[Idea] Improve TRU farming incentives for TRU staking

Summary:
As TrueFi v2 gets ready to launch and deliver improvements to the TRU staking model, it seems that farming incentives should also be improved for TRU stakers.

We propose that ~100,000 TRU per day (15.4 TRU per block) are rewarded to TRU stakers over the 90 day period following the contract upgrade.

This would represent an increase of ~16x from the current average rate (~6,000 TRU per day). After the 90 days, the intent is not to end this incentive distribution, just to formally revisit this decision.

Rationale:
Increasing this incentive to TRU should drive more demand for staking and start a positive feedback loop for the entire TrueFi protocol. Increased TRU staking can lead to more TFI-LP deposits farming TRU, more loans approved and issued, more fees generated for the protocol, and improved security for the TrueFi lending pool.

In context of TrueFi’s other farming incentives, it seems the TRU staking farm adds the second most value behind the TFI-LP farm (which is currently emitting ~150k TRU per day). The TFI-LP farm and TRU staking farm are the only farms intended to run long-term, and thus they should account for the lions’ share of TRU incentive emissions.

We’re excited about the TrueFi v2 launch and believe being adequately generous in TrueFi’s most important incentives will pay multifold dividends in community size and engagement.

To understand TrueFi’s broader tokenomics plan, and how this proposal fits into it, take a look at this document.

Next steps:
Let us know how you feel about this idea via the vote and discussions below. Community signal and feedback are essential in these decisions on liquidity incentives.

How do you feel about this idea?
  • Yes, I like this plan and it should move to a formal vote
  • No, I do not like this plan and it should be further discussed

0 voters

2 Likes

Large amounts of TRU staking in itself doesn’t seem very valuable to the platform. The value of staking TRU(to the platform) is in voting on loans and governance proposals, or more specifically, rejecting bad loans and proposals. On-boarding new stakers is useful to the extent that they are smart and care about the long term health of the platform. I don’t think that will happen for a few reasons.

  1. Virtually all votes are one-sided 100% yes affairs(not necessarily a bad thing), which signals to me that the community is basically fine with how the platform is being governed and its hard to imagine new stakers, many primarily looking to APY farm, changing how the platform is run. The arrow going “earn protocol fees>TFI-LP lending pool” only holds if the new holders are somehow improving governance decisions being made.

  2. Economically, it feels parasitic. Giving TRU to people who already have a lot of TRU rewards existing large existing holders at the expense of new members, other pools and people who just aren’t staking(through dilution). I think we should be very careful with having TRU holders voting to give themselves more TRU.

  3. Growing startups don’t offer big dividends because it attracts the wrong kind of shareholders. If our goal to grow Truefi 10x or 100x over the long term, then the governance structure should incentivize that. This will bring in APY farmers looking to sell as soon as staking incentives drop or someone else offers a bigger APY.

As for an alternative, if the goal is to get more smart people involved in loans and governance, I would reward that directly. Set up a grant or referral program for people who onboard good borrows/lenders or propose good improvements to the platform. This 90 day incentive would cost about 2.7 million dollars worth of TRU. That much money can incentivize very talented people or run a decently large ad campaign.

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@rattlecage Thanks for the thoughtful response. You’re right, the goal is 100% to get more smart people involved in loans and governance. I’d love to hear more ideas on how to run a grant or referral program to help bring more good ideas to the platform. I could see that running in addition to, or in replacement of this farm.

I do think this farm can help though, especially given we’ve set aside TRU for these types of incentives. The TRU/ETH farm on Sushiswap currently provides ~70% APY at the time of writing this. I’d argue this farm needs to be attractive enough to attract TRU into governance (instead of just going to AMMs) because staking TRU creates real value on that platform.

Here are some follow-up ideas on what you wrote above:

  1. Virtually all votes are one-sided 100% yes affairs(not necessarily a bad thing), which signals to me that the community is basically fine with how the platform is being governed

My hope with onboarding new stakers is that we give people more “skin in the game” and reason to take an active role in governance. It’s good to hear that people are happy with how governance is running today, but I think we need to bring more people in to grow TrueFi loans 10x from here.

  1. Giving TRU to people who already have a lot of TRU rewards existing large existing holders at the expense of new members, other pools and people who just aren’t staking(through dilution).

I worry about this too, honestly. On the flip side of this though, I hope that increasing returns on holding TRU encourages a lot more people to farm TRU through the TFI-LP pool. The TFI-LP lending pool still rewards more TRU per day (~150k TRU/day goes to that pool) and it’s open to anyone who deposits TUSD (no advantage for existing TRU holders in that farm).

  1. …This will bring in APY farmers looking to sell as soon as staking incentives drop or someone else offers a bigger APY.

I think this cuts both ways too. Perhaps platforms like Compound and Synthetix gave away too much in incentives to kickstart their growth, but the incentives really did drive hypergrowth on those platforms. The goal here would be to make holding and staking TRU more economically attractive than dumping it. As mentioned above, TRU stakers create value for the platform by vetting new loans, increasing the value of loans the platform can issue, and providing insurance on those loans.

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Thank you for the excellent posts @tylerw. I am in support of this proposal (100k TRU/day for TRU stakers in staking V2). I know it sounds like a lot, and I don’t want to see the protocol use TRU frivolously, but I think this is one of the most important farms, if not the single most important farm, because it directly creates utility for TRU. Hence I believe this is one of the best places the protocol can invest its TRU.

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The economic value of holding TRU is that if the platform goes up 5x, your TRU goes up that much as well. Look at Sushi or Aave token, for example. Aave gives 8.4% APY and Sushi gives 10%ish, however if you bought those tokens early on you have 5-10xed your investment over the last few months. If people are dumping because they aren’t seeing 50%+ right next to staking, then its a communication issue more than an incentives one.

I do agree the LP farming incentives of TRU make staking less desirable. I consider that an issue with incentivizing liquidity on governance tokens.

How does people staking TRU grow the loan pool? I guess I am missing that link. TRU staked>???>loan pool grows.

How does people staking TRU grow the loan pool? I guess I am missing that link. TRU staked>???>loan pool grows.

The amount of staked TRU will need to grow to support the amount of loans issued.

In TrueFi today (and v2 staking/rating should work similarly), each loan has to have >= 0.5 TRU staked for every $ loaned (see participationFactor in spec and contract).

In my eyes, growth in TRU staking helps grow the loan pool via two mechanisms:

  1. in order to issue more loans, more TRU will need to be staked. More TRU staked should also lead to better vetting on borrowers and better insurance against bad loans, which makes depositing TUSD in the lending pool more attractive
  2. better returns on TRU actually give people more incentive to deposit into the lending pool: if you want to hold/stake TRU, a good way to acquire TRU is by depositing into the TFI-LP pool and farming (TFI-LP has the highest TRU farm emissions per day)

Fair points. What about governance staking rewards being vested on, say, a 1 year schedule? Sushi vests 2/3rds after 6 months and Bao Finance vests 1 year.

That would eliminate risk of TRU being dumped immediately after incentive period and ensure stakers have an interest in longer term success of the platform.

I think introducing vesting schedule for governance staking rewards is absolutely essential. We want to incentivize folks to stake for a higher yield APY but vest them so as to allow for their slow release and foster folks to consider it holding for longer terms. This is definitely the way to go, as increasing TRU emission by a lot without adding vesting for staking rewards will put a lot of sell pressure from this new released tokens.

The emission rate in TFI-LP and Uniswap pools are quite high, but those involve Lenders and market makers who probably are in for short term rewards. But for governance staking pools, we want to reward long term holders with a higher APY, and the only way to ensure TRU rewards are held long term is to introduce vesting so as to prevent cliffs at the end of each loan period.

What would be a good structure to follow for vesting? Are there other protocols you’d recommend as examples?

I’m doing research and looking for good models to consider… SNX vesting for staking rewards would be one potential model. The COMP vesting thread is an interesting discussion – they haven’t enacted vesting.

I like Synthetix, seems easy to understand and implement. Sushiswap has a vesting schedule as well and recently opted for a smart contract people would claim them from.

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Yep, Synthetix is the best example for vesting token rewards. They have used it well to give high APY and attract a lot of users to stake SNX to issue sUSD. I would highly recommend going with this model.

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Without sufficient farming incentives, staking cannot justify the high gas cost