Proposal 22: Decrease CVP inflation

[Defly]

Proposal 22: Decrease CVP inflation

Reviewed, advice on numbers etc provided by @vasilysumanov

Motivation

Prior to proposal 20 the CVP liquidity mining program was focused on bootstrapping the protocol and building a community around it. Now, PowerPool has a pretty solid community and a list of ecosystem partners - leading Defi protocols. Recently TVL (Total Value Locked) reached $30m and the Community treasury grew to $400k+ levels.

However, the high level of inflation prevents CVP token value appreciation. The liquidity mining program should be further re-defined for sustainable growth of TVL and CVP token value.

…

Summary

1st Round of CVP Reward Cuts

For PIPT, YETI and Uniswap reward pools, changes apply on 7th March GMT (1 month from proposal 20)

Pipt staking -> 40,000 CVP
Pipt/Eth pool -> 150,000 CVP
Yeti staking -> 40,000 CVP
Yeti/Eth pool -> 0 CVP
Uniswap pool -> 230,000 CVP
Boost Reserve -> 150,000 CVP

For ASSY reward pools, changes apply on 23rd Feb 05:00 GMT (1 month from ASSY launch date)

Assy basic staking -> 40,000 CVP
Assy boosted staking -> 150,000 CVP
Assy/Eth pool -> 0 CVP

2nd Round of CVP Reward Cuts

For PIPT, YETI and Uniswap reward pools, changes apply on 5th April GMT (2 months from their 1st Reward Cut)

Pipt staking -> 0 CVP
Pipt/Eth pool -> 100,000 CVP
Yeti staking -> 0 CVP
Yeti/Eth pool -> 0 CVP
Uniswap pool -> 150,000 CVP
Boost Reserve -> 100,000 CVP

ASSY Pool 24th March GMT (1 month from their 1st Reward Cut)

Assy basic staking -> 30,000 CVP
Assy boosted staking -> 75,000 CVP
Assy/Eth pool -> 0 CVP

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Specifications

• CVP inflation by Beta and Gamma token release

Current plan is for Beta and Gamma testers tokens to be unlocked according to Proposal 6 - 6 month lock up and 18 month linear vest. This began on November 21st 2020. This means that sometime in May the lock up will end and linear 18 month vesting will begin.

From May 2021 to November 2022, 192 addresses will receive 50,000 CVP each. So a total of 9,600,000 CVP tokens will be released into the market.

This means that ~533,333 CVP/month will be unlocked starting in May, just 3 months away. This should refresh everyone on the incoming CVP inflation.

• CVP inflation by LP mining programs

Massive CVP LP programs helped kickstart the PIPT, YETI and ASSY indexes.

Now PowerPool has been in mainnet for more than two months. Technical development roadmaps and features are coming quickly into fruition, such as rewards from xCVP treasury, index staking cash flows and the governance power of cvp protocol. So the move away from cvp farming programs seems sensible.

Team suggests a total of 400-500k CVP/month for all LP programs. Proposal 20 cut rewards but there were some other pools that weren’t included. Currently mining speed is 4.77 CVP per block, so monthly rewards can be assumed as ~930k CVP.

Proposal 20 is a step in the right direction. These are suggestions to implement for all LP programs based on the new numbers in proposal 20 (since it’s already active):

*YETI/ETH and ASSY/ETH already have no CVP rewards
** Boost reserve is for the near future indices, probably as rewards for CVP boost i.e lock CVP to be rewarded CVP identical to current ASSY boost. If no new products, this reserve is kept and not released.

• Various other cvp reward allocation

We can’t forget that cvp will enter the market in the future by other channels, such as Ecosystem Fund, marketing, etc.

…

[Defly]

Big thanks to @vasilysumanov for his huge help!

[MichelVaillant]

Cant add more than full support for your awesome proposal Defly and Vasily and thanks for your great ideas and time spent.

This is another step to the moon and shows the awesome community members. And the engagement of the community (and the acceptence of the dev team, that is not the case with most protocols) is what i love about powerpool and shows the strengh.

[Getmegone]

Hey)
Good job as usual, but I have a question about CVP-ETH Uniswap pool. Afaik basic plan was to keep rewards for this LM without decreasing till CVP raises a bit to let all the LP’s avoid massive IL due to ETH pump. I started staking CVP-ETH when ETH was $350, so I know this pain as no other. And I think there are a lot of LP’s in this pair who they chose exactly this type of LP - because its the most important thing - to provide enough liquidity for DEX. Ofc I realized what kind of risk LP can bring and I was generously rewarded by LM program for this pool but I am afraid that rewards decreasing can alienate small and mid LP’s and trap those LP’s who started providing liquidity right before the ETH pump. I think there are about 60% of TVL in CVP-ETH Uniswap pool is having about 10% IL ATM.

But on the other hand - rewards from LM program. About 15% per month, so its about 4 months of LM or + 60% to stake.

But anyway it feels kinda strange to reduce rewards for LP`s in CVP-ETH pair at Uniswap cuz its the main source to buy or sell CVP (excluding Okex or Hitbtc cuz I am not sure that they have real trading volumes). And I am afraid that this can dramatically reduce amount of liquidity at DEX’es and dramatically increase the amount of CVP owned by CEX’es cuz all the minor/mid token holders will prefer to sell CVP there due to high ETH fees.

My point is that we should first decide how many CVP really has to be given to testers (seems like some of them either dead, either not interested in PowerPool at all) - Beta & Gamma Testers Low Activity and maybe this decision will allow us to keep rewards for LP’s at CVP-ETH pair on Uniswap to keep loyal LP’s.

[Glow]

I completely agree with @Getmegone. We should at least keept the rewards for CVP-ETH pools as they are now before we come to any other agreement as for the additional sources for funding (I point to possible source of rewards from unactive testers). I am also a LP provider to Uniswap Pool and subject to quite big impermanent loss and I would love to keep the current rewards for the time being to either catch-up with CVP price on Ethereum (hopefully) and to decrease the IL or to make it worth it, if the current rewards would last longer time.

[Defly]

Hey thanks for the feedback. I too am uniswap LP i can understand your pain eth has been outperforming cvp significantly.

I am not strictly against keeping the rewards the same. But these are my thoughts on why we can manage with lower rewards.

The reason that I felt that it was ok to cut uniswap lp rewards was because by implementing this proposal, it will further reduce inflation, and it will cause cvp price to further increase which means that uniswap lps will be in less of a loss right? Also what if uniswap lps might be claiming their cvp and regularily dumping, this proposal means we will see fewer dumping from lps.

Proposal 20 was only just implemented to reduce cvp rewards so I think we will see a positive impact in cvp price soon for uni lps over the month, and with this proposal it will further improve its price for uni lps and we should see cvp price steadily increase and not drop drastically as much. Uni lps, assy stakers are claiming big cvp rewards prematurely when price goes high which kills its run. We can limit this.

Also we just witnessed the cvp pump a few hours ago. My impermeant loss was cut in half just like that. So imagine when there is fewer inflation it will perform even better right, also with all the great products coming out over the next month even more value should come to cvp. This proposal won’t effect uni lps until 7th March which is some time away.

What I am saying ultimately is that CVP will perform well if we limit inflation and so my feeling is that we won’t need the same cvp amount, the price of cvp will do it for us by reduced inflation. Also its still less than a 50% cut to rewards.

I understand where your coming from and my opinions are sincerely for the best for the community, and im keen to hear your thoughts about what I said, thanks. And I am willing to change my view on this i’m totally flexible

[CryptoSignalz]

I’m for the proposal.

I have some notes…

1. In the 2nd round you wrote:

For PIPT, YETI and Uniswap reward pools, changes apply on 5th March GMT (2 months from their 1st Reward Cut)

Did you mean April 5th?

2. ASSY boost was activated on January 25th. I think the adjustments should be at least after 1 month from that date instead of the 23rd in order to respect the previous launch proposal.

3. I think it is worth to include potential testers inflation cut in this proposal. This will make the process less toxic since it will be clear that every kind of PowerPool ecosystem participant is giving its share to reduce the inflation.

4. If we are talking about price appreciation, I would also include my previous suggestion to burn some CVP tokens so that the diluted valuation will be more attractive. I don’t have the exact numbers but I guess that 30% of TTS can easily be burnt after all those cuts.

Cheers

[Defly]

Hey! Thanks for the notes. I have updated the proposal for 1.

2. I think that 23rd Feb is one month from Jan 25th. How about then make it close to 1 hour after PowerPool tweeted about boost being active (04:06 GMT)?
   So I changed it to 5:00 GMT giving it its deserved 30 days.

3. Its not 100% certain yet if, when, how testers tokens will be reduced. At this stage its unclear when it will even be implemented let alone drafted. I see what you mean it would be good to have it. I think right now if we had some idea laid out in front we could, but right now there is no timeline for it. But this proposal shouldn’t be delayed too long.

4. I just had a look at it for the first time thanks for bringing it to my attention. Seems like it was last discussed almost 3 months ago and it seems to have abruptly ended with no consensus or verifiable numbers. I think it shouldn’t be included in this proposal.

I think it should be brought to the research forum though. In my view something like that is a permanent decision and we need more research. I hope I answered your points.

[dae]

if CVP/ETH rewards are cut by 62% in total, we all know what’s gonna happen to the liquidity. Let’s not forget Uniswap is still where the liquidity is (neck and neck with OKEx, but who the hell uses that anyway), and the lowest spread.

More importantly let’s note that ETH hasn’t even started its parabolic run yet…

All in all, I’m in favor of further cutting inflation, nice one @Defly. Agree with @Getmegone, tester inflation should probably be a priority, as the real selling pressure will come from all the idle testers who in all seriousness, don’t give a flying fuck about this project.

[martin]

When we are talking about decreasing CVP Inflation - I really like the point. I have a doubt though. We are only discussing all parts of the inflation seperately - like pools, board etc.

I think, we should instead limit the overall inflation of CVP per period and define based on that limit percentage wise distribution to the seperate elements of CVP.

If you are interested I would definately go ahead and create a proposal for that.

[Defly]

I agree testers tokens need to be dealt with and there will probably be significant cuts to their allocation. We can use then use it for other things.

But just ignore testers tokens for a second if we just consider total cvp for all LP programs after the first round cut it’s still far too high - 800,000 CVP. That’s very high still for just one month so thats why I think we need this for CVP sake.

Do you think alot of uniswap LPs will bail if their CVP reward is cut by 41% for the first round?

[Glow]

I would like to see the draft of that proposal… at least

[Defly]

Hey.

Sure, this could be a good idea. Can you create a draft please. Thanks

[Tokenfuture]

My take on prevention of extreme depreciation and making everyone happy:

As there will be a release of rewards for testers ( independent of voting or not).
Would it be an idea to lock up rewards in a new pool for a period of time?

Then over time it can release the locked tokens in batches, but only if there is new people wanting to enter this/these pools?
This way you prevent dump, and you have a good balance by only releasing if there is new people wanting to get into the pool.

If this was voted for and happen, everyone worried about the release would start buying instead. It’s a win win for everyone, except for the dumpers.

Save the project,save the value.

Decide if non voters/non contributors should get reduced tokens on top.

Please hurry, we don’t want to loose this support level we built against ETH

[Lamer]

Totally agree with U, mate. I think there should be a complex solution taking into account all the sides of this issue: testers, board tokens, rewards, grants & others. Looking forward to a draft based on @martin idea.

[Defly]

Btw guys ASSY rewards will renew on 23 Feb for a total of another 441k on the market just few days away. Will the draft be ready very soon? I dont want to see the same cvp rewards hit the market again.

[ApplePie]

Hi everyone,

I expressed concerns about this on Discord chat and I have been told to post something on the forum. I am just wondering if this is the right time to start cutting rewards for pure index staking. At the moment, I am pretty sure pure index staking is the main driver for both 1) TVL increase 2) direct CVP buying.

I would use my personal example here: I would have never joined the project if not for the pure index staking reward. I am not a sophisticated investor and never really wanted to get into the DeFi space but the rewards were so good I decided to put the effort to learn, spend some time, and get on board. Although I don’t want to provide liquidity pairs because of impermanent loss, I was seduced by pure index stake. As a results: I bought some ASSY index and swap some ETH to CVP in sushi to get the boost. It’s a win - win for the project: increase of TVL and CVP appreciation. I am definitely not the only one in this case.

Now I understand that rewards might be too high but as long as the project do not have more visibility, cutting off the reward for pure index staking will hampered TVL increase pretty bad. In my humble opinion:

• Don’t cut reward for YETI and PIPT until the boost option become available for those 2 indexes with the launch of the V2
• Start to cut reward for YETI and PIPT when huge progress would have been made in terms of communication / marketing (lot of awesome stuff have been proposed on the discord chat, not sure if this is somewhere in the forum but the to do list is huge)
• Don’t cut reward for ASSY until a satisfactory TVL has been achieved for the index (and I understand from the core team that it is NOT the case at the moment)

[Defly]

Hey,

You have raised some fair points here. I’ll try to paint a picture of the whole thing to explain why we need this.

The first indexes started around 1st December last year. At this time we didnt have alot of features in development. Mostly we just had new index ideas coming and that was the main thing. So upon launch for each index, we had very large liquidity programs that were set to decrease as time went. The reason for these liquidity programs was to incentivise people to invest in the indexes early because of their high initial rewards. And we got a fairly reasonable tvl for each index upon launch and it grew for a few days.

As time has passed, i have witnessed several things. Despite pipt,yeti,assy tvl rising quickly for a day, it would slow down quickly a few days after and become very quiet, I witnessed it happen to each index when they launched. The number of people depositing the indexes isnt rapid, it becomes very slow.

But cvp rewards still keep getting minted so shouldnt we see number of pipt,yeti,assy being minted increase as more people deposit? The thing is we didnt see this continuous increase. The index didnt continue to rapidly grow with continuous cvp reward. It def helped to kick start the index, but its doesnt help grow tvl as you suggest. It merely becomes a farm and dump token.

Another thing I witnessed b4 assy launched, when yeti,pipt were the only two indexes, was the steady decline of the cvp price. It was going down like mad. The reason for this? Cvp being earned was being sold off, such vast amount of it were entering circulation. The community at the time then saw this and we have put several proposal to get to where we are with far fewer reduced rewards now. This is a big reason why cvp is very slowly increasing on average. We saw that cvp reward were having diminishing returns.

Dont get me wrong, you mention yourself as a new investor that joined because of the high apy and there are some others no doubt and that’s fantastic. But, the truth is, cvp rewards dont justify only a handful of people joining a week. It’s just not a healthy trade off.
Cvp minting programs are like a rogue printing machine at this point. The protocol is not extracting much value from it and the cvp token suffers hugely. Lp programs served their purpose by attracting alot of people that came in on day one but its deminsihing returns today.

I like to use aave as an example, I think they are the goal standard in tokenomics. Not only did they make amazing quality products that no one else was achieving, (as we are too now), their token inflation was a HUGE part of why the aave token did that well. They is such a small inflation amount. They are going against the grain of most other defi projects and not printing aave tokens like mad. Cvp can do a similar thing if we can achieve reduce inflation.

As we move into these next couple of weeks, powerpool is rolling out several features that didnt exist when this project started. It’s no longer a new kid so to speak, it’s making a name for itself, making partnerships. Staking of underlying tokens for instance is a massive feature for index holders. Damm. Other great ideas are on the horizon too for maximising utlitily. These are features that have huge benefit and can replace mindless cvp minting. We can transition from a farming and dump protocol to a self sustaining beautiful ecosystem. We want to minimize cvp inflation for the sake of everyone’s best interests in the long run.

I would also like to bring ur attention to the xCVP proposal on the forum. This can replace cvp minting and still reward people with some cvp, I urge u to read on it. I left some comments at the end of it that I believe will really help the protocol.

I hope I dispelled fears of lack of engagement with reduced rewards, cvp can benefit further with reducing rewards, making it an attractive investment.

[ApplePie]

Thank you @Defly

Overall, it’s a solid answer with good arguments, the most important one being how you have monitored the TVL increase. I agree that if we cannot prove that the current reward mechanism is a good way to boost the TVL constantly, it’s harmful to allocate that much CVP for the investors that are already there. As a suggestion, why not adding more rounds and reducing the CVP cut for each rounds? By this mean, we can better analyze TVL evolution and definitely see if we are going in the right direction. This would also help indecisive people to jump in as everyone would be aware of a deadline for such high rewards, but it needs to be extended over the time.

I still think that the boost mechanism is a formidable way to increase buying pressure of the token. I would rather see 0 CVP reward for basic staking and higher reward for boost staking in your suggested table. Oh and yes boost option for PIPT and YETI seems like a no brainer at this point, we definitely need it.

[Defly]

I understand what your saying, that was a concern for me as it may seem that this scheduling is out of nowhere and pretty aggressive. And it is aggressive. But given that tester tokens will start distribution and assuming the worst case that all tokens are released beginning in May, we have a huge inflation to contend with .

Another thing is this huge rewards have been happening for a couple months now. And so really this abruptish ending of rewards is to compensate for earlier. When we should have probably curbed rewards more. I think we just dont have that luxury of doing it gradually, we need radical change to tokenomics.

But perhaps it could be done more smoothly but time isnt on our side right now. And this proposal I will likely update before pipt and yeti rewards go to zero. Propose to replace it with xcvp or something so we can have cvp rewards but to a lesser extent.

Boost should be replaced by xcvp, essentially doing the same thing as a boost but with more benefits (e.g no inflation)