Rethinking USF Rewards (Part I)

Context:

Since the beginning of the USF rewards program, there was little to no change both for Capital Mining and Uniswap LP mining. Early on a Long-Term Thinkers vault was introduced for Capital Suppliers, the objective was to separate the distribution in two: a first distribution that is based on pure capital supply and a second one based on what the token holder does with their USF tokens. The rules and conditions were to be defined later but the spirit was to reward holders who act while having the interests of the protocol in mind.

Several community members discussed the rewards and USF distribution schedule as well as the tokenomics/utility. The two main points regarding the rewards were related to the APY given to Uniswap LPs that is between 150% and 200% and the Long Term Thinkers Vault. This proposal is meant to address the first point, the second is being discussed on Discord (you can check the discussions here) and has already started being structured.

Proposal:

The Rewards are currently as follows:

  • Capital Miners 150k USF (epoch rewards+ bonus) + 100k USF going to LT thinkers vault
  • Uniswap LPs 300k USF (epoch rewards + bonus)

This proposal aims to:

  1. Reduce the Uni LPs rewards by 1/3 from 300k USF to 200k USF
  2. Have 80k USF out of the 200k USF go to a Long Term Thinkers Vault for Uniswap LPs

If approved, this proposal will be starting from epoch 15 (tokens vesting during epoch 16).

[EDIT, 18/08/2021]
The discussions led to a first vote on whether we want to change the rewards or not: Rethinking USF Rewards (Part I) - #10 by Marh

2 Likes

How will the 80k Long Term Thinking Vault rewards be distributed, Ser?

That’s what needs to be defined in a Part II. It is also what MainBrain_ and DarkMattereum started structuring and digging deeper with the rest of the community :slight_smile:

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Perfect, thank you, Ser. Noted now here for future readers.

Though I thought that conversation in Discord included all holders (capital supplier’s, too) so it was not just for Uniswap LPs.

Overall I think its a good idea to reduce rewards some but cutting LP rewards by 33.3% and then (for now) by another 26.6% seems too steep. This will result in a 60% drop in APY for LPs and might result in a lot leaving. Since there is not much else to do with USF we will see a sell off and every LP being in a prisoners dilema: “If no one dumps all good but if anyone else dumps before me I will get even more IL and rather exit and dump before them”
Not sure where the 60% cut comes from or whats the idea behind it. Reducing rewards by 33% seems to me like the max we shoud do (and even that in 1 step is a lot). So if we want to reduce rewards that much at once I would rather opt for the following:

  1. Reduce the Uni LPs rewards by 20k from 300k USF to 280k USF
  2. Have 80k USF out of the 280k USF go to a Long Term Thinkers Vault for Uniswap LPs
  3. When the Long Term Thinkers Vault gets into effect reduce the Uni LPs rewards by 80k from 280k USF to 200k USF
  4. Have 80k USF out of the 200k USF go to a Long Term Thinkers Vault for Uniswap LPs

This way we reduce the LPs rewards for now by more reasonable 33% (imo still a lot) while already accumulting something for the Long Term Thinksers Vault. When the Vault gets into effect Long Term supporter shouldn’t see a drastic reduction in their rewards with #4 and get an extra payday for supporting the protcol so far from the accumulated rewards.

3 Likes

This is correct. Yield farmers will dump on an emission cut of this scale in the absence of an alternative use (read: yield) for USF, of which there are presently none. This is what has happened every time an emissions cut happens and it will happen here.

Cut now, think/“define” it later is not a good idea. Don’t kick the can down the road, do it in one go or don’t do it at all.

I agree we need to reduce emissions for LP.
But we also need to give USF some kind of utility.

So far, there hasn’t been many vote for token holder to participate in. The 3 month “carte blanche” reduced friction but also holder involvement.

To this day the only “productive” use of USF a part from selling it for more productive token has been LPing.

I think we need to handle the utility first part first. Making USF a desirable token to hold, and then it will be easier to cut on emission while preventing massive sell off.

A portion of the premium fees collected could be redistributed to USF holder, in the same fashion that CVX holder get a portion of the Curve fees collected by Convex, or that FARM holders get a portion of the yield generated by Harvest.

Making this available through stacking and/or an interest bearing token would instantly make USF much more desirable to hold/stack.

Vesting “à la EPS” could also be an alternative for the LT Vault: get half now or all of it in 3 to 6 month.

So while I’m generally in favor of cutting the emissions, such a large cut shouldn’t be done with proper announcement of what’s coming next (with numbers, not just a general idea) or even better, have it all done at once. As it stands, I wouldn’t vote in favor of this proposal.

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I tend to agree with the general sentiment of avoiding to cut the rewards that will go into the long-term thinkers vault until it has been defined/implemented.

Azra’s plan is going in the right direction, but if the goal is to limit right now the current (and future) emissions of the token it only cuts ~6.7% right now (going from 300k to 280k).

I would suggest doing

  1. An immediate reasonable cut in current rewards, maybe 25% as originally proposed in discord
  2. Discuss how the LT vault will be working before allocating part of the rewards to it.

So the first vote would only concern the immediate cut in rewards

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So to follow up on the feedback here and on Discord, @arzra suggested we start with a vote in order to decide whether we want to do something about the rewards or we just leave them as they currently are.

It seemed like a good first step for most participants so we can start with it!

1 Like

Scattershot being down, we are using snapshot for this vote:

Here is the link: Snapshot

The vote will end on August, 20th, 2021 at 10am CEST.

Express your voice, cast your vote :envelope_with_arrow:

LP rewards should be left fixed. Wrong decision is taken.

there will be no liquidity. We must change it immediately.

Based on the results of the first vote (doing something or doing nothing) and the discussions on Discord, we are moving to a second vote, we have 3 options:

Option 1: 50% reduction over 12 epochs / 6 months (~4.2% reduction each epoch = 12.5k USF) for LPs only

Option 2: 60% reduction of capital suppliers + LPs over 3 months

Option 3: 1/3rd (33%) reduction for Uni LPs starting the epoch after it’s approved (+ defining and introducing a Long Term Thinkers Vault for Uni LPs as well [TBD through another vote])

You can vote here during the next 48 hours.

In parallel, discussions regarding the next steps have been taking place in Discord. Our focus so far has been on the product/tech side, what seems to be missing is a roadmap that needs to be defined and voted over by the DAO. Everyone agrees that our objective is to be the number 1 insurance protocol in DeFi and increase the TAM for insurance beyond what it is right now + launch new products. There are many options and possible directions and I think we could have a project roadmap/Unslashed ecosystem working group that would flesh out and deep dive into the different paths then present them to the DAO with its recommendations . The process and work could be broken down into different steps/milestones with a vote after each milestone and a grant to be unlocked/voted for the next step/milestone.

The objective is to have more structure, be more efficient while putting together the different pieces as a community. Right now, there are many great ideas and discussions but they require follow up and often we neglect some important details and overlook feasibility, a working group will allow to be more focused and result oriented.