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 “TribalChief”, the Tribe’s version of the SushiSwap MasterChef.
The TribalChief 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.
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 TribalChief.
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.
Increasing the duration by a fixed amount using smaller distributions over a longer window
Perpetual TRIBE inflation of around 2-3% (similar to Uniswap). A portion of this, for example 50%, can go towards liquidity rewards in perpetuity.
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.
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.
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.
Hey everyone, wanted to add some clarity around the exact goals of the TribalChief. It would give TRIBE holders more granular control over the emissions location and speed of the remaining 140m TRIBE. This would not increase the distribution rate in any way.
New Features - Lockups and Optimistic Approval
We added a feature that allows for users to lock their stakes to earn additional boosted multipliers. Each integration can have its own custom lockup curve with a set of lockup times and associated multipliers. For example, this framework could specify that users who lockup for 1 year get 2x rewards. The multiplier would remain in effect until a user withdraws their stake.
Optimistic Approval would allow a multisig to make changes to the incentives through a timelock, which the DAO or the Guardian could veto. This has a few advantages over using the DAO for every single change to the incentives, and we’ll share a more detailed proposal on this idea this week.
First Round of Incentives
While we wait for the bug bounty to complete, we should snapshot:
Whether we want to use the TribalChief at all
the first round of tokens to incentivize with TRIBE
If the TribalChief is accepted, I propose we use a 3 tier system to determine the relative sizing of each pool. The TribalChief has a concept of “Allocation points” which represent the share of TRIBE rewards each pool receives relative to the total number of allocation points.
1000 AP Tier:
AAVE lending and borrowing - incentivizing borrowing would be a great way to stimulate the demand side rather than the supply side
Curve liquidity incentives - very high priority to have deep stablecoin liquidity
250 AP Tier:
FeiRari Fuse Pool TRIBE - single sided TRIBE staking with bonus liquidity + leverage potential
Existing FEI-TRIBE LP rewards
100 AP Tier:
StakeDAO - additional rewards to Curve deposits through StakeDAO
PoolTogether - cool lossless yield lottery with Fuse integration potential
Please add some thoughts on other tokens and liquidity pairs you think would be useful for incentivizing! I plan to kick off an “approval voting” style snapshot on Saturday
I second @countvidal’s question. By the way, what about Pickle?
Finally, I suggest we explore something for a 2x rewards pool with Sushiswap (250AP tier or above) to get some liquidity there too. If we have all of those then we should have a lot of incentives distributed to cover the largest markets.
I would focus on distributing incentives where we can bring more utility to Fei.
I am wondering in case we split too much, if we generate enough incentives to investors behave in a certain way. If the reward is small, we may not bring additional capital, but just reward the current users.
I think it would be good to make the calculations of how much each place would receive.
If I want to hold Fei, but do not want to get exposure to centralized stablecoins, how can I receive relevant TRIBE rewards?
I am imagining what someone holding FEI-TRIBE LP Token could think. Could sell part of the LP and would have TRIBE and FEI in hands. Where do we want that this persona puts their FEI and TRIBE?
I think we should think how can we help this investor to redirect the investment they already have in FEI-TRIBE.
Sure thing, AP are just proportional representations of the emissions. So if 50 TRIBE/block and 2000 AP total, 1000 is 50% so 25 TRIBE per block. If we add another 2000 AP of additional pools then that reward goes down to 12.5 TRIBE per block.
Open to pickle as well, although they already are somewhat aggregated on top of the rewards so I don’t find it to be as useful to add further incentives.
Sushi pairs absolutely, thinking about some good ones, maybe RAI or DPI
I’d prefer them to lend their FEI on AAVE or LP on Curve, and put their TRIBE on FeiRari, so I think both of those integrations are high priority.
All these options do look smart. Would be nice to consider all the options by “use case” or by “objective”. Then we could prioritize per objective which pool/market most needs the incentives, find balance overall and avoid potential redundancies.
When I say objectives I mean: strengthen FEI peg, protect TRIBE holders from dilution/dumps, make FEI borrowing attractive, start collabs & integrate FEI into the ecosystem, etc
I think we should avoid rewarding 2nd layers of rewards (I mean, distributing rewards to something that gets value from our staking rewards in the first place). But if we do, please consider my CompoundingStaker
I have voted for “more discussion” on the TribalChief Rewards snapshot, which is also the final result of the Snapshot poll. Based on discussions in the forum and discord, the core team feels we are attempting too many changes at once.
The TribalChief is an important change in providing the Tribe the flexibility to adjust rewards and incentivize desirable behaviors, and we can ease into these changes as use cases and partnerships arise. We should aim to make some set of useful changes while maintaining similar structure to the current system.
We intend to propose a binary vote with the following characteristics:
Initially maintaining roughly equivalent rewards towards FEI and TRIBE holding
No change to the reward distribution schedule
Focusing on the most important integrations for incentives
Based on the current snapshot results show that FEI-TRIBE LP, FeiRari TRIBE, Aave, and Curve are the most desired incentives, which we agree with.
The following AP distribution would represent a positive shift for the protocol towards FEI utility while also maintaining a much closer relative amount of rewards to TRIBE holders:
1000 AP Uniswap FEI-TRIBE LP
1000 AP FeiRari TRIBE
750 AP Aave
750 AP Curve
Since FEI is not listed on Aave or Curve yet, these incentives would be added once we are on those platforms.
The net effect would be more heavily weighted rewards for TRIBE in the short term, and as FEI gets added to Curve and Aave the rewards would shift towards FEI while still being relatively balanced (57% FEI, 43% TRIBE). The benefit of this approach will be to signal to Aave and Curve exactly how many rewards we plan to add as an additional incentive for listing on top of any TVL commitments.
Additionally, the distribution rate (75 TRIBE/block linearly decreasing) should remain consistent with the current schedule.
Please share your feedback here, as the discussion will inform another snapshot on Thursday, Aug 12.
I think all parties would prefer this. Many retail TRIBE holders voted for both Uniswap and FeiRari because those were the two options that had TRIBE in them. But between those two, I think they would favor FeiRari since it’s 100% TRIBE. At the same time, we all seem to agree that rewards on Uniswap isn’t very useful for the protocol, especially with the IDO already there.
So FeiRari seems better than Uniswap on both accounts. I would also support getting rid of Uniswap rewards all together, but that seems to deviate too much from the snapshot, so perhaps something to consider later.
Edit: The snapshot significantly favored Uniswap over FeiRari, so it seems unwise to move AP to favor FeiRari.
However, I still advocate for treating the current amount of rewards going to TRIBE holders as a hard restriction that we must honor.
In addition, I think the reward going to Uniswap should count as close to 100% towards TRIBE. That is because FEI must be paired with TRIBE in order to earn the reward, and TRIBE is the scarce asset while FEI does not appreciate above 1. Intuitively, suppose the government started giving a fixed amount of rewards pro rata to gold bars deposited at a government owned vault, with the provision that each gold bar must be paired with $1. This policy is going to increase the market price of gold bars, but not the price of a dollar because everyone can get a dollar at, well, $1. Now, suppose the government halves the reward, removes the restriction that gold bars must be paired with $1, and gives the remaining half of the reward to people who deposit one dollar bills. This has a negative impact on gold bar holders because they will not get the other half of the rewards by moving their $1 to the new staking program. The APY on the dollar will be extremely low, as many other people will use their dollars to stake as well. Moreover, the gold bar holders do not benefit from this increased demand for dollars, since the dollar does not appreciate. (TRIBE holders do benefit when there is increased demand for FEI, but that is distributed among all TRIBE holders, whereas only the stakers bear the cost of reducing staking reward).
As a result, I think we should keep the current rewards reserved for single-sided TRIBE staking (including Uniswap), and use Treasury for additional rewards that bootstrap FEI usage.
How increased supply of TRIBE on FeiRari would help the protocol? Can we estimate the impact on TRIBE APY there? It would be attractive to supply TRIBE there? I don’t imagine TRIBE borrowing will be big.
I think there should be a large demand for borrowing TRIBE as long as we reward TRIBE holders with more TRIBE. As long as the protocol’s value stays the same, TRIBE price will decrease over time, as it has for a few months now. In fact, as long as PCV largely consists of ETH, depositing ETH in FeiRari and borrowing TRIBE can be a good short play with low risk.
Alternatively, people can just loop TRIBE on FeiRari. This by itself isn’t particularly useful for the protocol, of course. But the TRIBE reward can incentivize FEI borrowing as was mentioned in other places, and I believe it’s one of the efficient ways to honor retail TRIBE holders’ expectations.
If we are going purely by the expectations pre-launch, it’s also relevant that right now the staking rewards are 200% of what was suggested in the original launch plan, so the staking parameter updates we are discussing don’t violate the Genesis expectations that you’re talking about, because they’re still well above the originally planned levels.
Plans can adapt as conditions evolve. I’m not trying to suggest any specific plan, just to point out that TRIBE holders can always change the plan if a better plan is found.
Many other protocols (aave, curve, yearn, …) use their rewards to incentivize different behaviors that benefit their ecosystems. Their gov token holders vote for this to happen, even if this causes some form of dilution, because they expect that these incentivized behaviors will develop their ecosystem like watering a plant. Incentivized behaviors have been a major factor in allowing these protocols becoming the dominant players in defi.
The $90 million dollar question here is, what is the best way to distribute the remaining $90m in staking rewards? It might be the current system, it might not be. The TRIBE will decide!
You’re right, the doubling of staking reward was a transfer from non-retail to retail investors that happened because of the circumstances back then. So retail may be more open to relinquishing some of it back to them, but I would still consider that a sacrifice for the good of the protocol.
I absolutely agree that we should start incentivizing beneficial behavior, and TRIBE-FEI liquidity is certainly not a priority given the IDO. But my question is, why should only one group of stakeholders pay for the incentives? If we want the incentives, everyone should equally dilute their shares, not just Genesis investors.
The decision between using Treasury vs. diverting existing staking rewards is simply one of who should pay for the incentives. Retail can of course make the selfless decision to pay for it themselves, but I don’t think that should be expected of them, just as we don’t expect VCs to give up their non-vested TRIBE. We can ask them to be selfless, but we should be clear about what we are asking them to give to the protocol.
Sounds good to me. This should also drive borrowing of TRIBE, with more liquidity added there. If there is 40% TRIBE APR on FeiRari TRIBE, we can expect borrowing costs to go >40%.
A person depositing TRIBE in the pool will earn 40% from staking rewards + ~20-30% from interest paid by borrowers. Someone staking now can sell their FEI for full TRIBE, and earn 60-70% APR on it, and not be impacted by IL, and be able to leverage (to swap borrowed FEI for TRIBE & loop deposit, earning up to 150% APR TRIBE on TRIBE… sounds like a strategy for fei-tools shhh). Pretty cool for holders. We’ll be able to comfortably borrow FEI while earning more TRIBE, like a negative interest loan. The last thing missing would be fTRIBE-8 delegating back the voting power to the depositors
I’d even remove the FEI-TRIBE LP incentives. But let’s not do too many changes at once, as Joey said.
