Draft for revised GRO Tokenomics

This draft synthesizes various discussions and ideas into a tokenomics proposal. It’s considering perspectives from Slacking and Shroom’s community forum posts, with some historical backdrop in Joel Monegro’s Buyback and Build article. Have a read and discuss :purple_heart:

Background on the Gro DAO Token (GRO)
The Gro DAO Token is currently used to (1) Vote in Governance, (2) Claim a share of Vesting bonus, and (3) Pair in liquidity pools to earn GRO. While locked GRO in the vesting contract enables claiming of Vesting bonus, the only way to get more locked GRO is through mining rewards or airdrops. Locked GRO is to GRO what veCRV is to Curve’s CRV but with more limited utility at the moment.

Opportunity to increase utility of locked GRO
Few people are exiting the vesting contract so less vesting bonus is generated (2). This leads to the Vesting bonus looking less compelling, and as a consequence locked GRO also looks less compelling. The primary utility of GRO is really governance (1). We believe there is a great opportunity to strengthen the utility of locked GRO and make the vesting contract an attractive place to put your GRO to work. Primarily by increasing the GRO Vesting bonus and enabling special product access to locked GRO.

Enable Performance fee that users can claim as a Vesting bonus

  • Enable 5% performance fee on base products (e.g. Vault & PWRD) returns.
  • Enable 10% performance fee on Labs products (e.g. upcoming Avalanche) returns.
  • Performance fees buy GRO and deliver them to active users as a claimable Vesting bonus. A subset (10%?) of the acquired GRO are delivered to the DAO treasury and provides it with a slow/gradual way to replenish its treasury.

Make it easy to get liquid GRO Rewards for short-term farmers AND increase the vesting bonus for long-term DAO members

  • Let users choose 30% liquid GRO directly on claim, OR 100% with 1 year vest. Change vesting schedules to go from 0% to 100% over 1 year, BUT give users a choice when claiming rewards to either get:
    • 30% GRO directly into wallet & 70% forfeit to Vesting bonus, OR
    • 100% added to their personal vesting position
  • Enable partial exits from the vesting contract with prorating of the exit fee. Instead of only allowing people to exit 100%, users can choose a portion of their total GRO to exit. For example: User has 100 GRO in the vesting contract. 90 GRO locked and 10 unlocked. User decides to exit 50%. 50 GRO remains in the Vesting contract. 5 GRO goes to their wallet and 45 goes to the Vesting bonus.

Reduce user cost of claiming GRO

  • Extend Vesting bonus claim cooldown period to 4 weeks. This halves the number of gassy actions needed to claim vesting bonus, and doubles the size of each claim.
  • Combine multiple pool claims into a single transaction. Requested by many is the ability to combine multiple pool claims/“start vest” into a single action. This would result in some gas savings for people who are participating in multiple pools.
  • Continue scoping migrating vesting contract to cheaper/faster chain. Pools & staking contracts on various chains (including Ethereum L1) could raise vesting positions through cross-chain communication into a central vesting center. However, migrating the Vesting contract would be a big effort and a commitment to run our central governance operations on another chain. We’re currently looking at several options but are not ready to propose a commitment to any specific chain yet.

Get early/more/better access to Gro products through locked GRO

  • Threshold for innovation access. Having a threshold amount of locked GRO will be a requirement to access some new products from Gro. E.g. upcoming Gro Labs on Avalanche.
  • More GRO improves experience. Higher amounts of GRO will enable better product experiences like higher deposit allowances and rewards multipliers.

Enable users to increase locked GRO
As locked GRO would now have more utility through attractive vesting bonus and special product access, we can let people increase their locked GRO though:

  • Ability to lock more GRO. Let users acquire GRO from the market and lock it into the vesting center to increase their locked GRO.
  • Ability to extend vesting schedule. Let users voluntarily extend their vesting schedule up to the max duration of 1 year.

Other things considered

  • Remove vesting completely. This radical change would go counter to the overall governance mechanism design which is about concentrating ownership to those who are engaged and have a long-term view.
  • Smaller activity rewards. While larger GRO allocations for liquidity mining and the Vesting bonus is handled through the vesting contract, several people in the DAO have proposed that smaller GRO allocations related to community and marketing activities are done as non-vested liquid GRO. The core team thinks this will make activities more dynamic and engaging and will do so going forward (such as in the recent Halloween competition).
  • Modified base APYs based on GRO holdings. This would mean penalising non-GRO holding Vault and PWRD base rates, which are competitive in DeFi. This would reduce the overall appeal of the protocol and make it less competitive for non-power users. Core team recommends to rather focus on increasing the utility of GRO without hurting the base products. Already the proposed 5% performance fee will have some impact on the base rates.
  • Tokenizing staked GRO. Since each user has an individual vesting curve; vesting GRO positions can’t be fungible. And if they were transferable fungible tokens, that would defeat the point of having them vesting to begin with. Tokenizing as NFTs would not make the positions very composable.

Let us know what you think!

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Thanks for this post Haanes! And happy that me and Shroom was able to help assist in the ideas for the draft. I do have a couple of questions:

Are Labs products in general like alpha products in general? Or are they actually a different suite of products altogether? If they are mainly alpha products wouldn’t you think a 10% fee be a bit steep considering the risk of newness that users have to face? Of course something like Avalanche will be a tremendous cost savings on gas fees so the 10% fee in general will still be a net win, but just want to make sure that the fees won’t drive away users from the products itself

I’m a bit loss on how exactly this vesting schedule scaling would work with the fixed 30% liquid GRO claim. How does it work exactly if say I would rather vest for 6 months and decide to also claim the 30% liquid GRO? Or is that mutually exclusive?

By the way great timing with the Olympus Pro partnership as we would GRO supply to be funneled there instead, which means increasing supply of GRO if we want to continuously capture bonds over time

Just want to note for others as this may be lost on some. Why would you want to do this as a user? One of the biggest reason is to manage and hedge against price action. Like the recent price decrease in GRO, you may want to capture some of the upwards price momentum before a downward momentum. The risk/reward analysis will be more sophisticated, but it’s suitable for those that are active on their positions. Also you would be able to regain your position eventually in the future through the exit bonus

:+1: :+1: :+1:

I’m assuming these innovations will eventually be released to the general public? :nerd_face: Related to my previous comments on taking on risk on newer products/innovations, is the team thinking of having to be ready to provide compensations in case of unexpected negative events occurring, or would it all be under a disclaimer of “New DeFi things are risky”?

This one is likely to be contentious if the locked GRO is vested and then people decide that they want to exit but then have to sacrifice their GRO. Not that I am necessarily against this as the intention is clear, locking down to gain further access, but just a heads up that this point is made clear when anyone attempts to lock market bought GRO. It’s a very risk on move

How about reducing vesting schedule (so long as they haven’t past the duration of course). Likely also with a penalty fee of sorts. And perhaps even successive reductions incur incrementally higher fees

I think overall it is a solid take on the tokenomics iteration. It echoes a number of things suggested by others in the community also. I have two further suggestions/thoughts:

Voting power boost for vested GRO

Would the team consider boosting the voting weight of vested GRO/GRO used in vesting? veCRV, veFXS, gOhm (Olympus upcoming token v2) have voting rights but their base form tokens do not. Tokemak as we know has certain voting boosts based on whether the TOKE is staked or not. Boosting the voting weight aligns with the long term thinking. But of course this always runs with the risk of governance concentration through capital concentration (that’s true in general for governance tokens, but boosting increases the degree)

Strengthening Vault/PWRD through the tokenomics

Probably the biggest missing thing is a value accrual strategy in the tokenomics to further improve the demand for the products. While vesting GRO does give access to innovation products the uptake of those products will consist of noisy data due to incidence. That is, the product uptake may not necessarily be because the product garners real interest, but because vesters incidentally gain access to them. And the opposite case also applies. This is not bad per se, just that it is an analysis complexity. But more than anything would be the missing growth link between GRO and the current products Vault and PWRD.

Ultimately, a governance token gains governance utility precisely because the thing being governed in itself proves to have utility. And in crypto market the loudest signal for that would be TVL. Being the primary live products with known utilities (and hopefully expanding such as being a treasury asset) it is important the growth of Vault/PWRD to be taken into account in the tokenomics improvement, if not in this draft then hopefully soon.

One possible idea that was thrown around in Discord (forgot by who my bad), was to let GRO be able to act as an insurance mechanism for/besides Vault. In this way there is some value add between GRO and Vault, that would hopefully be able to further Vault’s TVL which is important for the success of PWRD too. Just an idea of course, to drive the conversation

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A lot of great points and questions!!!

Labs are stand-alone unique products. I expect yields will be so high that 10% of that performance will have minor impact. For the avoidance of doubt, a 10% fee on a 10% APY would be 1%, and on 200% it would be 20%. It only makes sense to have any fee (and sizing the fee) in a way that doesn’t make the underlying product unattractive. So if things perform differently we should lower.

Mutually exclusive. Either you get
(30% liquid immediately BUT forfeit 70% to others vesting bonus)
OR
(100% into your vesting contract but nothing immediately)

This would allow people to take some profit from the vesting contract before it’s fully vested. It’s less binary, less all-or-nothing. Some people may sit on a large position of GRO in the vesting contract and don’t want to take it all out.

Certainly. Think about the freemium models of Spotify, Revolut and others where there is a free base product that’s great and available for everyone, but if you upgrade to higher tier (i.e. lock in GRO) you get access to better products. As demand for Labs and capacity of the strategies scale, we open it up for everyone, but prioritised access to DAO members.

As for risk on emerging strategies, we should probably draft an explicit policy around how the DAO will or won’t take on compensation responsibility in case of negative events.

I agree we need to have clear indicators of the consequences, but I don’t think there is a categorical problem with a design that allows people to lock down GRO over an extended period of time. Locking Curve’s CRV into veCRV is permanent without ability to unlock ahead of vest. But locked GRO could still be unlocked with a penalty - so we’re actually allowing more flexibility.

Reducing your vesting schedule is already built in - that is the early exit with Vesting bonus forfeit as the penalty fee. And with the addition of partial exit mentioned above there are more options for reducing your vesting schedule on a portion of your GRO.

Great point! I think voting should be for locked GRO as those GRO have a commitment to the protocol, but for that to work we need to enable locking of externally acquired GRO. This would further focus on the utility of locked GRO.

What if GRO accrued to the base products in a more integrated way like on Compound or Aave - without having to stake them? That way the immediately liquid 30% could be included into the headline calculations for Vault and PWRD. Users would then have the choice when they claim whether they want to just be a casual farmer, or go down the governance rabbit hole with vesting positions and a longer term view.

Liquidating locked GRO in case of an adverse event on Vault is likely to be a double whammy on GRO price and I expect would make locked GRO less attractive. One idea would be to use locked GRO as a final backstop to protect PWRD. PWRD should anyway in all cases be protected, but GRO could act as a last line of defence.

2 Likes

I support the proposal as it helps increase utility for GRO and its DAO members. The proposed changes incentivize short term users and long term users. Plus, it proposes an advantage for commitment with locked GRO for future market opportunities (i.e. Gro Labs on Avalanche).

100% agree with this statement as it highlights casual farmers and invites new users to the protocol by embracing short term rewards.

With these proposed changes I think we would see a higher TVL and growth in the protocol because DeFi users are moving their funds around short term and long term. Now with DeFi 2.0, users are moving across multiple chains based on what is offered.

I like all the proposed ideas!

Excellent that we’re contemplating further GRO Tokenomics evolution. I have a few thoughts regarding locked GRO. I feel incentives balance could be improved here. When a DAO invites people to contribute significant amount of time and efforts, like in the case of G-Force, KPI options or coming grants, it’s already more like part time job for the contributors. Here GRO is competing with Aave Risk DAO, MakerDao delegates program, Uniswap, Compound. None of them pays their contributors in vested, let alone locked, tokens. To draw a comparison from the corporate world, people get compensated with salary + stock options. To compensate with locked salary seems wrong, people have daily expenses. And we’re heading towards DAOs offering people full-time employment. If a DAO expects to be competitive with the offline world, it should provide not worse, but better terms.

GRO has to compete for talent both with other DAOs and with the offline world. Offering locked compensation imo renders it largely uncompetitive. Two categories of contributors it could attract in this case: 1) people, who don’t have to care about earning their living, how many of those are there?; 2) people, who engage with GRO just for fun in their spare time – input of what quality can we expect from them and how sustainable will their positions be with the community?

2 Likes

I believe this covered by Smaller activity rewards section pavel. Not sure about the G-Force payment whether it is going to be vested or not. But totally agree with you that such compensations should be unlocked

That said GRO in itself is more akin to stocks rather than cash income. I think personally it would be great in the future to have the option to get paid out in PWRD, as an equivalent of more liquid low-volatile income with GRO as more of a “stock option” compensation. Though understandably at the current stage of the protocol treasury, it is cheaper to compensate in GRO than in PWRD, for the same similar reason as to why startups compensate with stocks: cheap capital borrowed from the future

Looking forward to the evolution of compensation in the DAO!

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I thought Smaller activities rewards are for really small activities, like meme contest or something.

  • First epoch will have 10,000 vesting $GRO to share between the 20 G-Force (~116k USD at the time of writing)

There certainly should be some (negotiable) part paid out upfront without forcing the recipient to lose the rest.

Startups pay salaries (150-200k in the Valley) + stock options. That’s where GRO DAO can’t compete for talent with startups for now.

@Slacking

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Thank you for entertaining my long winded reply!

I see that you removed the fee allocation, the one that says:

90% is distributed as a vesting bonus and 10% is sent to the DAO treasury

What was the a reason for removing that section. I think its a wise decision for the DAO treasury to collect some of the fees (whether 10% or less or more) for future development, programs and even insurance of sorts

Now off to answering your reply

For sure! And I think the optionality will be appreciated. And just to make sure, I was in support of the idea, just wanted to help others process the reasoning as to why you want to do a partial exit

:+1: :+1: :+1:

Yes I don’t think it’s necessarily problem. But we know it’s DeFi where unfortunately (or fortunately maybe) optics and impressions matter. Just wanted to note the risk on that side. And on the comment about Curve’s veCRV, Convex being used to wrap CRV → veCRV and then also swappable through cvxCRV/CRV pool has largely been used to circumvent this locking and I’d say has contributed to their growth. While the approach with GRO will be different, goes to show that optionality, which is related to some degree with liquidity also

Right, forgot about that haha. I guess I was just thinking of users that like to plan instead of deciding to exit on the spot. In essence they lead to the same result, but just different UX

I’m guessing you mean adding GRO as a bonus APR/APY? I know @shroom suggested that. I don’t think that’s a problem as the protocol currently stands. Just have to come up with a formulation with the DAO how these GRO will be allocated across Vault/PWRD. Of course this is akin to liquidity mining so it’s sustainability should eventually be revisited, but am in support of it as the protocol stands

So the idea in my head wasn’t necessarily to auto-liquidate the locked GRO, it is more that each individual user (wallet) may choose to liquidate some of their locked GRO to stables. So the next question would be how exactly the locked GRO will be converted to stable. If it’s through the market then for sure there can be added selling pressure (which isn’t necessarily bad, at least for this purpose).

But it would be exciting if the protocol can instead be used to swap these locked GRO to stables (say from the treasury) at some price, up to a certain total limit that is algorithmically set based on variables the DAO has set ahead of time.

In this way the GRO doesn’t go to the market and the whole procedure simply becomes an asset swap, which is pretty much what central banks do in times of distress i.e quantitative easing! Difference is that the protocol can’t come up with stables out of thin air, so this would certainly be a long term vision and would require tokenomics that can further boost the protocol’s owned liqudity and reserves

Yup! I think someone else considered that in the Discord (again forgot exactly who). Definitely something the DAO can consider.

My focus on Vault was because Vault is an integral part of the system, but based on conversations I’ve seen on Discord there hasn’t been a lot of talk on improving the tokenomics around Vault specifically. In contrast I think PWRD has been given a lot of intention

I personally like many of the individual suggestions in this proposal. The ones that resonated with me the most were:

  • Enable partial exits from the vesting contract - balancing the incentives of long-term GRO holders with making the protocol reasonably liquid/lightweight seems like the right approach.
  • Threshold for innovation access.- giving tangible benefits (like AVAX access) to early adopters is always good.

The proposal I would oppose most vehemently is the removal of vesting completely. I think the vesting mechanism makes Gro really unique and more legitimate in a world of DeFi ponzis / get-rich-quick schemes. (It’s reminiscent of the Olympus bonding scheme on a longer time scale.) The market will come to appreciate the built-in incentive to hold longer term.

Excited to see the team adjust its Tokenomics in this positive direction!

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Very good suggestions to improve the GRO token utility.
I would like to add one suggestion for the “bonus pool”. In short: extend the cool down period from 14 days in to 4 weeks. Auto-divide (or airdrop) the forfeited tokens to staked addresses in unlocked manner based on the time in that specific month they have had locked their tokens. Take a small percentage (of max 10%) to feed the DAO treasury for future programs/incentives.

This way staked GRO holders get directly rewarded for the risk of staking. Are incentivized to keep the GROs staked because they get monthly unlocked rewards, can add these unlocked GROs to increase their locked GRO, while their other GRO keeps generating staking rewards which are 12 months linearly locked.

GRO emissions are going to be an issue if we keep paying in Gro.

We need to make gro resemble a revenue generating asset without diluting gro on extended time frames.

I’d suggest returns in pwrd or vault

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These emissions are not dilutive. Revenue from the strategies would be used to buy back GRO and then make those GRO available. It’s not inflation but rather using stablecoin returns and converting it into GRO before making it available.

The current bonus reward has some elements of gamification and game theory to it. That said, we all know (or have a strong hunch) that gas fees are one of the main restrictive factor for many people. The team has said that they’re working to the reward bonus be less costly, which I think is the best route to take while maintaining the current flavour

That said, I don’t think airdropping them will be a feasible thing without the treasury taking large hits on gas fees. A less costly implementation would just be auto-accumulating to each user’s individual rewards. But tracking each individual’s bi-monthly schedule will either be costly for gas fees, or just a lot of complexity. So probably for auto-accumulation a simple cycle-based mechanism where at the end users receive a pro-rata share of the exit bonus accumulated by the vesting bonus contract within the cycle. To avoid front-running, either:

  • the exact accumulation time is not announced
  • affected by a function of total locked GRO during the cycle adjusted by length of time (similar idea to conviction voting)
  • or possibly both of the above

This design obviously removes the gamification aspect and to a large degree the game theoretic aspect of the vesting bonus. It may even lead to a result where even more people never exit (only 80~ or so vesters have so far), and hence the exit bonus pool gradually becomes 0

As far as my impression of the vesting bonus, it is not meant as a reward to some staking mechanism (and the team has never referred to it as staking). The vesting bonus is essentially like buying a heavily discounted GRO ($0 + gas fees), with an unfortunate gas fe due to Ethereum’s state. So I would think continuing to put effort into migrating the reward claims to a less expensive environment/method is the best course of action

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We thought about something similar to this approach, for example Ellipsis on BSC uses weekly epochs of airdrop claims. It becomes both operationally very heavy and there would be significant gas costs to do regular centralised airdrops from the DAO. It also becomes a centralised/trusted setup compared to the current rewards vesting center which can be made trustless.

To note, vesting bonus in the current implementation is based on users’ share of locked GRO (which degrades over time) and not their share of total GRO. This means users who are nearing the end of their vest will be able to claim a smaller share of vesting bonus compared to new users who have a large portion of GRO locked.

Ultimately, Ethereum L1 gas is too painful and we need to move complex logic elsewhere to make interesting and elegant solutions that require computation.

2 Likes

Thanks everyone for joining the community call yesterday and continuing the discussion around the revised tokenomics both there and in the thread above. This is to recap what we are putting in the tokenomics DAO vote tomorrow:

  • Performance fee of 5% will be enabled for Vault and PWRD yields.
  • Performance fee of 10% will be enabled for new Labs products.
  • Performance fee will buy back GRO from the market.
  • GRO acquired from performance fee will be delivered as Vesting bonus to users. 10% of the performance fee will be delivered to the DAO treasury.
  • Users will be able to partially exit the vesting contract to take some profits early.
  • Users can claim Vesting bonus at most every 4 weeks.
  • Users will be able to lock down externally acquired GRO into the vesting contract.
  • Users will be able to voluntarily extend their vesting duration up to the max length (1 year).
  • Users will be able to claim pool rewards / airdrops either as immediately liquid GRO or as vesting GRO. If they chose liquid GRO, then 30% will go into their wallet and 70% will be given to the Vesting bonus. If they chose vesting GRO, then 100% will be added to their vesting position. The 30% will be a parameter that can be adjusted to get a mix of users between both options.
  • Users 1 year vesting schedule will change from current 10->100%, to 0->100%. Already existing vesting schedules will also rescale to have started at 0% instead of 10%.
  • Users will be able to claim multiple pools in one single claim for some gas savings.
  • We will revert with a separate vote specifically on scaling solution for the rewards vesting center as it’s a much more complex topic.

We will put this up for a DAO vote tomorrow morning / Wednesday 24th AM GMT. Please raise any questions or concerns ahead of then!

4 Likes

Changes sound good to me as a smoothbrain ape - but why change the vesting schedule to 0->100%, including retroactive change? Sorry if this was discussed above somewhere but I couldn’t see anything about it.

everything is clear!

Why switch from 10%>100% to 0%>100%?

The original design of starting at 10% vested was so that some users could decide on day 1 to take that 10%, but others could let it vest for more GRO. But that flow requires to first 1) set up a vesting position and then 2) exit that vesting position which are extra transactions and creating more friction. With the proposal above users will not have to create a vesting position but can pocket 30% directly at the time of claim with one tx, and those who are long-term can go for the longer period and bigger reward. Because people now have the possibility of selecting 30% up front, then it is no longer needed to have the longer term option starting at 10% pre-vested. People who want to exit early can just pocket the 30% up front. N.b. the duration is still 1 year in total, but the % amount that vests per unit of time is increasing and the starting point is lower.

Why do we change the vesting period for new and old users? Why can’t old users retain the 10% to 100% and new users get 0% to 100% vesting schedule?

The system architecture is based on a uniform vesting schedule for all users. To change it so that some users have one vesting schedule and others have a different one would require significant rework. To simplify onchain logic and make it more gas efficient it helps that everyone sits on the same schedule - the only questions per user is what their vesting start date is and how much GRO they have in the vesting contract.

1 Like