IMPORTANT: xSDT HOLDERS WILL BE ABLE TO VOTE ON THIS PROPOSAL. IF YOUR xSDT ARE STAKED IN THE PALACE, PLEASE WITHDRAW THEM TO BE ABLE TO VOTE. (There are no penalties for withdrawing from the palace).
In the perpetual strategy, users lock CRV in perpetuity and receive sdveCRV in return (more info on this twitter thread). sdveCRV holders can currently deposit their tokens in the LP farming section of Stake DAO to earn ~75% APY in SDT, or simply hold the tokens to receive 3CRV rewards from Curve (~12.5% APY). Users cannot currently exit.
This proposal is intends to create the option for users to exit if they wish.
Users participating in this strategy are valuable to the DAO, because they help boost the yield on other strategies to bring more users (and more revenue). The DAO has already allocated a significant portion of the SDT rewards to this strategy, and the DAO has been considering its options to incentivise more CRV to be locked.
The general sentiment around this strategy is that users are not always prepared to lock their tokens in perpetuity (which is understandable), and market research has shown that more people would be willing to contribute if they knew there was a way to exit.
For that reason, it is proposed to introduce the following incentivised Balancer pool, with 80% sdveCRV, 20% CRV
This Balancer pool is mostly composed of sdveCRV, as this is the most useful asset to the DAO and it is the one that is being incentivised. The minority of 20% CRV are added to facilitate users looking to exit the strategy back to CRV. Concretely, sdveCRV users in need for liquidity can sell their sdveCRV back to the Balancer pool to receive their CRV back. When doing so, the balancer pool would be slightly unbalanced, with more sdveCRV than CRV.
In doing so, this would lower the price of sdveCRV, meaning that it would trade at a discount. This therefore means that new users looking to lock CRV to receive sdveCRV would be incentivised to trade their CRV for sdveCRV in the Balancer pool instead of directly in Stake DAO.
The outcome is a last resort option to get liquidity, and on the other side, an opportunity for patient users to convert their CRV into sdveCRV at a discount.
The proposal would be to update the SDT rewards as follows:
Current rewards for sdveCRV: 0.8 SDT per block
Current rewards for 80% sdveCRV - 20% CRV Balancer pool: 0 SDT per block
New rewards for sdveCRV: 0 SDT (-100%)
New rewards for 80% sdveCRV - 20% CRV Balancer pool: 0.80 SDT per block (+100%)
Additional points of consideration:
In the event that sdveCRV is trading at a significant discount to CRV, the DAO may have the option to use some of the CRV generated from strategies to restore the equilibrium.
Points of discussion:
- Should we start incentivising a balancer pool with sdveCRV and CRV?
- If so, should we move all the rewards to the balancer pool, to incentivise migration?
Note: After 5 days at 12:00 UTC on Sunday 23/05 a vote will be published on signal. The snapshot for the vote will be taken shortly prior to a post on signal.