Proposal:
Allocate a total of 8M TRU (2% of TRU incentive supply) as incentives for the launch of the TrueFi Lending Marketplace, to be used over the course of the next 100 days.
Summary:
The upcoming TrueFi Lending Marketplace will enable independent managers to create new lending pools (“Portfolios”) where they can implement their own strategies and customize the pool functions to the specific needs of their borrowers and lenders.
This proposal aims to >2x current loan activity on TrueFi by attracting top borrowers, managers, and lenders to build on TrueFi’s Lending Marketplace, while only increasing total lending pool emissions by ~18% from 276k TRU/day to ~325k TRU/day.
This proposal draws inspiration from programs run by Avalanche and Fantom, which successfully brought builders to their ecosystems:
Attract new lender capital, borrowers, and managers to the TrueFi Lending Marketplace
Grow protocol earnings by 50%, via allocating capital from lower utilization pools to higher utilization portfolios which generate protocol fees for TRU (50bps per annum on loan originations to TRU treasury)
Key Results:
How will we measure success? We will track the following metrics to assess whether this program achieves its objectives:
Increase total utilization from current 55% to >75%
Grow current loans outstanding from $500M to ~$1B
Increase protocol earnings by 50%
"Beta Test" Timeline:
Implementation of this program would start in the next 2-4 weeks as the first new pools (“portfolios”) launch and would be expected to run for 100 days, roughly through May 2022. This initial allocation of 8M TRU will provide a means to “beta test” rewards models in the Marketplace and subsequent governance discussions will determine specific allocations among the marketplace pools / portfolios.
Pulse Check (now): Get community feedback and gauge community feedback through this post.
Snapshot Vote (this week): If there’s sufficient support from this pulse check, the proposal will move to a Snapshot vote this week.
Implementation (Feb - May): If a Snapshot vote passes, the proposed incentive program would kick off as the first new pools launch around early Feb and continue through May.
If the program is successful in achieving its outcomes, governance could decide to expand or extend the program through subsequent Snapshot votes. If it is not deemed successful, governance could decide to decrease the scale of the program through Snapshot voting.
Budget + Other details:
The proposed total of 8M TRU represents ~2.1% of the remaining incentive supply (393M), as per the TRU Supply Dashboard by Armanino. 8M TRU represents ~0.6% of total TRU supply (1.4B) and ~$2.5M in USD at current TRU price of $0.30.
This proposal does not allocate to specific pools but instead sets aside total amount to be directed among pools. Future Snapshot votes will determine specific allocations to each pool.
Proposal would make adjustments to current pool emissions as follows:
Strongly support this proposal. Our competitors are moving fast and allocating incentives with almost no community involvement. This will allow the team to iterate quickly while still ensuring the community has overall governance.
TL;DR Emissions should be allocated to new portfolios but allocation should be adjusted as portfolios are added and grow to larger sizes.
Problem:
In the long term we should be reducing total emissions rather than increasing them. The unfortunate scenario we are in has us competing for liquidity versus other DeFi protocols that either:
Have a higher market cap and therefore can afford to have low emissions
Emit tokens quickly
The issue with continuing to increase emissions means that more tokens are going into circulation which reduces the price. For all protocols with yield farming, this creates a race to 0. TrueFi needs to be able to outlast other protocols in attracting
I think this proposal is fine in the short term, but if TRU price increases the total emissions need to be reduced. The increase in emissions aligns with the desire to grow, but sustainability is important to consider.
Solution:
A good compromise is to commit 8M TRU to emissions for new portfolios, but add incentives as portfolios are released (as opposed to committing 80,000 immediately to the first portfolio). This accomplishes the goal of incentivizing liquidity for new Portfolios as they grow and ensures TRU emissions can be sustainable.
@hal I agree with your points above and share your concern about relying too heavily on TRU emissions / getting into a “race to the bottom.”
The ideal here is to allocate rewards on a case-by-case basis in a way that gets TRU holders the best bang for its buck. This proposal would reserve ~80k TRU/day for portfolios, which means that we might give 10k TRU/day to the first portfolio that launches and then 10k/day to each of 7 portfolios that launch later.
**One question I’d like to hear thoughts on:
How do we make these case-by-case decisions about which portfolios get rewards and how much? Do we put these decisions to Snapshot vote each time? OR Do we delegate power to a council who manages emissions for the 8M TRU?
I proposed that each change to emissions should go to Snapshot vote so that we get continuous feedback, but I can see counter-arguments against that being too tedious/slow.
To me this comes down to leadership style. For high-performing teams, you want to give them some guard rails and let them make decisions within that framework, that enables them to iterate quickly. For lower-performing teams, you check every decision. I personally think TrueFi is a high-performing team, and can be trusted with some TRU to properly incentivize these early portfolios. This industry is moving very quickly, and we need to test different approaches to grow TVL and increase the value of the protocol for everyone. I strongly vote for trusting the TrueFi team to manage the emissions.
One thing to note is that with the current smart contract implementation (Ragnarok) there is no support to transfer tokens for KYC pools. This means that we can’t use the farming Gauge in a normal way. Either we need to add new rules to the smart contract to allow transfers to/from the Gauge, or airdrop tokens to liquidity providers after an initial pool ends.
