I would like to propose a tweak to the tokenomics, in order to align the GRO token economy closer to the success of the protocol:
Add 20% performance fee (same as yearn) to vault and pwrd, accruing to GRO stakers and GRO-USDC liquidity providers.
The accrual mechanism should work as follows, 20% of all yield produced by the gro protocol goes into a seperate vault which auto market buys GRO on a weekly basis. This GRO (bought from the market) gets redistributed to GRO stakers and GRO-USDC liquidity providers.
Introduce a timelock on GRO stake and GRO LP. Sliding scale from 1-12 months in return for 1-2x APY boost. This avoids people opportunistically getting share of the vault by quickly going in and out.
Boost base apy from vault and pwrd with gro rewards (unlocked), so that total yield on pwrd is around 20% and vault at 40%. This is needed to incentive further TVL to GRO protocol.
Introduce composability with sGRO (single staked GRO), which perhaps could be used as collateral in other protocols or even in GRO itself if it decides to set up a lending market in the future.
Why do you only mention two categories and not all the other pools / LP providers?
GVT-GRO and PWRD-GRO do not increase liquidity for GRO, they only create liquidity for GVT and PWRD on the secondary market routed through GRO’s ultimate liquidity in GRO-USDC, hence in my opinion they should not benefit from staking rewards, although these pools can simply stay as they are and still earn decent APY as currently stated on the app.
This rewards would be lineairly locked for 12 months (like any other reward). Would that change your proposal?
Under my proposal the yield is generated from the underlying protocol revenue (performance fee is used to market buy GRO), hence no additional GRO needs to be minted to achieve this (APY would be generated with 0 supply inflation). Considering this APY is generated without inflating the supply, it should not be locked, it’s simply redistributing existing circulating GRO tokens to stakers and liquidity providers.
Could you explain more deeply why these rewards should be unlocked. Until now every reward is linearly locked.
APY boost is needed to attract further TVL so that the 20% performance fee is actually meaningful. No one is interested in yield which is locked, hence why these rewards should be unlocked. If you look at CRV, SUSHI etc the rewards are never locked. Creating a succesful market for a token is not about removing all possible sell pressure from an inflationary supply, it’s about creating a market where incentives to buy > incentives to sell. The proposal in its entirety achieves this.
GRO rewards from LP should just auto compound back into the single GRO LP with the 12M timelock. If it’s not technically minted yet anyway I’m sure there is a better way to tie the locked rewards into LP to increase TVL while also incentivizing investors/stakers with rewards and less gas
I have some questions and considerations (for the community at large too)
Is this a 20% fee across both, or on both PWRD and Vault? Because of the way that APY is distributed across PWRD and Vault, a 20% performance fee on both PWRD and Vault will technically result in fee being imposed on PWRD twice. Once on the side of PWRD, another time on the performance that is distributed to Vault. So funnily enough PWRD is “shielding” Vault from the fee. I’d personally like for the amount and the mechanism of the fee calculation to be up for further discussion
GRO/USDC LP already have an incentive mechanism with the current liquidity mining (which we don’t know yet when it stops). I would personally love to make the LP pools be eventually protocol owned in order to both grow treasury but also help stabilize market activity. But that’s a while away. So overall am for the target of the incentive
I assume you mean this is referring to the allocation share that a staker gets from the market buys? Basically a zero-sum result between the stakers (similar to a number of other protocols out there currently)
How would this best be tackled for PWRD and Vault in LPs and shifting weights? I think the simplest thing is to necessitate them to be staked in order to get the increased APY. Perhaps its possible to exclude or manage PWRD and Vault being LP’d (not entirely sure). Besides staking PWRD/Vault itself, tying it to staked GRO and the some combination of staked GRO + held Vault/PWRD value can be used. I’d like the increase in symbiotic relationship between GRO, Vault and PWRD (basically your point #5). There are some nuances to deal with such as the fluctuation of GRO’s value and the added barrier for users to have to get GRO first
Thinking out loud, should the yield from the GRO emission be subject to some profit sharing mechanism or not? Mainly to keep utilisation ratio uniform with/without the additional APY boosting such that if whenever they are stopped TVL allocation. Sharing profit mechanism would also mean that Vault would protect PWRD’s GRO emission. But a 15 - 20% yield with risk protection may just be too good that it already tilts TVL allocation to PWRD even more.
Don’t see why not, 8% vs 10% APY won’t move the needle for many at this point. I think the narrative of having staked GRO accrue revenue would be much stronger to grow the protocol vs having slightly higher APYs.
I’m not a fan of the vesting. I believe it actually prevents growth at this point. Creating right incentives which encourage people to buy/hold GRO > restricting supply (OHM is a great example of this). Also because the protocol is buying back tokens which are already in circulation and are just being distributed to stakers there is no new supply coming in. It’s simply redistributing existing supply from sellers to stakers, as such don’t see why it should be vested.
Don’t necessarily mind adding vesting on this but I think it would send a stronger signal if it wasn’t.
Agreed. Although utility for staked gro (xGRO) would only come in further down the line, use as collateral for borrowing etc, as such not an immediate priority.