Saddle D4 TRIBE Rewards

Abstract

Allocate TRIBE from the DAO Treasury to liquidity mining incentives on the Saddle d4 pool (LUSD, alUSD, FRAX, FEI) for constant distribution over 1 year. Saddle is a stablecoin optimized AMM similar to Curve. The goal of this pool is to provide liquidity to top decentralized stablecoins to help reduce ecosystem dependence on USDC/USDT. Any TRIBE allocated would be paid back to the treasury if we upgrade the staking rewards per the existing discussion here: MasterChief Staking Rewards Upgrade

Motivation

There is a kicked off discussion around adjusting the current staking rewards distribution by leveraging a new rewards contract similar to SushiSwap’s MasterChef. This will take time to implement and audit. In the meantime we have an opportunity to collaborate with some of the best decentralized stablecoins (FRAX, LUSD, alUSD) in a Saddle d4 (decentralized four) pool. Saddle is a StableSwap AMM which has low slippage for pegged assets.

This proposal focuses on allocating some TRIBE staking rewards in conjunction with the other communities which will all discuss adding their own rewards for an expected 4x rewards.

Proposal

This proposal would allocate TRIBE from the DAO treasury for rewards to liquidity providers of the d4 pool. These TRIBE will be paid back to the treasury from the existing staking rewards if and when the upgrade to the MasterChief takes place.

The amount to allocate should roughly align with the ranges from the other communities involved. We are expecting this to be between 1-10% of the current reward distribution.

For example, an amount of 5,000,000 TRIBE (~3m USD) would translate to a 6% APY on 50m TVL. If all 4 tokens allocate a similar amount of rewards, then the APY would jump to 24% for this amount of TVL. This represents ~3.3% of the current staking rewards distribution.

Benefits to the Tribe:

  • Additional liquidity for FEI
  • Peg support through StableSwap AMM
  • Alignment with top decentralized stablecoins
  • Reducing industry dependence on USDC by providing liquidity between viable alternate stables
6 Likes

I really like this proposal.

The benefits really align with what I initially hoped for FEI to become.
But as it is dependent on the MasterChief Staking Rewards Upgrade (MasterChief Staking Rewards Upgrade) and the Curve integration, and I don’t really have the knowledge to discuss it vs. what @arcology is challenging, I’ll just give you my definitive interest for this proposition :slight_smile: .

Having a direction/vision in the integrations makes a lot of sense to me - as much as the integrations themselves. I love the projects those stablecoins are linked to, and I find interesting the non-aggressively competitive approach to those decentralized stablecoin.

I really think that it could, among other things, push FEI/TRIBE to make progress in a direction where there is a clear nascent market, and still room to interact with other protocols:
others, like OHM and RAI are really having different approaches that can be put in this same perspective that you mention in the benefits, “Reducing industry dependence on USDC”.
FEI is in a strong position there, but the game has just started.

Anyway, perfectly aligned with what caught at first my interest for this project. Thanks for this.

Hi there, thank you for your support.

I’ll try to explain the rationale behind my post on the rewards diversion.
We all know that integrations are necessary to grow the Protocol. My issue about the current TRIBE rewards is that it is incentivizing a pool which is inward-looking (FEI-TRIBE) and therefore only serves a limited purpose. We really should be incentivizing liquidity between other stablecoins/assets. Hence this Saddle integration (and hopefully Curve) will be a great direction.

Now, it appears that simply changing the destination of the TRIBE rewards require some code modifications - this is being highlighted by @joey’s post with the MasterChief upgrade. My suggestion then, given that integrations are essential, is to implement this upgrade as soon as possible so that we can provide incentives for these new integrations swiftly, safely and smoothly.

5 Likes

Thanks a lot, super clear. I really appreciate.
I also was lagging behind and read more of what was discussed and the main proposition - it definitely helped.

Why not approach Curve for this project of a “D4 pool” ? Saddle may have IP rights problems for forking Curve’s code, and is a protocol with 90 times less TVL (and that probably translates similarly in number of users).

I see their founders are in the SF area / NY, and Saddle shares multiple investors with Fei Labs (Coinbase Ventures, Framework Ventures, Nascent, …?), maybe these connections would make a partnership easier ? Though, have you tried to reach the Curve team for this project ? All other stablecoins (FRAX, LUSD, alUSD) are already listed there, should be easy.

Generally speaking, I prefer more isolated pools : decentralized stablecoins are still risky products, and by pooling 4 of them under the same LP token, that means if any of the 4 stables loose its peg, the whole pool is rekt.

I personally won’t LP in such a pool, but I’d support TRIBE incentives : it’s a good diplomatic first move to establish an “alliance of decentralized stablecoins”.

As an aside, IP and other risks not considered at the moment, why would a Saddle implementation be superior, compared to say, a Balancer pool?

This sounds self-congratulatory. Integrating and maintaining good relationships with other projects is important, yes, but not necessarily through an AMM pool.

An AMM pool’s fundamental value proposition is the trading of assets. The major trading demand of algorithmic stablecoins lies at trades against other more-adopted stablecoins (as an on-/off-ramp) and other major Ethereum assets, at least at this moment and confidently in the short-term future.

Incentivised liquidity at the expense of TRIBE governance is not justifiable by the anticipated low demand to trade FEI with other algorithmic stablecoins.

All of the StableSwap protocols (Balancer, Curve, Saddle, even concentrated UniV3) have similar characteristics to the technical differences are minor.

I agree this likely wouldn’t be a particularly high volume pool, and for that reason we should consider the sizing of incentives to the pool. The pool also represents a bet on increasing demand for censorship resistant stablecoins which is growing.

This is a huge benefit in my mind, and part of the reason why we didn’t approach Curve for this project is that Saddle organized this by reaching out to all of the constituent projects and everyone was on board.

Feel free to signal below sizing preferences on the rewards

  • 10M TRIBE - ~6% of rewards
  • 5M TRIBE - ~3% of rewards
  • 2M TRIBE - ~1% of rewards
  • 0M TRIBE - no rewards

0 voters

The great benefit I see here is more in terms of vision alignment and to strengthen our bonds with other key players in the sector, while incentivizing additional liquidity for FEI.

I see this as a risky pool, because if any of the stablecoins depeg, the pool liquidity providers would hold almost all their liquidity in the most problematic currency.

Taking all this in consideration, I would support a smaller size of rewards to start, like the 5M TRIBE, and then with more data reconsider this allocation.

Snapshot is live! Snapshot

Poll above was tied and I went with 5M because this is something we can increase in the future but will be harder to decrease.