Tokenomics idea: Create stronger symbiotic relationship between GRO and protocol product

As it stands both the protocol product and the GRO vesting mechanism provides good incentives to keep people for the long(er) run. During holding periods, hodlers have some degree of interest to Gro. It will be a missed opportunity if during the hodling period if there are little to no incentives to further create positive protocol usage or increased interest.

While the DAO as a community is one form of incentive (a social one), we know that many people are in DeFi because of the financial incentives. Therefore, considering the two financialized aspects of the system right now, GVT/Vault and GRO, I think there is room to further improve the symbiotic financial relationship between them. Currently the protocol product and GRO are at weakly financially related through:

  1. Arbitrage mechanisms through GVT/PWRD minting and LP pools
  2. Belief that Gro is a DeFi protocol that’s going to the moon, or at least the token

The first relationship is not something we can easily affect due to actors outside of our control. The second relationship is something that can be affected by a stronger relationship between GVT/PWRD and GRO. The following are some possible ideas:

  • Let GRO ownership unlock higher personal Vault/PWRD APYs. Or alternatively it can be a globally increased APY through community pooling
    • Have to determine how to get the higher APY
  • Option to automatically get Vault/PWRD yield in the form of GRO i.e returns are denominated in GRO not stablecoins
  • Allow collateral borrowing against unlocked GRO to invest further into Vault/PWRD (I see this as a possible first step to Gro becoming more like a bank by providing lending)

I hope others would chime in with their ideas and hopefully we can get more traction for a stronger and more diverse tokenomics for the system

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Thanks for the thoughtful suggestions @Slacking! The social incentive is here exactly because of devoted members like you :purple_heart:

On the possible ideas:

  • GRO ownership unlocking higher Vault/PWRD APYs:
  1. For unlocking personal APYs - I remember seeing mStable doing this so that MTA holders get higher APY than others
  2. For increasing global APY through community pooling - could you share more on this? Would that be like having some of the yield currently in GRO pools being shared to Vault or PWRD holders (in a way that’d be like your second bullet point)?
  • Allow collateral borrowing against unlocked GRO in the form of Vault/PWRD: that sounds very interesting! It’d allow people to earn yield from the unlocked GRO creating extra incentives. I suppose we’d want to go with over-collateralized loan in this case to minimise the chance of liquidation in case the token price fluctuates… the complication could be that right now every wallet has one vesting contract, so in case there’s liquidation we’ll need to come up with a way to claim back what’s been liquidated vs what’s continuing to vest. I don’t know how difficult that would be from a technical standpoint, but overall the concept of building a more comprehensive product suite within the Gro ecosystem is appealing :star_struck:
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Thanks for the continued support always Joyce!

The community pooling idea was something that came out of the blue so I didn’t really think of it much myself. But redirecting some of the yield into Vault/PWRD is one possibility, but may dilute the intentions of the liquidity reward. However, there may be room to use the vesting bonus pool to increase global APY. It may not work nicely with the current vesting bonus system due to tragedy of the commons, but with talks in #general chat about rethinking how the bonus system works, this may be one avenue.

The main reason why I thought of global APY boosting is to encourage collective bonding and action where possible

The collateral idea is definitely something that will appeal to some people in the community so that they can unlock greater capital efficiency and looping into Vault/PWRD further will also hopefully further strengthens the economic value of Gro

I like that. Maybe this can also offset the Hodler Tax of 0.5%? Say, if you take out your funds in stables you pay the 0.5%, if you take it out in GRO you only pay 0.25%? Or all GRO generated in VAULT/PWRD is automatically staked in the Single GRO Pool.

100%!
GRO should also look into getting admitted to AAVE and Compound imo.

Another thing, although I’m, not sure how that could work out, is using GRO as an insurance? Not much more than that as an idea - but I feel something brewing in may head, and maybe that will inspire someone reading that to find this insurance use case faster than me.
I’m sure there is one.

Hey Slacking, thanks for the post! Regarding your ideas:

Let GRO ownership unlock higher personal Vault/PWRD APYs. Or alternatively it can be a globally increased APY through community pooling

I really like this idea and would be all for it. We can see similar mechanisms in other projects such as BadgerDAO, so it’s been done before and would give Gro more utility apart from voting rights.

Have to determine how to get the higher APY
It could be that APY is decreased by e.g. 50% for non-Gro holders, and that APY is transferred to the Gro holders. Maybe the APY increase for Gro holders can be relative to the proportion of Gro they hold vs their staked position, with a cap of course.

Option to automatically get Vault/PWRD yield in the form of GRO i.e returns are denominated in GRO not stablecoins

This is interesting! Would the Gro returns be subject to vesting here? If so, I think this could be another route for long-term protocol users to accumulate more Gro. If not vested, I wonder if this might introduce a new source of sell pressure on Gro token?

Allow collateral borrowing against unlocked GRO to invest further into Vault/PWRD (I see this as a possible first step to Gro becoming more like a bank by providing lending)

I don’t understand enough about this to make a useful comment, sorry. But anything that adds utility to Gro, I would see as a good thing.

Thanks for taking the time to read and reply @eskalexia.eth and @chocoblocko !

@eskalexia.eth

Interesting thought. I would prefer a “discount” rather than a full offset, reason is because hodler fee is one road to help build the protocol’s treasury in the future which is important for future stability and development. Definitely worth a thought tho on the idea of creating further circular incentives within the ecosystem through GRO ownership. One possible caveat is that it may be a bit hard to accomplish without forcing users to “stake” GRO just due to the decentralized nature of Ethereum protocols. But others with more technical chops on blockchain can comment on the technical hurdles

@chocoblocko

This is definitely a reasonable approach to take. Though I would personally put this solution on the end of a list of desired solutions i.e this won’t be my personal first choice. Taking away the APY from non-GRO holders can create a tension between different kinds of users with what may be seen as an overly compensated risk vs reward outcome. It seems in BadgerDAO’s case, the increased incentive of the higher APY is in the form of more BADGERs, which really is just printing tokens from nowhere. In Gro’s case we’d need to materially create yield, so it’s trickier.

Of course we can try to keep the message clear that GRO holders are bearing a more outsized risk due to them needing to put more capital to access this higher APY. But in general this would require a fine balance, and we may just need a formal framework to think through this

In other protocols the rewards tend to be claimable separately. In my head one potential interesting “lock up” mechanic is to tie it to the Vault/PWRD withdrawal from the dApp. This can help the protocol generate extra APY from the hodl fee, but also help create a vesting like scenario. If paired with higher APY idea, which is accessible through this accumulation of GRO from Vault/PWRD, the vesting mechanism may not be as needed. Also just to note, it’s certainly possible to have Vault/PWRD continue to accrue yield in stablecoins, with GRO as an additional form of yield. So there are several possible variations

More like, thank you for the discussion!

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I am curious to know what the state of affairs is. Have core members responded yet? Perhaps personally?

Slightly different angle but I’ve responded on this tokenomics post:

Will respond on the one here as well, although some overlap :slight_smile: