Ideas & Feedback for GRO Rewards

Introduction
Vote 5 was recently passed to introduce a revised tokenomics model for GRO (see here). The purpose of this discussion post is to list my ideas for GRO rewards and understand the core team’s long-term vision for GRO.

Rewards Dashboard

  • Add metric for total locked GRO (quantity and dollar amount).
  • Add metric for average daily earnings for GRO (earned in LPs/unvested GRO)
  • Add metric for revenue from performance fees

My thoughts behind these ideas are to help protocol users understand how much GRO is locked in the rewards page also known as the vesting contract. TVL is a big focus for DeFi protocols and is used to measure a protocol’s success (e.g. higher TVL = earned trust and utility). The idea for adding average daily earnings and revenue from performance fees is a marketing method to showcase the protocol’s product offerings like Vault, PRWD, and Labs.

The idea is similar to to Curve’s staking page for veCRV:

GRO Performance Fee Rewards
Current features (Vote 5):

  • 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 lock down externally acquired GRO into the vesting contract.

Would the team be open to introduce a new contract for users to stake their externally acquired GRO? Users will stake their GRO in the contract and will receive a receipt token called sGRO (staked GRO). The idea is built upon Vote 5 changes for locking externally acquired GRO by increasing GRO utility.

Proposed sGRO features option 1:

  • sGRO users will receive the performance fee buy backs instead of the vesting bonus.
  • Performance fee buy backs are auto-compounded into sGRO (users will not have to claim).
  • Performance fee buy backs occur every every week or month (interpretation for the core team).
  • 14 day staking period

Proposed sGRO features option 2:

  • sGRO users will receive the performance fee buy backs instead of the vesting bonus.
  • Users can time-lock their externally acquired GRO for sGRO
  • Time-lock introduces a multiplier for voting power and reward amount (longer time = more reward/votes)
  • sGRO holders can claim rewards (GRO from performance fee buy backs) every 24 hours.
  • Rewards do not have a vesting period and are liquid so they can be claimed immediately

These changes will make sGRO an interest baring token similar to AAVE’s aTokens or Yearn’s yTokens. I believe that introducing this separate contract for staking will allow dedicated users to receive performance rewards instead of through the vesting contract. The vesting contract is diluted from earlier LP participants who may no longer hold externally acquired GRO. Also, the vesting bonus can only be claimed every 28 days, which takes 13 months to realize the performance fee buy backs.

Would like to hear from the community and team on these ideas!

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Thanks for the feedback @casper and great to have you involved in the discussions.

There’s some concern that delivering the value to the sGRO holders would be a passive reward for holding GRO, which in turn could strengthen an argument that GRO is a security (which from our analysis to date it is not).

There are advantages in giving back benefits in the form of effectively a marketing budget, which benefits both GRO holders and protocol users - which is what the vesting contract does.

The other way you could address this is by the sGRO holders performing a utility / service to the protocol. In Aave’s case they have a safety module meaning that in case of protocol failure they are at risk, and any fees are a performance for that service (and not a passive distribution of value to AAVE holders). The DAO could think about that in future.

Out of interest, what is your concern with the current proposal to deposit additional GRO into the vesting bonus? Would be great to understand if we can mitigate those concerns in any way during implementation of Vote 005. And I don’t immediately get the maths for 13 months either so that would be helpful to understand too! :grinning_face_with_smiling_eyes:

Thank you for the response! This helps me understand the design of GRO and thoughts behind its implementation.

With the changes in Vote 5, we’re able to lock our externally acquired GRO into the vesting contract, but with my proposal the externally acquired GRO would be in a different contract than the vesting contract.

Out of interest, what is your concern with the current proposal to deposit additional GRO into the vesting bonus? Would be great to understand if we can mitigate those concerns in any way during implementation of Vote 005. And I don’t immediately get the maths for 13 months either so that would be helpful to understand too! :grinning_face_with_smiling_eyes:

My concerns with the current proposal is how the performance fee buy backs are distributed. Anyone that has locked GRO in the vesting contract will receive the performance fee rewards through the vesting bonus pool.

Why should the protocol reward users who don’t hold GRO (externally acquired)? Users who were early LP participators when APYs % were higher to claim GRO into the vesting contract are at an advantage for the performance fee buy backs.

For an example, wallet 0x7CE0 (keyblade.eth) voted with 66.64k GRO but does not hold any externally acquired GRO. The wallet was an early participant in the LP and was able to yield farm GRO with the higher APY % to have great locked GRO. I believe we should keep the vesting pool bonus the same with early leavers but reward performance fees separately to users who lock their externally acquired GRO.

My proposal is to provide rewards to “active” protocol users and reward them immediately. I would take the performance fee buy backs and keep locking the GRO I’ve earned if this was made possible.

The 13 months is calculated by the following:

The vesting schedule is 0% - 100% which is a max length of 12 months. Users can claim the vesting pool bonus rewards every 28 days and all rewards are subject to a 12 month vesting period, which is roughly 13 months with the added 28 days. I understand that the vesting calendar is a weighted average, but the unlocked GRO in the rewards page is not liquid until I decide to leave the protocol.

This will be a long reply so bear with me. The main thrust of @casper 's proposal is greater economic utility through sGRO. It does so by providing a more liquid reward form making GRO rewards more attractive as part of an interest bearing token.

Secondly @casper raised concerns regarding reward dilution and casper has a point. But it must be noted that allowing sGRO woul cause greater forward dilution. Buyback and redistribution systems as planned in Vote 5 cannot escape from being diluted by users with larger shares entering in. While the addition of being able to lock market bought GRO in the future will also dilute, the user/investor will have to forsake a significant portion of their locked GRO into the vesting bonus pool making quick reward extraction method unprofitable. But with the suggested sGRO forward dilution cannot be prevented

@casper also pointed out that it seems off that a user that has no stake in the form of external GRO (raw tokens or LP tokens) seems to be able to get future rewards. But this is not necessarily a bad thing, in fact we cannot ascertain it is a bad thing. Traders and investors alike are heterogenous, they have multiple non-sytematic, non-economical and personal reasons why they may behave one way or another. A farmer/investor like keyblade.eth that seeks to gain rewards may very well hedge their position by removing their staking pools but retaining financial exposure through the vesting contract. In a way this is a great economic utility to have, allowing the users to retain financial/voting interest into the protocol over a long period of time but giving them the freedom to take any hedging position. This is the thrust of governance tokens as a voting tool, that voters have a financial stake in the outcome of things

While we may think that someone that is directly holding GRO has a greater stake and interest, this is not entirely true. In fact, this is well argued by Vitalik in this article that there are ways to disentangle economic interest from governance responsibility. Of course, it is not the case right now for GRO where there is a lack of supporting ecosystem around it that would enable this disentanglement, but knowing DeFi there may very well come a time where that happens and the addition of sGRO would accelerate this possibility. An argument can be made that the investor who only has financial exposure through rewards do not really have a significant stake/interest in the success of the system. But that would discount the consequence of opportunity cost that the investor has taken by having stayed in the vesting contract. Of course some may not notice that there was an opportunity cost involved, or that they are okay doubling down on that cost

Regarding the 13 months effective distribution rate, it is true that on the first claim of the bonus rewards that you will be locked up for 12 months. But subsequent bonus rewards claim does not necessarily cause those rewards to vest over another full 12 months. This is because the vesting contract considers the weighted average of all your claims to determine your vesting end date. This is well covered in the initial vesting mechanic Medium article. Note that the average vesting mechanism depends on the size of the claim and the size of GRO still vesting

While I have laid out critiques that doesn’t mean I don’t see the value in having like sGRO. Predominantly I think of sGRO as supplying a greater economic utility, while the vesting contracts provides a greater community building and governance utility, at least for the time being. It depends on where we want to take GRO in the short and medium term. The second proposal for sGRO (which may be thought as more similar to veGRO i.e vested escrow GRO) is closer to what the vesting contract does. In fact you can think of the vesting contract already being a veGRO

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