[Idea] Design for Governance-Directed Token Grant Pool

Based on fairly impassioned conversations in TrueFi Discord and on the forum alike, it seems that there’s a pretty strong desire among at least a portion of the TrueFi community for a TRU budget directly aimed at marketing/educational activities. These might include AMAs, influencer collaborations, video explainer production and other non-obvious ecosystem grants like, say, securing a conference sponsorship or funding a hackathon.

This Idea thread will seek FIRST to gather input on, and AFTER substantial discussion, eventually propose a design for governance-directed ecosystem grants, denominated in TRU from the Community Treasury, targeted at marketing outcomes.

Our guiding questions in this discussion:

  1. How do we align incentives between TRU holders, TrueFi users, and grant recipients?
  2. What other projects have a high quality community grants process from which we should learn?

What this discussion is not:

To date, TrustToken Inc has been reasonably aggressive with spending company TRU in the pursuit of growing awareness, and is continuously ramping up these efforts. This thread is not to discuss TRU-funded marketing efforts to date (ie how much was spent, or on what).

It’s also not to receive feedback on how TrustToken Inc spends its discretionary TRU on marketing efforts - plenty of room for that conversation elsewhere.

This thread is also not an attempt to respond to the token economics discussion - if we all arrive on a design for this pool we like, it should be compatible with any allotment of TRU.

What this discussion is:

Instead, this thread is to discuss how the community might spend the TRU allocated to a governance-directed TrueFi Protocol “Community Treasury” that has yet to be finalized.

Designing a Marketing/Ecosystem Grants Methodology:

I think any grant methodology should fulfill a number of simple but important mechanics:

(1) Transparent - the grant design should emphasize consistently clear understanding at the level of the system (“Here’s how to apply - 4 easy steps”), the grant seeker (“Here’s what I propose, here’s why I think it’ll work, here’s how I’ll report results”), and the community (“Here’s what we do and don’t like, here’s what we think it’s worth, here are the KPIs to which we’d like to keep you accountable.”)

(2) Accountable - the grant design should build in some type of performance indicators to which the community and the grant-seeker mutually agree, and, in my opinion, by which the grant should be tranched (on milestone A, unlock tranche 1 of 4; milestone B, unlock tranche 2 of 4…)

(3) Appropriately Lucrative - Those making a big impact on TrueFi should be richly rewarded. I believe they should also be exposed to the price action of the asset in which the grant is made. As such, I believe grants should be made in TRU, not in $X USD of TRU.

(4) Long-term Aligned - In my opinion, paying an influencer for a single video is not a good use of a grant. Giving that same influencer, bug bounty hunter, or crypto educator a locked TRU allocation tied to the success of the platform is a good use of a grant. I’d propose these unlocks try to optimize for substantial milestones for the platform as a whole, such as $X of TVL, Y # of wallets holding TRU, and that each grant is made with a substantial time frame in mind, such as 3-12 months.

(5) Simple but Robust - A good grant design system should have creative constraints (ie available grant sizes, available types of requests, standard KPI requirements) that make it easy for nearly all community members to substantively opine on the proposals. At the same time, a good grant design system should not be so rigid as to exclude creative, new proposals.

I’d love to start the conversation by learning which projects (ideally crypto DAOs, but not necessarily) have a sound grants process. I’ll post one of my favorite suggestions to start us off.

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One of my favorite recent Ecosystem Grants designs: UMA’s KPI Options & Airdrop, shared with me by @Jacks.

From the post:

Tl;dr — UMA will be airdropping a new incentivization mechanism called a “KPI option” to a curated list of addresses in DeFi. The value of these options depends on the TVL of the UMA protocol, thereby giving every recipient an incentive to grow the protocol. (KPI = key performance indicator)

Compared to a typical airdrop which can be easily dumped, KPI options are synthetic tokens that will pay out more rewards as the core KPI of the protocol grows.

The Risk Labs foundation has allotted 2,000,000 $UMA [~$60M USD] for this purpose. The target date for the close of this program is June 2021, at which point the KPI options will be redeemable for $UMA. These tokens will have a minimum value of 1 $UMA each — but if the KPI target is hit, they will pay out 20 $UMA, a 20x increase.

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We dug into this idea with the UMA team. Here’s what we learned:

Imagine a token design that would allow TrueFi to issue TRU tokens pegged to the TVL of the TrueFi pool. Let’s call these tokens TRU-TVL for the time being, and refer to this concept as “conditional rewards tokens”. Read UMA’s explaination here here: KPI Options 1-pager - Google Docs

How these may work:

  1. Assume when TVL size = X/2, TRU-TVL is worth 0; at TVL = X, TRU-TVL is worth 1 TRU; at TVL = 2X, TRU-TVL is worth 2… up to 3
  2. At date Y, these “options” are called and the TRU relative to the TVL is distributed, on a 2-week trailing average of TVL
  3. These tokens are tied to the TUSD (vs the TRU) in the pool; in the future, could be tied each to DAI/USDC/etc in the pool to motivate specific pool growth.

We’d like to explore using these conditional reward tokens to offer folks a way of aligning incentives with platform growth, specifically promoting word of mouth.

What we’d need to do to proceed:

  1. Allocation: To mint TRU-TVL, TRU must be locked (escrowed?) proportional to the highest reward tier. If the option’s ceiling is 3 TRU per each TRU-TVL at the highest target TVL, then one must lock 300k TRU to mint 100k TRU-TVL. The question: what allocation should go to this mechanic?
  2. Goal TVL: What target TVL should we promote, such at that once it’s reached (again, at a 2 week trailing average), the TRU-TVL value moves to the next tier? Current pool size is $50.4m in TUSD.
  3. Timeline: Over what timeline should we run this initiative? As purely an analogy, when should this “option” be “called”? Consider this may likely cause circulating TRU to increase (provided TVL has grown) at moment of call, so we’d probably not want to align with any other major unlock period.
  4. Distribution: How should TRU-TVL be distributed? Grants? Farms? Trade-in? Pure buy?

Distribution Ideas:
Consider option 1: Alternative to TFI-LP farm. Instead of farming pure TRU with staked TFI-LP, you may have the option of farming TRU-TVL, which is worth less at t=0, but may be three times as much at t=end.

Consider option 2: TrueFi treasury grants TRU-TVL to influencers of its choice. Influencer can sell at t=0, sure, but for very little; influencer can also help pump TVL and sell TRU-TVL at a vastly appreciated value.

Consider option 3: The sale of TRU-TVL directly to the market, either directly via TrueFi or a DEX. This may also mean TRU-TVL would have ongoing liquidity, if it were a standard pair on a DEX. Optionally, the sale could be offered in exchange of TRU that’s then burned.

These ideas are not mutually exclusive.

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I am not here to be pessimistic. However, pegging some token values with TVL is not always a good idea.

Everything goes well when TVL goes up pushing TRU-TVL value grows faster than TRU. People earning money will participate actively in the community and YOLO. However, if the TVL drops or only slowly growing, the delta of TRU-TVL compared to TRU will drop to lower than 0.5 and time value drops. People will lose incentives to participate in the community quickly, making the TVL further lower. A terrible vicious cycle will form.

A similar example would be Nexus Mutual. They somehow pegged NXM value with TVL and people are not allowed to swap back to ETH when TVL is insufficient to support insurance. It goes well when Nexus Mutual launches as NXM grows when TVL grows. The have a curve indicating the relationship of TVL and NXM price. However, when some other insurance appears and slowing down its growth, their tokenomics collapsed. Many community members lose passions and leave as they cannot sell the NXM back to ETH. wNXM is sold at a 30% discount to NXM and people are still willing to wrap and sell in exchange. When you enter their discord and telegram, it is much quiet than before.

It may not be an exact same comparison. But always think of the case when TVL growth slows down. Don’t let the vicious cycle form. Maybe simply some KPI wth normal TRU distribution is enough. People in crypto world are not patient nor loyal, they will simply go to other protocol when TVL drops, especially when TRU-TVL has some pseudo-leveraging that cause it drops double by the drop of TRU price and drop of TVL.

I think that’s a good point, @Raccoon. Maybe targeting TVL by itself isn’t best.

I do like the idea of providing incentives via grants though. I think a grant program should reward the behavior that we want to see more of, but don’t directly reward enough through farming and staking today. Key areas that come to mind are:

  • vetting and rating loans - building systems to help the community make these decisions
  • contributing to how borrower credit limits and interest rate are set
  • referring new borrowers to the protocol
  • referring new lenders to the protocol

Does anyone have good ideas for how we could reward these functions? Are there examples you like from other platforms?

Maybe grants them TRU directly according to their contributions assessed by some KPI such as views or likes or community feedbacks instead of setting up TRU-TVL. Simplier the better.

For building systems, maybe Gitcoin can be a good choice to set up bounty.
For community contribution, the TrustToken team can do it with higher flexibility such as granting some rewards or awards some contributors before a larger community is built. Ourcurrent community is too small, especially with many short-term speculators that not passionate in TrueFi project itself.
Referring program may not be necessary as we aim at institutional investors in current stage. They are less likely to be influenced by a single person. So difficult to measure who refers that lender/borrower, most likely collective afforts or the lenders and borrowers discover us themselves.

haha…I should have voted on those snapshot in UMA airdrop after seeing this post. Cannot get that UMA airdrop :sweat_smile: :sob:

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I would agree with the earlier feedback that simpler is better. I tried to read the TRU-TVL description for about 20 minutes and I am not any further in understanding how it works, though I appreciate it has some fascinating design goals.

Developers are busy, especially those in the blockchain space. It would be ideal if the value proposition for a developer to build on top of TrueFi was simple and aligned with the goals of the community.

Why not just award TRU as described in the original post, given out on a project delivery schedule? TRU is likely to appreciate as TVL goes up because of collecting loan origination fees. Incentives for grant recipients, stakers, liquidity providers, and borrowers are aligned.

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