This is an great proposal that addresses some of the debate points we’ve seen in the community between LPs and Testers regarding long-term incentive alignment. I hopped on a call with the Delphi guys over the weekend and have a couple thoughts I’ll share here.
While the lockups make sense philosophically, I think the current plan could introduce too much inflation in year 2. The Circulating supply will increase from ~10mm to ~45mm over the course of that year as both testers and liquidity providers begin vesting every month. I worry this could lead to a lot of sell-pressure or at the least be an overhang for anyone holding in the first year. I propose smoothing out the vesting schedule by bringing it forward 6 months and having the tokens vest linearly for 18 months.
The first vote around PowerPool composition is critical and I agree the rewards for participating in it should be heavy and understand the benefits of locking up additional supply (although I’m open to reducing the rewards for doing so). One thing I do think we should consider though is allowing Beta and Gamma testers to participate in the vote with their locked tokens. With the lockups, testers are structurally some of the most long-term aligned on the project and deserve influence over the pool’s initial composition. However, I think Beta and Gamma testers votes should have reduced weight, so they don’t swing the vote. Perhaps a 50% reduction would be adequate.
I really like the idea of a withdrawal fee that decays over time. I’d favor long-term capital over short-term capital as this would likely reduce the impact of mercenary farmers swooping in and dumping CVP.
Final thoughts: I think the token econ proposed here is elegant and I’m excited to see the community continue to iterate through this design. I also like leaving a large portion of the supply dedicated to rewards that the community will govern. We can use these to incentivize new pools, incentivize other stakeholders beyond LPs like protocol politicians, and even burn the supply if we find out we don’t need all the ammo. Look forward to hearing everyone’s thoughts.
We discussed it today and @DeFi came up with another nice idea of how to create quick and effective interim solution: to put 50% of beta/gamma tokens on a separate contract with voting rights.
This is a bit artificial, but looks like this can be implemented super quickly and after that we will be able to vote on the new tokenomics model and than have another comprehensive iteration on reputation system and possible dual token model (where the second token is reputational token which allows the active community members to boost their voting influence)
@Sergey, we launching Baby Power Index (the capped MVP version for mainnet demonstration and testing by the community) exactly for this purpose. Our community members need to play with it, see how it works before they will vote on its composition.
As we cannot launch Power Index without proper testing, bug fixing (if there will be any) and a security audit, there will be time to prepare for voting and make a research of GTs. If you have some ideas regarding research/education to prepare people to conscious voting, please present them.
Thanks, yes, I dont have any questions to the team re the Power Index - I invested in CVP because I was sure that the team will add this product.
I tested it and I like it.
@YHRW is right about launch of other indexes, but I believe the team can find a sweet spot between a quick delivery and product quality
Re the procedure for community voting on index composition - yes, I will lay out my thoughts in more details in coming days (need to play with tokenomics model first)
I should say after reading that this prop I liked more than props 4&5 by @Sergey. Cuz
It doesn’t reduce testers reward
Have more fair distribution IMHO.
But, As @RyanW said, I’m also worried about inflation and huge sell pressure in the second year. The voting power of Beta/Gamma testers should also increase linearly with circ supply increase. We should escape imbalance.
Hey, actually prop 4,5 and prop 6 are not very much comparable
As proposal 4 was published 7+ days before the Delphi’s proposal (and we didn’t know at that moment that Delphi had been working on their proposal 6) the key goal of prop 4 was to summarize all the info on the tokens distribution schedule we had at that moment and to show the community that this is a bloody big issue.
After we discussed prop 4, we come up to idea that we will not reduce the testers reward and will only introduce new lock ups and vestings (which were more testers friendly btw:) and started to discuss what can be improved with proposal 4 (additional incentives etc)
Re the proposal 5 - its key goal was to just halt the distribution
Now prop 4 and 5 can look a bit useless, but they more than achieved their goals
The current CVP supply on the market is 5,438,154 CVP, so we need to make Beta+Gamma less than that. We propose to limit overall Beta+Gamma cumulative voting power up to 5m of CVP instead of 10m (each wallet will have 25k votes instead of 50k), so current CVP holders will have the majority in this vote. The idea of limiting the voting power of Beta+Gamma up to 5m votes (in mainnet) was also proposed in Proposal 7.
So I think we will find a middle group fairly soon
I have played with Delphi’s model, and here are some additional thoughts (dont incl consideration on voting power):
Alphas have received their tokens and I understand, the team will not take measures to try to contact ~50% of alphas who hold (maybe already less) and negotiate a lock up with them - so this is given. (I personally don’t know the way of how it can be solved)
This distribution to alphas creates contradictions between early LPs and beta/gammas
2yr total vesting for the testers is a sweetspot between usual vesting for teams (2-4 yrs) and private round investors (1-2 yrs)
Early LPs should have an advantage in lock up / vesting terms. This is pretty straightforward - the more you risk and the more expensive you buy an asset the better liquidity terms you should have
Alternatively, we could consider distribution of the first 2 mn CVP from LM program to the early LPs retrospectively and lock /vest the early LPs LM rewards with the same timeline as Beta/Gamma
Unlock of beta/gammas and DAO grant should be tied to a simple KPI - the size of the pool (can model it separately if folks are interested)
So lets compare several scenarios with adjustments below
Hey guys!
Why not just to make a 2 year linear vesting both for beta and gamma testers + add KPI for them?
So imagine the situation with proposed vesting (1 year lock and then 1 year vesting):
The tester was working well during the first 6 months of the project (discussed proposals, did marketing and etc) and then something went wrong with him and he stopped doing it at all. Team noticed it and told him: unfortunately your tester allocation would go to the community pool because you became inactive. But that’s kinda unfair besause the tester has been working for 6 months at the start.
So that’s why I would like to see 2 year linear vesting after mainnet launch with clear definition of testers KPI. Happy to discuss it futher.
As early LP I would be OK with linear vesting for the testers (maybe 3-6m lock and then linear vesting), but there are two things here to consider:
Early LPs should receive a proportional retrospective mining rewards for august-sept-2020 (2 mn in total from Delphi’s proposal) on top of currently implemented mining program - this will reflect the greater risk early LP have taken (see more details in the post above)
Following LM rewards from Delphi’s 24mn CVP LM plan should be matched in lock up/vesting terms with beta/gammas
-> Only this approach will be fair for all the parties involved
(One more thing which could be done is to negotiate the vesting terms with Alphas which still hold CVP, but I am not sure how easy this would be for the team and how much is this realistic)
Conclusion
If we vest beta/gammas for 24m, we need to improve the terms for early LPs (who took more risk) in parallel. This will lead to boosted cir supply in year 1 and selling pressure
This is an aside, BUT, can we develop a proposal for testers who want to LP to receive some portion of their beta or gamma distribution of CVP sooner? I’d like to LP across several of the pools, not just the 10% CVP, 90% ETH pool, so if we could skew rewards to be higher for LPing vs beta testing, and apply a bonding curve or vesting schedule to the LP rewards, wouldn’t that also solve the problem of changing the distribution of CVP over time and encouraging lockups? Just thinking out loud here - seems like it would be a good mechanism to separate people who want to market sell vs people who want to accumulate voting power by LP’ing.
I think I’ve voiced this before but as a Gamma tester just reiterating I’d be fine with a vesting period of a year, particularly because LPs are subject to it as well.
Meltdem,
Thanks for participating in the forums. It’s refreshing to see a tester here.
Is this accurate to what you’re proposing?
Proposal
Don’t dilute tester allocations and impose a vesting schedule
Offer an alternative vesting schedule for testers that want to LP
Tester LP rewards have their own vesting schedule
Comments
I am against this proposal as that would double down on the influence of testers that have no skin in the game and would earn exponential funds off of the house’s money. I would be for this proposal in typical VC and private sale deals where there’s vesting + forced participation in the protocol through lending or staking. However, testers never spent money on allocations.
The fact that there was no capital at risk to receive the testers’ allocations is a pretty important factor that restricts the implementation of the model you describe.
Also, could you please advise how to tie a bond curve mechanics here? not sure I fully got it
As I said in response to your prior proposal, I personally don’t have issues w changing the balance between testers v LPs, so long as it has community consensus to pass, that’s the whole ethos of Powerpool - distributed metagovernance. I’m saying that testers who want to LP should be able to do so, you’re saying testers shouldn’t get anything and only ppl who had capital to buy tokens should, so idk that’s pretty far apart in terms of philosophy. Predicating participation based on $ is sort of antithetical to the Powerpool experiment - I find it odd that you’re advocating for plutarchy (pay to play) in an experiment that attempt to change the dynamics of protocol politics by giving active participants and contributors a stake early on. Anyways, it really feels like a few people want to push things in a very specific direction so I guess this is the best test of the Powerpool governance mechanism. Unless the voting dynamics change, it’s really up to the Alpha testers and the VCs who market bought their tokens.
