(RFC) Proposal to Revamp the Gro Rewards Vesting Process

[infinitehomie.eth]

Author: Homie
Date: 7/21/2023

Related links:

[GRFC] Whitelist MIM-3CRV Convex Strategy for use in Gro protocol

[GRFC: Require GRO tokens to be locked to vote, and define off-chain governance processes (Meta-governance update, sub-proposal 1)(GRFC: Require GRO tokens to be locked to vote, and define off-chain governance processes (Meta-governance update, sub-proposal 1))

SUMMARY

The Gro Rewards Vesting Process has been a pivotal asset in GroDAO and investors in Gro Protocol since inception. However, overall crypt market fluctuations, a major Gro DAO changing event, and general changing opinions have caused the tokenomics and sentiment of the vesting protocol to change. We have seen growing interest in a change to the rewards poll, with a greater interest in a change needing to take place for contributors.

Some people may believe that vesting in Gro DAO is no longer profitable. I believe this reconfiguration stage of GroDAO is the best time to make a change for Gro Vesting Rewards. In order to do so, we can make three changes to improve the vesting process.

1. Change the Transparency process of GroDAO buyback to having an update of where the buy back stands at every community call.

2. Increase the Performance fees to 6% from a 5% current buyback fee from current yield protocol funds.

3.consider a change to the buy back period (monthly buy back)

These decisions would give either more power to contributors to make informed decisions for their finances and their contributions to the DAO.

IMPLICATIONS

1. increased amount for rewards pool
2. increased contribution leading from more transparency around potential rewards
3. Change in fees attributable to yield from Gro Protocol (potentially offset by change in strategies introduced in MIM proposal listed in related links)

Options for voting:

Yes - you agree to this proposal
No - I do not agree to this proposal
Abstain - I abstain
I have a suggestion - you have a suggestion that can be added into the comments.

Next Steps:

Poll will be posted for comments and feedback for 1 week: 7/21 - 7/28

Do You Agree to this Proposal?

• Yes
• No
• Abstain
• I have a suggestion

[kwww]

I think this is a great suggestion;
I think we will need to consider additional measures due to the current low price of GRO. Outside of top 20 holders, most users have less than 30k GRO that are liquid (~$1k at current writing), with a staking/unstaking transaction being ~$40 in fees, increasing the APYs for staking may move the needle, but when the base $ amounts are low, we may still struggle to engage the audience of GRO token holders

[jaypow]

Thanks for sharing your ideas Homie! It’s great to see genuine proposals emerging from the community. I do agree that a re-evaluation of the vesting rewards mechanism is worthy of attention, and it would likely benefit the DAO to see changes in the future. I have a few responses and questions below.

1. Change the Transparency process of GroDAO buyback to having an update of where the buy back stands at every community call.

For the Gro Buyback mechanism, this seems like something that could be tracked on an analytics page and made simple for community members who want to see it, e.g. on a Dune dashboard. Then, if community members have specific questions about it, they could ask during community calls. For example, this dashboard tracks rewards distributions, though I don’t see any queries specifically relating to buybacks.

2. Increase the Performance fees to 6% from a 5% current buyback fee from current yield protocol funds.

I’m not opposed to changing the performance fee percentage at some point, but is there any reason this specific number was chosen? To further justify this proposal, it would be helpful to have some data projections to demonstrate the cost-benefit.

• Some background: The standard 5% performance fee for Vault & PWRD was set into motion after Vote 5 passed, and the 0.5% withdrawal fees for Vault & PWRD were removed during the launch of G2. This dashboard tracks certain metrics of the protocol performance fees collected, but the community could request more or different metrics to be tracked.
• It would probably be more practical to employ a performance fee increase after the MIM-3Crv strategy goes live and not before, since this strategy will theoretically increase the protocol’s APY access. Might also help to establish a contingency plan, such as when to take action if the yields fall below an expected threshold. This is where more specific data & examples would help make the case (other pod members, feel free to jump in).
• @kwww has just replied with a valid observation about the challenges of buybacks given current GRO price and liquidity. This harkens back to a broader topic of GRO token utility & value accrual, which in my view will be contingent upon upgrades to the protocol & strategies, and/or GRO token utility in partner projects or spinoffs.

3. consider a change to the buy back period (monthly buy back)

I think there are a few points worth examining here, which I’ll explain below.

• First is that buybacks are dependent on the amount of fees collected, and yields are variable. If buybacks are done more frequently, there may be times when the fees collected are negligible and the gas costs/slippage aren’t feasible (related to kwww’s reply about the GRO token price).
• Next, if buybacks are made regular and transparent, the treasury would be exposing itself to frontrunners and other forms of MEV, and potentially other speculators. Tangentially, speculation about yield rates isn’t necessarily a bad thing (plenty of protocols are built to allow this), but given the complexity and changing nature of Gro Protocol’s yield sources, I can’t imagine healthy yield rate speculation playing much of a part in terms of treasury buybacks (perhaps there is some partnership worth pursuing in the future).
• One possible alternative to time-based buybacks is to set a profit threshold instead, but if that threshold is made public and/or is easily traced on the blockchain, then it could run into similar MEV problems outlined above.

Finally, I was requested to post here in the forum one of my messages from discord on this topic:

The intention behind this sentiment is not to dissuade from making changes, but to encourage reflection on longer-term ramifications, and choose the most optimal times to make changes. As I mentioned in the beginning, I support the spirit of this proposal and would like to see changes to the vesting mechanism in the future. However, I would also like to encourage the community and interested pod members to contribute more quantifiable analysis before we proceed with any formal changes.

The standard GRFC forum post template suggests including a few more details in the Rationale, Implementation, Benefits, and Disadvantages sections. I’ve tried to include some top-of-mind details above, but again, it would be great to have input (especially quantifiable) from more pod and community members on this.

[infinitehomie.eth]

I actually reread the template and will be looking to make some changes in the future. It took me a while to get to the template through the system, and that’s okay.

Potentially I wonder if there is a way to quickly find some important docs with respect to Gro.

Will add my two cents to the responses soon!

[raambo]

re the dashboard comments, might be worth checking with @wint3rmute_Gro if there could be a dashboard created on buybacks.

Also, I’m not sure if the Gro Rewards Distribution dashboard linked in your comment is still up to date. @wint3rmute_Gro might be able to confirm.

[raambo]

I second Jaypow, great initiative in proposing this. Here are my immediate thoughts:

1. What do you mean by ‘a major Gro DAO changing event?’
2. It is worth noting that the main purpose of vesting is to be able to partake in governance (as per vote 26) and be rewarded with greater governance power.
3. Were you able to found out how often buybacks take place or what triggers them? This could help inform some of the suggestions you made.
4. Re the 6%, were you able to calculate approximately how much more buyback this would lead to, based on recent protocol performance?
5. It might also be worth considering further/additional changes to how the protocol operates regarding the vesting bonus pool. For example:

• changing how vesting works itself (i.e. increasing or decreasing the current 30:70 ratio when someone decides to claim their GRO immediately, when they keep 30% of the GRO and sacrifice 70% to the vesting bonus pool.

• or perhaps adding a fee whenever someone exits their (completed) vesting schedule… But, as always, these would also come with trade offs which need to be considered.

[raambo]

Good point…

Perhaps such links should be pinned to the respective channels on Discord. WDYT?

[infinitehomie.eth]

This is what I like to call a fun way if calling attention to the issue.

It’s working!

Now, on to the questions (and will do the same with @jaypow shortly)

I’m not sure why I can’t quote, but that’s okay.

“ What do you mean by ‘a major Gro DAO changing event?”

This is in reference to the terra exposure that affected Gro protocol.

“ 1. Re the 6%, were you able to calculate approximately how much more buyback this would lead to, based on recent protocol performance?‘

This is a great point. I did not do so, I threw out a number to promote conversation. This alludes to the idea that sometimes, things are not out in the open and clear. I did some rough general basic math based on the conversation with you. A minimal precentage bump
Could make a difference for the better, of course, but the bigger issue is the lack of communication around this topic. Which brings me to your next point.

@raambo

It is worth noting that the main purpose of vesting is to be able to partake in governance (as per vote 26) and be rewarded with greater governance power.

Now it works!

Yes, you and I could assume this; and know this. However, I’m hard pressed to believe that your general every day gromie knows this.

@raambo

Were you able to found out how often buybacks take place or what triggers them? This could help inform some of the suggestions you made.

I have reached out to a few groda pod members via DM. I have not heard back from them. A good suggestion here would be to ping @kwww as he has made a comment above.

@raambo

changing how vesting works itself (i.e. increasing or decreasing the current 30:70 ratio when someone decides to claim their GRO immediately, when they keep 30% of the GRO and sacrifice 70% to the vesting bonus pool.

This is great! As governance becomes more solidified, this would be a good move, once it is clear for every member that the goal is voting power, (well one of the goals, perhaps)

@raambo

Perhaps such links should be pinned to the respective channels on Discord. WDYT?

Yep. People need to know what the devil is going on, right?

[infinitehomie.eth]

@jaypow

I’m not opposed to changing the performance fee percentage at some point, but is there any reason this specific number was chosen? To further justify this proposal, it would be helpful to have some data projections to demonstrate the cost-benefit.

You’re not wrong here.

There is a bit of secrecy that occurs with some of this data, or general lack of accessibility, and approachability to this data. However, as we begin to see in this conversation, it’s telling that some people have amazing opinions with respect to this.

Possibly, the amount of the fee may not be as much of a factor here. However the discussion is important. The idea that people are asking about these vesting rewards, and the responses have been not as prevalent, will make conversations like this more important.

@jaypow

It would probably be more practical to employ a performance fee increase after the MIM-3Crv strategy goes live and not before, since this strategy will theoretically increase the protocol’s APY access. Might also help to establish a contingency plan, such as when to take action if the yields fall below an expected threshold. This is where more specific data & examples would help make the case (other pod members, feel free to jump in).

Yes. I’ve seen recent numbers. Will have to revisit this after the MIM strategy goes live.

Let’s see what the survey says when we obtain responses.

[infinitehomie.eth]

@jaypow

Next, if buybacks are made regular and transparent, the treasury would be exposing itself to frontrunners and other forms of MEV, and potentially other speculators.

This is an odd opinion.

Why would it be be exposed to front runners? What is your reasoning for this response? A major ideal behind daos is transparency, right? So that does not mean of course to be open and transparent for everything, but if the comments are concerning communication in the community, I feel like this is a cop out, and not far removed from tradfi opinions, that tend to lead to folks not believing in the product.

[jaypow]

Hello Homie. MEV is a reality in many blockchains, Ethereum included. This Wiki explains some common types of attacks if you’d like to familiarize yourself.

If the treasury were to announce all planned details of a large upcoming buy transaction (including the time), it would be exposing itself to multiple MEV attack vectors, and other forms of manipulation. For example, let’s imagine the Gro DAO treasury announcing long in advance the exact details of how many GRO tokens it plans to buy, in which liquidity pool, and when. An MEV bot (or private entity) could perform a large buy transaction of GRO tokens from the same liquidity pool prior to that, causing a change in price and imbalance of the pool weight, which would force the treasury to incur slippage and an inflated token price in their buy transaction, while the MEV-performing entity benefits from the price movement. This is an oversimplified example, but one of many.

The treasury faces certain forms of MEV when it transacts regardless of making public announcements or not, but the more details that are exposed publicly before performing a transaction (and the more advance notice given), the easier it is for MEV attacks to be performed.

This is a common issue faced by accounts transacting in larger values in places like the Ethereum ecosystem, and a phenomenon with a history far longer than crypto itself. In crypto, it is often a result of the transparency of the blockchain and consensus mechanisms that certain forms of toxic MEV are easier to perform. Toxic MEV is a contentious issue with various solutions emerging that attempt to mitigate or prevent it to some degree, but it will likely never be fully extinguished in the Ethereum ecosystem at least.

From a crypto ethos perspective, I do not see a contradiction between transparency and protecting oneself from attacks. For instance, there are many reasons why self-custody wallets involve public and private keys. A certain degree of privacy and protection from attacks is fundamental in crypto.

It is fine for the treasury to announce its general plans of performing buybacks and share info about the buybacks performed after the fact upon request (this can already be tracked on the blockchain, by the way). However, signaling every single detail ahead of time would expose it to levels of manipulation that would deplete the treasury, open up other critical vulnerabilities, and ultimately “lead to folks not believing in the product”, as you said.

To wrap up, I understand the spirit of your post and I also expect that most people will accept the reality of needing MEV protection.

[infinitehomie.eth]

I’m going to be blunt here:

Hiding behind a comment like what you’ve just presented is one of the reasons why people feel like the protocol is dead.

I fully understand that you run a risk of being overexposed if you lay all your cards on the table. I am not asking this to happen.

But so far, I’ve seen next to no conversation about rewards, I’ve instead been told (often) we can’t say anything because we have to protect the product

You will end up protecting yourself so much that you won’t have anyone interested in what you think you’re protecting. That will ruin you more than letting curated info out to the masses