SDIP #2 - Implement a sdveCRV Balancer Pool

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).

Summary

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.

Motivation

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.

Specification

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:

  1. Should we start incentivising a balancer pool with sdveCRV and CRV?
  2. 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.

4 Likes

finally - i fully agree with your points and I like the idea to move all the rewards to the new balancer pool. Regarding incentivising the new pool we have to find a competitive structure to new projects like convexfinance. I am not sure if 0.8 SDT per block is enough to move enough liquidity

1 Like

So you propose to leave sdveCRV stakers with current 11.32% APY and fully remove Perpetual Passive Strategy LP Farming removing current 68% APY? If it is so, i personally disagree and hope it won’t pass!

Perpetuity is one thing that every SDT holder should consider, we are here to stay and I am happy to use my CRV to show this commitment. Lock them forever , there are plenty strategies to invest and even convex finance have copied this model to some extent for CRV where CRV changed to cvxCRV is irreversible. StakeDao can use this CRV better in more profitable way … wait and watch for CVX rewards …Sanctuary benefits 50% yammy and this is because CRV holders have commited to locking CRV forever !

2 Likes

I STRONGLY disagree with this proposal.

You can’t lure people into locking assets in perpetuity for a high APY (that keeps going down due to the price of SDT going down because of over printing) and then propose to remove the rewards completely. Who do you think will trust this DAO if this is accepted?

I would be okay with 10% of the PERP strategy rewards going to ‘liquidity’ no more.

PS: Start making proposals where there are multiple options instead of black or white.

1 Like

i think if we are going to do a Balancer Pool it should be 50/50 and do a 1:1 CRV match. StakeDao is no longer competing just with yearn, it is now competing with Convex who is offering

1:1 CRV liquidity
190% APY for LP

This has brought in 13million in liquidity in 24 hours! that is 6x what StakeDao has brought into the perpetual strategy. Clearly what they are doing is more attractive to the market.

We need to incentivize people to stake their CRV but also realize that lockups have proven to be DISincentivized - keep them in the system with great strategies that offer best in class APYs, not lockups that take away their control.

Yes, it was originally built as a perpetual strategy, but the market is telling us loud and clear that it is not what the people want. Thats why convex is attracting so much CRV.

I do think we should move forward but would reconsider the 80/20 pool to offer a 50/50 pool and make the SDT rewards 2x or even 3x higher than 0.8 SDT per block.

i agree with the sentiment of this - if they said that perpetual locks would deliver high APY they should deliver on that in good faith. Pulling those rewards seems like a bait + switch.

I think if they do decide to pull the rewards they should offer 1:1 CRV liquidity pools (50/50) for people that don’t want the new offer of 13% strategy or whatever would be now.

Otherwise, like you said, it would be a complete loss of faith in the protocol by most of the perpetual stakers (and community I would imagine)

Initial strategy meant to lock the token for life, it is clearly stated there and i don’t understand why this approach has to be changed and this market has to be created this way. If someone wants to sell sdvecrv he/she can go OTC or there can be a pool arranged by someone from community but it is absolutely wrong to stop incentivizing those who locked and staking for SDT! Completely wrong approach in my opionion which has nothing to do with initial strategy and idea. If this passes i am out of StakeDAO frens.

1 Like

there is no real OTC desk for sdveCRV holder who want to exit their position. We need to find a way to have both … perp incentives AND balancer / sushi or uni pool incentives.

Thanks for sharing your insights, based on the feedback there is probably a need for some clarification.

Incentives will not be stopped for the PPS but rather directed to a separate LP pool similar to the recent pools announced by Convex. This way users can deposit liquidity into the Balancer pool and then stake their sdveCRV/CRV LP tokens to earn SDT on top of trading fees.

So at a high level we have 2 decisions to make:

Vote 1. Should we start an incentivised balancer pool with sdveCRV and CRV? (Yes/No)
Vote 2. If so, how should we split rewards to the balancer pool to incentivise migration? (Multiple options here, will include the options discussed above for the DAO to decide)

In order to remain agile and respond to new entrants, it makes sense to decide sooner rather than later. With that in mind, I propose we decide Vote 1 with an informal poll (see below). This informal poll will run until Friday 21/05 12:00 UTC. If there is no clear direction we can extend this discussion and create a formal on-chain vote.

Should we implement a sdveCRV Balancer poll?

  • Yes
  • No

0 voters

2 Likes

Thanks Hatashi - I vote yes to #1.

Now for the second vote, can we add a vote to get a separate (new) allocation for the balancer pool instead of directing perp rewards into the balancer pool?

My point is: we are all super excited about the rewards that are being obtained thanks to the crv related airdrops, let’s keep the incentive for the perp participants and extend it even further for those that provide exit liquidity.

Lastly, this should be commensurate with the ratios we vote for: ex. 0.80,2 if the pool is 80/20 ;;; 0.80.5 if the pool is 50/50

3 Likes

I agree with the proposal. I think it travels the line of giving some people what they want in the form of exit liquidity while those that want to stay locked can get rewards but they are just shifted not removed. I don’t see why that would be not satisfactory to those who have the sdveCRV token. The balancer pools have been battle tested and shown to work in starting liquidity at a low cost of funding which I believe was part of the concern on who would start it. For sure I vote for part 1 YES. For part 2 I do agree it may require a small boost to incentivize the move at least to get it going. Yet, I would like to see part 2 points more laid out to compare against. At the moment it seems mostly to either be simply move rewards as is or to boost them. Are there other permutations people had in mind?

2 Likes

Agree with this. Create a separate allocation of tokens for the balancer pool. Make it equally or slightly more rewarding. This way there is no loss and people can choose to do either. Your total allocation spent will remain relatively the same, but just be split between two groups.

If you really want to incentivise the pool, make the pool allocation significantly higher.

Either way, many herd member appreciate the PPS strategy.

3 Likes

Thanks all for your contributions - The DAO has unanimously voted to implement a sdveCRV Balancer Pool. Since there are no conflicting votes there will not be a formal signal vote for this, however, it will be referenced in the official signal vote on incentives for this pool.

2.1 - Should we implement a sdveCRV Balancer Pool? (PASSED)

2.2 - How should we arrange incentives between the pools?

From the discussion above we currently have a few different options:

  • Add incentives on the PPS LP (over 0.8 SDT/block) on Stake DAO and don’t incentivise the new sdveCRV Balancer Pool.
  • Keep current incentives on the PPS LP (0.8 SDT/block) on Stake DAO and don’t incentivise the new sdveCRV Balancer Pool.
  • Split incentives between the PPS LP (some portion of 0.8 SDT/block) on Stake DAO and incentivise the new sdveCRV Balancer Pool (some portion of 0.8 SDT/block).
  • Transfer current incentives from the PPS LP on Stake DAO entirely to the new sdveCRV Balancer Pool.

On Sunday 23/05 11:00 UTC a vote will be published on signal for the DAO to vote on. There are multiple options to decide from, all options suggested here will be presented for the DAO to vote on the path forward. Stake DAO will take a snapshot shortly prior to publishing the vote.


2.3 What sdveCRV/CRV split is appropriate?

My rationale for the 80/20 split is that it provides a balance between enabling users to exit their position whilst providing some guardrails for the DAO. 80/20 is more optimised, as only 1 CRV is required for 4 sdveCRV. The downside is that when people sell sdveCRV in an 80/20 pool, they get less CRV than in a 50/50 pool but effectively users are incentivised to buy sdveCRV at a discount upon any exits from the PPS.

50/50 enables a 1:1 exit from the strategy but it goes against the original agreement for the PPS and is unoptimised since the balancer pool will hold a lot of CRV that are not useful to the DAO (50%).

On Sunday 23/05 11:00 UTC a vote will be published on signal for the DAO to vote on. There are multiple options to decide from, all options suggested here will be presented for the DAO to vote on the path forward. Stake DAO will take a snapshot shortly prior to publishing the vote.

We should go for a split of rewards to maintain the PPS LP alive, the repartition between PPS LP and balancer pool dont really matter imo as people will probably arbitrate the APYs (so a 66/33% or 50/50 wil probable be alright !)

Locking up CRV is beneficial to the protocol and therefore should be incentivized even without buying additional CRV and taking additional risk in LPing. What’s more, it’s beneficial to the protocol FOREVER so the reward should, in theory, approach infinity.
Incentives are just the protocol paying for the things it needs so just how much additional CRV locked up is expected to be locked up if people are able to exit? What’s the budget for these incentives and is it worth it? Simply saying we’ll slap 0.8 SDT on it and see what happens without any clear numbers or goals doesn’t make much sense to me. How much CRV is waiting on the sidelines, how does that translate to boosted performance and finally how does that translate to the fees generated which is the only number that matters in the end?
I’m worried that if the reward for locking up is 0 and the reward for LPing is attractive, it’ll mostly result in people buying off the market and then withdrawing if LPing is no longer profitable. No benefit to the protocol.
Some ideas:
Create attractive oneshot incentive for CRV lockup, let’s say SDT rebate or NFT multi-tier reward according to how many CRV were commited, once CRV is locked it doesn’t matter what happens to sdveCRV next from Stake DAO profitability standpoint.
Bribe Balancer LPs, e.g. with governance or ability to stake for points, it would allow redirecting emissions to incentivize strategies that actually generate fees.

Unless you have evidence or compelling guesstimate that there’s a ton of CRV just waiting to stake if only there was a way to exit, that’s a no from me on the liquidity incentives.
Besides, with no rewards for CRV pool1 and the current sentiment going by TG discussions → massive sdveCRV selloff → sdveCRV price near 0 → LPs rekt, horribly so with 80:20 → no way to exit anyway → more negative sentiment. And cheap sdveCRV, attracting mercenary capital to LP and not to lock CRV.
Maybe this should be revisited after some strategies are released and NFT contracts deployed?

EDIT: quick napkin math says that it’ll cost some $350k/p.m. at current SDT price with 0.8 SDT/block. How long are we theoretically willing to pay this for the liquidity, what’s your estimate for newly locked CRV and when does it become profitable?

The vote is live now on signal, closing at 13:00 UTC tomorrow.