As mentioned in FIP-104, the Tribe DAO should be cutting costs where possible and preserving equity. By setting TRIBE incentives to zero, the DAO would recover this primary cost going forward.
Currently, TRIBE incentives fall into 3 categories:
Single-sided TRIBE
Stableswap liquidity
Bribes
For single sided TRIBE staking, this is largely unnecessary as it does not secure the protocol in any way. That TRIBE would do better to remain in the treasury. These incentives were pointed to Fuse pool 8, but has increased smart contract risk and reduced optionality for users.
For stableswap liquidity, the protocol could market-make AMMs using PCV without the need for high cost incentives. There are currently 10M FEI incentivized in Uniswap v3 at over a 20% APR of TRIBE incentives. There are 25M FEI on Curve at a 12% APR. We can also use our veBAL to incentivize FEI liquidity without spending TRIBE.
Lastly, Bribes on Convex are no longer profitable as yields have collapsed, so this cost should be cut as well.
If approved, the Guardian would be used to deprecate incentives upon snapshot result.
I think this is a pretty desperate move but I understand your position and the need to preserve capital for the Tribe DAO.
Taking your proposal as basis, other than buying on open market, are there any more ways to acquire TRIBE as any source of emissions? Does this also mean that there will be no more inflationary system for TRIBE? Where will all of this diverted TRIBE go, given that there was a tranche earmarked for liquidity mining?
As it stands TRIBE is essentially valueless - and that its potential as a backstop is outstandingly risky (see Terra).
I do think preserving equity is important but isnât there liquidity mining allocation set aside for incentivization. Are there thoughts on where these rewards will go in the future? Do we have any metrics on how equity distribution has led to an increase in fei usage or LPing?
I do think heavy rewards for a 4pool is a great idea to drive attention to FEI. Now this may lead to sell pressure on Tribe, but I would argue, the sell pressure exists because there isnât velocking mechanism similar to Curve and Frax to avoid sell pressure for its gov token.
Buybacks of TRIBE are still possible, and the TRIBE holders can decide how to spend the treasury. For example, buybacks when TRIBE trades below equity would increase PCV equity per unit of TRIBE .
Inflationary rewards are quite expensive and decrease PCV equity per unit of TRIBE for temporary liquidity.
All preserved TRIBE would return to the DAO Treasury, where TRIBE holders can deploy in the future as desired.
Yes, the at its peak it has led to about 200m of FEI on secondary markets, most of which has been removed with roughly 40m remaining.
Rewards can always be resumed in the future. The current market conditions are a good time to get the protocol to a stable baseline and establish strong unincentivized PCV growth for the Tribe DAO.
I am not in favor of this proposal - at least not all of it. Minimizing the single-sided TRIBE staking incentive as valueless is grossly myopic and frankly, it worries me some in the community donât see this. Terminating this incentive will shatter the already fragile bit of rationale many remaining TRIBE holders have for not throwing in the towel - it will be a mistake. Moreover, the FEI protocol promised this incentive to its holders - its fundamental, even sacrilege (not to be dramatic).
That said, inflation is an expensive problem. I am in favor of terminating stableswap and bribes incentives for the reasons given. Also, these incentives donât break any fundamental obligations to DAO members.
The snapshot should leave out the single-sided TRIBE incentive. It should also not be a single polar âyes/no to incentivesâ question but rather, a separate yes/no for each incentive category - stableswap and bribes.
To mitigate the the inflation dynamics of single-sided TRIBE staking, ve/vlTRIBE tokenomics and other locking mechanisms need to be introduced - and what better time to do this than in a bear market. The scope and characteristics of xTRIBE can be modified and used for this purpose.
I got the following question from a DAO member in a private channel:
âhey, interested to hear more on your thoughts around Tribe Incentives
What reasons for single-sided Tribe staking do you see other than preventing sell pressure? To me it seems that preventing sell pressure is not a problem as of now as the PCV can (and should) buyback TRIBE when below equity value.â
My response:
Its basic good-tokenomics for token holders to have the option of a risk-minimized single-sided incentive mechanism to mitigate token inflation from protocol growth strategies. Single-sided staking in Fuse is the only option holders have. If single-sided staking isnât providing direct value to FEI, the problem isnât staking, itâs the tokenomics. This means the tokenomics must be redesigned in such a way that single-sided staking becomes beneficial to the protocol. The solution is not terminating incentives all together.
DAO member:
âcould you expand more on what you mean by âtoken inflation from protocol growth strategiesâ? Is this emissions for LPs?â
My response:
yes from LPs but also from myriad of things - done or to be thought up - that the community will spend TRIBE on.
âŚnot to mention the risk TRIBE holders take on for being the back-stop for FEI
If singled-sided TRIBE staking rewards are removed, I agree that it would disincentivize a lot of users from continuing to participate here especially with downward pressure in price - it may cause a lot of users ragequitting. Would it be feasible to resume buybacks at a lower rate to the current emissions as a compromise scenario?
It concerns me that the leadership of this project is starting to improvise with sensitive issues. The team should focus on:
-How do they make Rari a secure protocol. This acquisition had a terrible impact on the balance sheet of the DAO (the costs for the merge + all the exploits).
-Hiring a CFO. I am not confident in the ways the team is using the treasury. Devs feel that they know how to manage a treasury because they are doing a finance product. Building a finance product is one thing, and managing a balance sheet and building a financial plan is another thing. Why donât we hire a skilled CFO?
-Why donât we focus on tokenomics instead? Whatâs the REAL utility of TRIBE? Why donât we focus on building xTribe to become a cash-flow token like FXS, iFARM or xSUSHI. There is a big misalignment between the utility of Tribe and the decisions that the leadership of this project wants to do.
-Focusing on building a Tribe UI that can embrace all the products of the DAO. Now its very confusing for newcomers to understand what Tribe is and whatâs the utility of the token. I am tired of hearing the vague statement that âwe are a superDAOâ. A superDAO that has no tokenomics, no real use case for the token, no clear leadership with financial skills, bad market perception, and no good audit firms backing the protocols because we canât wait 6 months to get Trail of Bits to review the code, etc.
-Whatâs the communication plan? Have you seen âCrypto twitterâ no one talks about Tribe/Fei/Rari. We are famous for our exploits.
My apologies for the tone of my message but I am very tired of backing a project that has no alignment with token holders. Product will not be King if we donât have a positive market perception, a healthy balance sheet, and good tokenomics.
I am generally for reducing incentives and I have shared this in discord that I think the community is overpaying for liquidity. I would encourage further discussion on this topic and exploring how the TRIBE inflation schedule can be used to grow the adoption of FEI.
I agree on Bribes. I would rather see a TRIBE/CVX or TRIBE/CRV bonding curve be deployed as mercenaries will leave but holding the assets will always have a book value.
My high level thoughts:
Reduce LM on FEI/DAI and FEI/USDC via Uniswap. Move towards creating Protocol Controlled Liquidity (POL) which is more cost effective. The cost of debt to fund POL is a lot less than incentivising others to provide it. Increasing and decreasing debt can be done such that it supports the peg as well. Borrowing DAI at 2-3%, to purchase FEI beneath $1 in order to repay loan and vice versa. I think a PSM whitelist of 0 bps fee for redeeming FEI worked into the above debt idea could also enable a tighter peg.
I would like to see some TRIBE rewards on the Arrakis gauges to support others entering the Uniswap v3 pools. I would then integrate ERC4626 strategies on Rari Fuse pool 8 and Aaveâs AMM market. SPICE + TRIBE rewards plus the ability to leverage farm should improve liquidity especially when Tribe DAO provides liquidity into Uni v3 directly and helps maintain the pools 50/50 allocation.
I would target around 5% APY from TRIBE rewards rather than the loft APYs on offer now. The trick is to get folks into the pools and then pay just enough to retain them.
Tokenomics of xTRIBE, this should be revisited. I have been noodling the idea that if the PCV exceeds a pre-defined collateralisation ratio then TRIBE buybacks should occur and similarly when the colleteralisation ratio falls beneath a ratio the Tribe Treasury provides a non FEI stablecoin into the PSM module. My general thinking is selling TRIBE to support FEI is probably the single worst outcome the community can encounter and if that event was to occur then having a non FEI stablecoin holding to transfer into a PSM module as the first line of defence is ideal. This would reduce the potential downside risk of holding TRIBE. I also have the general view that if Tribeâs market cap was to get high again, say $1, then it would be prudent to diversify some of the community treasury into non FEI stables.
TRIBE incentives should be directed to boost adoption of FEI. Perhaps some kind of scheme that incentives DAOs to use FEI as their stablecoin of choice. Imagine if DAO contributors are all getting paid with FEI because they are getting TRIBE as an incentive to do so. This would provide a great boost to the number of wallet addresses that hold FEI and TRIBE, also increase FEI trading volume and most importantly gets users familiar with FEI. My initial idea here is how much do I need to pay folks to swap from DAI/USDC to FEI as there stablecoin of choice. Then who are the heavy hitters in this space to enable this idea to be progressed at scale. Selfishly, if you told me Index Coop was to pay me in FEI instead of USDC and gave me a 5-10% bonus in TRIBE, I would be knocking on payrolls door saying give me FEI. I wonder what the cost of user acquisition is. (I have already floated with Parcel during a brainstorming session).