There is consensus that Pooltogether V5 is complex. This post takes a quick dive into why and shows that there are other paths possible. Considering all options can solidify our direction towards one shared goal. This is vital given our community is at a crossroads.
The V5 design was created to give Poolers:
Bigger prizes by combining yield from multiple sources into one prize token
Greater value creation for POOL
Many yield sources, potential assets to deposit and save
An autonomous protocol that can run forever without centralized service providers
In the 4 months since V5 has launched we have not seen any of these four objectives come true. I do not think anyone would disagree with that. While growth and scaling could bring these goals both to fruition, we have found ourselves at a crossroads of considering a treasury depletion plan to revise and redeploy V5. This is a direct result of the inherent complexities of the V5 protocol, with the necessity of developing the protocol to incentivize liquidation bots, prize claim bots, draw bots, and now potentially prize compounding. The protocol has become a lot more than yield and prize by intertwining POOL throughout.
In the most recent thread it has been suggested that POOL stakers would take a direct fee on yield. In my mind this busts the need for V5 to create value with POOL buybacks. POOL buybacks suffer from a loss of revenues to gas costs, and a need to potentially add more gas costs on the other end where POOL gets swapped back to tickets. It’s not just complex, but the gas costs mean less prize value to Poolers.
Integrating new yield sources with V5 is hard! Our first two attempts at an Aave integration have had bugs after multiple audits. First a rounding error and then a collateralization issue. Everyone wants to see PoolTogether have more yield sources. Our mission is yield to prize. We need the yield.
Autonomous is hard! The RNG remains custodied which means the prizes are custodied. The vaults remain custodied which means the yield is custodied.
The prize distribution is autonomous unlike V4 but I am not sold that the working design is optimal. Concerns include:
Prizes are too small.
Prizes are randomly delivered.
Prizes are awarded and unclaimable.
We are identifying the issues with V5 and looking to improve and address them but I think it is relevant to consider if it’s simply too complex of a beast to wrangle given our limited resources. As we stare down the runway of the treasury and peak community uncertainty I think this is an opportune time to consider any and all possibilities.
People liked V3! It sent life changing prizes out with no claim bots. It had many yield sources and partnerships. It pumped. We had two main concerns, gas and whales. The gas is resolved by moving to L2s. The whales are good, we just need more prizes. Again we can get more prizes on L2 because gas is a fraction of the cost.
V3x2 is a high-level idea that we could use a protocol like V3 to have multiple prize pools for different assets and yield sources. These prize pools would win prizes every day in their deposit asset. Imagine 5 or 10 equal sized prizes per day. A fee can easily be added on the pools for POOL stakers, or POOL stakers capturing value with a chance to win a share of prizes. We can direct a reserve cut of yield of 20% to a grand prize pool (this is the x2). The grand prize pool collects tokens from all prize pools and is awarded less frequently creating a JACKPOT (name tbd) of prize tokens. Say once a month. To participate in the grand prize pool you deposit your JACKPOT tickets that you farm while participating in any of the prize pools.
- Grand prize aggregation of all yield sources
- Win your deposit asset with meaningful prizes
- Engaging JACKPOT ticket farming to play in the grand prize pool and your chance can accumulate over multiple grand prizes which encourages savings and staying in the pool
- Prize distribution is known, not statistical
- Value for POOL through direct fee, alternatively POOL stakers get JACKPOT tickets as well or other ideas to gamify the whole setup
- Less moving parts same autonomous hurdles - RNG and yield custody
A lot of ideas can be built on this concept but the primary consideration is that if we want to simply take a cut of the yield for POOL stakers we do not need a complex system of turning yield into POOL and then back into the yield asset. There are other ways to create aggregated grand prizes that are simpler to build, simpler to understand, and more efficient. They might even be more fun.
Full credit - V3x2 is not my idea, but a culmination of TWG discussions with drcpu, BraveNewDeFi, TheRealTuna, BRONDER and others.