again please?

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Yes!

Tuna’s plan:

Give out $1 million in prizes over the course of 1 year to POOL depositors.

My suggestion:

Instead of a separate pool and prizes for POOL depositors, keep it to just one pool. You can deposit USDC or POOL, depositing 1 POOL token is the same (from a chance perspective) as depositing $10 USDC. Now add the bonus $1 million there.

Does that help clarify?

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No, this is a terrible idea. It effectively turns POOL into a ponzi.

How? Let’s revisit the intent of this proposal.

Tuna wants to give away $1m to the POOL token holders, with the assumption that the value of POOL goes up. He then says we could raise another $5m in stables by selling POOL.

Let’s follow through on what that looks like.

  1. Prior to this, we had a group of investors buy POOL. This was the OTC deal that happened some time ago.
  2. With this proposal Tuna wants to take their money and give it to the previous POOL investors. Big assumption #1 is that the price of POOL goes up.
  3. Assuming POOL goes up, Tuna wants to do another OTC deal and raise another $5m.
  4. The new raise would be distributed among previous investors

These are ponzi mechanics. There are also two MAJOR assumptions:

  1. That giving away USDC will increase the value of POOL significantly.
  2. That investors will be willing to buy POOL and have their money go to previous POOL investors. Frankly, I don’t think the institutional investors we dealt with last time would appreciate those mechanics.

We already have some data to go by: we are giving away ~$4m per year (amortized) to the USDC pool and it’s only grown to about $27m. APR is an insane 25% on a good stablecoin and it’s still topping out. We only have $2m in POOL liquidity on AMMs right now. If this does create POOL demand then the market is very, very small.

I oppose this plan.

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I don’t think that’s an accurate characterization of the ideas presented in this thread. But it does seem we are getting less aligned as its discussed more… not more aligned. :laughing: so I think best to continue the discussion not in the written forum format.

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I’ve been thinking about this a lot as I have been struggling with the valuation mechanic on the Pool Token itself. Specifically, I have been asking myself why would anyone want to own a Pool token. Sure it provides governance over the platform, but to what end? People buy and hold goods because it provides them some sort of utility.

Either consumption utility, like they can get access to something they value and can consume. Or Return Utility, the token will provide them either yield, or a higher price in the future because there is greater demand for the token.

My hypothesis is that the underlying driver of Pool token price is multiple on the expected value of a future yield. What I mean specifically, is that the majority of people are buying and holding Pool, because they believe that one of two things will occur:

  1. At some future state they will be able to distribute a % of the yield generated by TVL back to Pool Token Holders

or

  1. At some future state, there will be another DAO or corporate entity that will see benefit in a controlling interest in the PT protocol and want to purchase a 51% share of Pool Tokens driving up the price and thus, future return.

I see Tuna’s proposal as a version of pursuing option 1 immediately. Whether the money is taken from the treasury or the money is taken as a percentage of yield, the idea is simply, provide an ability for PT holders to generate some form of immediate expected return on their holding.

By doing this, all you are really doing is changing the equation on Pool Value from:

Pool(Value)= XE(future yield) + YE(future control interest) + e

to

Pool(Value)= W*(P(winning yield lottery) + XE(future yield) + YE(future control interest) + e

So long as the P(winning yield lottery) > P (winning USDC lottery), W will be > 0

X would be some multiple on expectations (it would technically be some function on the expectations for future yield to stay…but this is getting too technical)
Y would be some multiple on the expected return from an outside party expressing a controlling interest
e would be a random error

So this is a long winded way of me saying…I think the idea of taking a % of the yield generated from TVL and putting it towards a POOL lottery, even though the cross-chain lottery is operating in a loss position, does make sense ONLY if the probability of winning the POOL lottery is greater than the probability of winning the USDC lottery.

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one sub point, doing this however, would of course put significantly increase pressure on TVL and user growth…obviously

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No, it’s exactly what he said:

I’m simply following that logic through to its conclusion.

  1. Raise money from POOL sale
  2. Give away raised money to POOL holders
  3. Raise money from POOL sale to new holders
  4. Give away to POOL holders

This is the logic that Tuna is using: saying by giving away money now we can raise more later.

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Again love how transparent you are in your thought process. Love it

In your opinion, how would you align interests of POOL token holders and ticket holders in short term?

As things stand, I am a POOL token holder (first and foremost) and I have 0 incentive if POOL ticket holders/deposits stays the same (or) grows in size to millions of unique depositors/ticket size in the next few years.

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Thanks for not holding back.
We need this type of bluntness.

@tanman I think the focus right now is on growing the protocol and TVL, first and foremost.
Even drastically improved tokenomics will not help if we’re not growing our TVL and becoming sustainable. I genuinely think we’ve bottomed out and should just focus on protocol growth.

The governance mechanism of POOL is enough for now. I just don’t see a path forward in the short-term to improve POOL fundamentals other than growing TVL. Too much divide in that area, lol. Then again, this is not my area of expertise at all. I’m sure there is a creative, forward thinking approach for increasing POOL’s utility that everyone would be on board with but I don’t know what that is and won’t pretend to.

I don’t think we’d be “kicking the can down the road” if we shifted focus from the token back to the protocol. We’ve capitulated and it’s clear. We reactively want to correct course, but maybe the worst is behind us? Not many of the major DeFi protocols have done major token reworks other than YFI, right? Maybe we sit tight for now? It’s clear that we’re just acting reactively now. I am guilty of this.

I’ve brought this up before, but we’re not the only protocol that has giga-dumped in ETH terms. That has been the case for most of DeFi, even with revenue sharing tokens like $SUSHI. Will this trend reverse? Probably? When? I have no idea.

The “easiest” thing we can do is focus on growing the protocol and maybe it isn’t wise spending our scarce USDC on a stimulus plan like this. I leaned towards favoring it earlier, but that was more out of desperation than anything. Like I said, I characterized this move as a life-raft, but a risky one. I’d probably vote “No” if this proposal came to a vote.

Edit: I changed my vote on the poll, accordingly.

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Here’s my response to this.

In the crypto space, my values closely align with what @Brendan is stating here. I personally stay away from meme tokens, ohm forks with ponzinomics, blockchains that provide short term incentives to attract folks etc…so i am okay to change my vote to ‘No’, if everyone thinks we are following a similar route in pool protocol

But i am not comfortable with idea of treating POOL holders and ticket holders as separate entities. The idea that when protocol magically grows into something huge, then POOL token gains value automatically should not be a assumption any POOL token holder needs to make. I want to clearly see incentives for a POOL token holder to be defined in the short term

So i am honestly looking to hear ideas that clarify this question. Until i hear them, I will continue to vote ‘yes’ to anything that’s not ideal but moves us in that direction.

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What you are not realizing is my plan is a plan to decrease spending by decreasing the reliance on subsidizing the USDC pool with our stablecoin reserves. This proposal will not cost us additional USDC if it comes from the $17,000 in USDC per day being used to supplement USDC prizes. Sitting tight means we will either a) Have to stop subsidizing the USDC pool or b) raise more USDC.
1- How do you expect to increase TVL without the prize subsidy? and without any POOL drip?
2- Do you want to have to raise more stablecoins by dumping more POOL onto the market at $4.00 per POOL?
This plan is not added cost to our treasury, it is a plan to help reduce costs to our treasury. We just burned through $1MM in 3 months and are still only 1/3rd of the way to sustainability.

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I respect that approach! It’s completely rational.
You’re right though, token price doesn’t magically go up when TVL increases.

There is a protocol out there with $3B locked and a sub $200M market cap, lol. They have a 0.06 MC to TVL whereas we have an 0.17.

So… it can be worse.

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Yeah, I hear you.
Those are questions I don’t have answers to, but I’ll mull over.

I just need to go through everything outlined in the thread again over the weekend.