D- sUSF Distribution:

This is the fourth of four parts of a community drafted proposal that originated from Discord chat and being moved here-

Purpose: The goal of this proposal is to further align the interest of the stakeholders (capital provider, cover buyers, liquidity provider) and the DAO as a whole by encouraging long term stakeholders. We would like to encourage and attract long term capital and liquidity providers as well as provide additional value and utility to long term stakeholders in USF.

  1. To distribute the profit/fees, we will tokenize the staked USF in the pool (sUSF) representing a holders portion of the USF in the pool. As the profits/fees increase, the ratio USF per sUSF increases. The benefits of doing so are outlined below

Benefits:

  1. You can continue to stake your USF in this pool while also participating in voting by using your sUSF token for voting. This may require some additional work or the core team, but removes a barrier to voting by saving effort and gas costs and encourages those with staked sUSF to vote.
  2. This serves as the main distribution mechanism and minimizes transaction costs as well as creates additional buy pressure on USF.
  3. The concept of sUSF also introduces additional use cases such as using sUSF for collateral on other platforms or future utility.
  4. One way this could be accomplished in the existing structure is by having some type of a DAO within a DAO. Basically USF holders would be voting directly with their USF tokens on the unslashed DAO and sUSF holders will be voting in a sUSF DAO and the winning side of the sUSF vote will see their decision/vote sent to the Unslashed DAO with the whole sUSF voting power
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fully agree here, although maybe we should do it like Sushi and buy back USF with whatever earnings the platform have (in eth)?

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I agree with this and mentioned something similer here B- Profit/Fee Sharing: - #3 by gon

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I agree with the proposal as a whole, but I don’t understand why should USF holders be allowed to vote.

In my opinion, only sUSF holders should form part of the governance and have a say in the voting process. Otherwise, you can have a situation where someone buys a large amount of USF today, votes on an important decision with a high % of votes and then sells its USF tomorrow after the vote has been decided.

Allowing only sUSF holders to vote and having a time lock on withdrawals following a deposit should resolve this?

Interesting point. This is actually one of the strengths of Compound governance (vote delegation). If we could find a way to elect governors to delegate votes to via both the official DAO and “DAO within a DAO” (Snapshot/Scattershot I believe) we could prevent that situation from occurring. This would need to be done ahead of time, and there would need to be some protective mechanism in place to ensure votes are accurately cast on Tally (e.g. multisig).

This definitely starts to get complicated because delegated votes on Tally must == sUSF shares, which we know will not be the case at any given moment in time.

I agree with the proposal as a whole, but I don’t understand why should USF holders be allowed to vote.

In my opinion, only sUSF holders should form part of the governance and have a say in the voting process. Otherwise, you can have a situation where someone buys a large amount of USF today, votes on an important decision with a high % of votes and then sells its USF tomorrow after the vote has been decided.

Allowing only sUSF holders to vote and having a time lock on withdrawals following a deposit should resolve this?

I agree with the proposal as a whole.

I think the wording is a bit confusing here. What are we proposing precisely ? this is my understanding :

  • to generate a sUSF token based on the USF pool of proposition A
  • initially sUSF:USF ratio is 1:1, but if fees are accrued to the USF pool (prop B) the ratio could change
  • that only sUSF holder can vote for the DAO

am I correct ?

A central question that is emerging here is:

Q: Who is the DAO?

In this thread we have 3 suggestions:

  1. USF + sUSF holders
  2. sUSF holders only
  3. It’s two separate DAOs (DAO within a DAO).

I dislike 3. Crypto is confusing enough, let’s not add complexity on complexity (let alone merging. I don’t think there is a need to innovate here).

I also think USF holders should be allowed to vote. It feels to exclusive to say “if you want to be able to vote on things that impact the value of the USF you hold, then you have to stake the USF you hold.”

If you are a holder, you should have say IMO.

The two types of holders we have is 1 above.

If you get sUSF as a representation of the USF you have staked in the DAO, it would make sense that voting power is based on the sUSF balance of users.
The only issue with that approach is that USF token holders will have to decide whether to stake in the DAO and participate in the gouvernance, or simply act as liquidity providers on uniswap. Ultimately it’ll come down to the level of rewards/incentives that will be distributed for each scenario.

I am good with sUSF being the voting group in the ecosystem. In the end, to me, that means we’re saying sUSF is the DAO.

I’m just trying to address the more broad question - who is the DAO?

This may be getting a bit off topic, but requires thorough discussion. Anyone who holds some version of USF should be part of the DAO. If we get the early proposals done correctly, we shouldn’t have any issue with whales buying votes, passing a proposal for short term gain, and dumping. We have time to get this voting figured out.

Being mindful of the Tally/Compound governance is very important. IMO, we should be getting governors established ASAP for votes to be delegated to.

Questions:

  • Do we anticipate having the ability to count USF in wallet + USF in Uni LP + sUSF for both Snapshot and Tally?
  • Will the above total USF voting power in Snapshot/Scattershot == voting power in Tally?
  • Which kinds of proposals will be passed with Snapshot/Scattershot and which will require Tally? I ask because it appears the policy proposal with PERP will be a Snapshot process.

If you think USF holders should be allowed to vote then you also need to enable voting to LP providers, who also own USF…

Allowing voting only to sUSF holders increases the utility of sUSF, hence the reasons to lock up USF which is part of what we are trying to achieve?

Limiting voting to those that commit by staking their tokens in the DAO for a period of time ensures that their decisions are aligned with what is best for the protocol (rather than focussing on the short term to make a quick profit by selling off soon after the vote).
But that only makes sense if the staking/locking in the DAO is also combined with some type of distribution or claim to the revenues of the protocol. We need to find a good balance between benefits (so that users are willing to lock their tokens for several months) and the constraints.

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