MasterChief Staking Rewards Upgrade

Abstract

The current TRIBE staking rewards are not providing sufficient utility to the FEI ecosystem for the associated costs. This proposal aims to provide TRIBE holders with more control over exactly how these rewards are distributed. Using a fork of SushiSwap’s incentives system we can provide TRIBE rewards to multiple tokens and adjust the rates as needed.

Motivation

Currently Fei Protocol is issuing TRIBE rewards at a rate of 3.4M per week (~$2M USD) to incentivize FEI-TRIBE liquidity on UniswapV2. The liquidity provided for these incentives is currently $90M. This liquidity is largely redundant, as there is an additional $180M of liquidity that is vesting over 4 years from Genesis. The FEI-TRIBE volume is also not particularly high. It is about $14M over 7 days, which is ~5% of the volume on the FEI-ETH pool.

Gradually redirecting these TRIBE rewards towards pools which help the peg or FEI utility in other ways will provide more benefit to TRIBE holders.

SushiSwap uses a contract called MasterChef to distribute rewards to stakers of SLP (SushiSwap Liquidity Provider) tokens. It allows the Sushi team and community to distribute rewards from the total Sushi inflation towards different liquidity pools. They adjust their rewards for both long-term incentives and temporary liquidity bootstrapping programs. This model has proven to be largely successful and has helped establish SushiSwap as a top 3 DEX by TVL.

Proposal

Transition our current staking rewards from FEI-TRIBE LP to the “MasterChief”, the Tribe’s version of the SushiSwap MasterChef.

The MasterChief distributes a constant amount of TRIBE rewards per block. The initial TRIBE per block will be 50. This would be a 33% decrease from the current reward distribution frequency ~75/block. Every quarter the Tribe will update the rewards distribution by subtracting 5 from the TRIBE per block. This would reach 0 after 2.5 years, a slight extension on the current rewards schedule.

The distribution of rewards can be adjusted to the highest leverage FEI and TRIBE deployments for the protocol as needed.

The initial deployments to incentivize:

  • FEI-TRIBE LP - Existing
  • FEI-3Crv on Curve - Curve Integration
  • Saddle decentralized stables pool
  • FeiRari Fuse deposits
    • For example fTRIBE rewards would effectively be single TRIBE staking with the possibility for leverage

This approach would require current FEI-TRIBE stakers to unstake from the current StakingRewards contract to transition to the MasterChief.

Future Consideration - Perpetual Rewards

The proposed reward distribution will terminate after ~2.5 years. In the future we can consider extending the reward distribution duration to reduce the short term TRIBE inflation impact.

  1. Increasing the duration by a fixed amount using smaller distributions over a longer window
  2. Perpetual TRIBE inflation of around 2-3% (similar to Uniswap). A portion of this, for example 50%, can go towards liquidity rewards in perpetuity.
  3. Reward halvenings so the rewards continue on indefinitely, smaller and smaller each year (similar to LQTY).

Further discussion will be needed to determine which options, if any, are most favorable to the protocol.

13 Likes

@joey,

Thank you for putting this proposal up. I am in favor of a much more flexible approach to rewards distribution, because of the need to be nimble to adapt to market conditions and other new projects and integrations. I strongly suggest you implement this as a priority as our approach is now towards integrations with other projects.

However, I’m not a fan of perpetual rewards because this becomes a liability for us (you have highlighted how much we are spending to incentivize the current FEI-TRIBE pool). Any incentives must be fiscally balanced with the revenues the integration will bring in. In reality incentives only artificially inflates demand up to the point where incentives end. I would like to see organic growth and unincentivized liquidity being dominant (DPI does a good job here).

In the spirit of budgeting and also in the interests of TRIBE holders, I strongly suggest that this Rewards upgrade be paired with a ‘Buyback-and-Make’ scheme into the Treasury for value accretion in TRIBE as well as ‘recycling’ market circulating TRIBE for additional future rewards while it is trading at a discount.

9 Likes

Not in favor of this and I doubt the general community will be either. I am in favor of something much simpler to increase value for TRIBE holders - create a cliff vesting schedule of 1-2 years (community decides) for TRIBE farmed with the FEI-TRIBE LP token - this way farmed TRIBE is not being immediately dumped in the open market.

I like the idea of diverting part of the rewards and allocating it better to incentivize desirable behaviours.

Besides the initial deployments proposed, I would suggest considering incentivizing Fei liquidity with the most traded tokens in crypto/DeFi.

I would consider, for example, LINK, AAVE, UNI, SUSHI, COMP, CRV, WBTC. If Fei is the stablecoin for DeFi it should have more liquid pairs with top DeFi tokens. To incentivize the creation of these pools we may need to start new bonding curves.

I agree with @arcology that to implement this it would be better to have “Buyback-and-Make” model working and would not use all the bought TRIBE on it.

2 Likes

Just can’t agreeeee more!

there should be a governance , the TRIBE community has the VETO right