[Idea] TRU Value Accrual - Staking Rewards in TUSD

Hi TRU Community,

I would like to propose a change to the TRU token that gives TRU stakers a claim on fees accrued by the TrueFi protocol.

Currently, active participants of the TrueFi protocol (stakers) are only earning rewards denominated in TRU and there no other forms of value accrual to the token other than Buy & Burns.

The details of the proposal can be found below:

  1. TRU stakers start earning a cut of the fees that the protocol charges (ALL of the .25% loan origination fee in TUSD – which is also being discussed on the forum here).

  2. TRU payouts & incentives for staking on the specific loans remain unchanged.

  3. These staking rewards will accrue over the term of the loan (in TUSD) and will be claimable on a regular basis.


What this would look like in practice:

Loan ($1,000,000, 12% , 30 days)

  • Let’s say the origination fee is 0.25% of the loan principal. $2,500 will be collected as origination fee. Assuming that all the stakers had staked a total of 1,000,500 TRU (1,000,000 TRU as yes, and 500 TRU as no). Apart from the TRU rewards and payout stakers would also receive 0.00249 ($2,500/ 1,000,500) for every TRU staked.

  • If you had staked 10,000 TRU (value = $1,500) you would receive $24.987 TUSD ( 1.67% 30-day ROI or 20% annualized).

This gives TRU an explicit form of value accrual and helps to answer the question of “What can I do with my TRU?”


The case against relying on Buy & Burn:

As some of you have pointed out, the buy & burn model is outdated and fails to reward protocol stakeholders fairly according to their level of contribution back to TrueFi. Not all tokens holders deserve the same rewards.

When we spend protocol fees to buy & burn TRU off the open market we are rewarding all TRU holders equally, no matter if they are an active contributor, TA trader, or random speculator.

The proposed change would skew rewards towards the active participants (stakers) that are driving the protocol forward, and gives token holders a clear reason to care about governance (fee-adjustment).

Discussion:

Let us know how you feel about this proposal. Would love additional feedback.

Once this idea has been finalized, it will become our first snapshot governance poll. TRU token holders will then be able to vote in an explicit form of value accrual.

References:

9 Likes

Thanks Jack.

100000% support this proposal. It is a GREAT idea and will really help push TRU holders to participate in the loan approval process.

Here are some additional suggestions:

  1. Change the loan approval period from 3 days to “whenever the loan reaches exactly 100% staked”. Right now, the loan approval period means almost nothing since you need 1 TRU for every $1 of the loan amount. If after 3 days, there aren’t enough TRU staked, the loan can’t be approved anyways. So why even bother putting a set time period? Just make the loans automatically approve once 100% of the TRU is staked.

Also, by changing the time period from 3 days to “enough TRU staked” on the loan – you will guarantee that the APY will be consistent with the example you gave above. In your example, of a $1,000,000 loan – if there are 2,000,000 TRU staked by the end of the 3-day period, your APY is reduced by 50%. That greatly diminishes the whole purpose of what you are proposing. By fixing it so that the loan approves after the exact number of TRU needed is staked, you protect the APY of the TRU stakers on that loan.
Also, this prevents extra TRU that could be staked on the next loan from being wasted on the current loan that has already met the threshold. Why would we even let 2M TRU stake a $1M loan? What about the next loan? What if the next loan needs that extra 1M TRU to stake on it for approval? It’s just really inefficient.

  1. While I love the idea of giving 100% of the loan fees to the TRU stakers, I would go one step further and give a small % of the loan’s APY to the stakers as well. Maybe 10% of the total APY can go to the loan stakers at the maturity of the loan. So a 12% APY would give 10.8% APY to the lenders and 1.2% of the APY to TRU stakers. It’s not a significant amount but I think that it would encourage even more people to participate. In the end, isn’t that what we’re all striving for? If we find that there is more participation than we need, we can always remove that extra incentive later. But I would err on the side of giving the TRU stakers MORE incentive right now than less to start.
5 Likes

I love this idea, @Jacks! Thanks for welcoming and iterating on the community’s feedback.

I agree with @Kenny’s tweaks too, especially suggestion #1.

I think we encourage more people to stake TRU by preventing dilution. We could increase the ratio of TRU staked per TUSD lended if we want more TRU staked as insurance on each loan. I think it’s fine if we decide later that 2M TRU should be staked per $1M TUSD loaned.

I do think having a time limit on loans make sense… Otherwise, people would need to un-stake their TRU from loans that never go live. It’d be a simpler system if TRU was locked until the loan staking expired or the loan was paid back.

1 Like

I like it, Jack, and agree with Kenny, I think participation is key and incentives for participation will help. As Kenny said, the community can vote to adjust when necessary or as the community desires.

1 Like

Hey Jack. One more suggestion to add to the 2 that I already suggested.

  1. Instead of giving the fees to the TRU stakers in the form of TUSD – why don’t you BUY the TRU using the fees and/or interest APY from the loan from the open market and reward the stakers with more TRU. This will help support the price of TRU and also put more TRU in the hands of the stakers. I think that’s a double-win.
2 Likes

I support this proposal.

I think we should keep the 3 day minimum voting period on loans, since not everyone can check TrueFi every day to agree or disagree on approving a loan. I think it doesn’t make sense to have the stakers earn a percentage of the APY on a loan, since increasing/decreasing the origination fee is effectively the same as giving stakers a percentage of the APY.

I support this proposal

I certainly LIKE where you are going with this Jack, but my concern is the amount of ETH/Gas fees you need to pay to participate in one loan process - i.e. stake your TRU on a loan then claim your rewards (TRU and TUSD) at the end of the loan. Your example used 10,000 TRU, which is $1400 at todays price - which probably represents a regular user. In your example, they would receive $24.987 TUSD for that loan. Which IMO is a good amount for the investment/risk and work involved to participate. But when you consider needing to spend say $10/15 in ETH/Gas fees, this reward then become far less appealing for the regular users (using your example). Are their any ways to improve this process and reduce ETH/Gas costs?

What if the TRU staking was moved to an L2 solution? Then individual TRU stakers will also be more likely to leave their TRU on the platform to continue staking out of convenience. Also, TRU is not used in any other protocols and hence, in my opinion, the benefits of being on L1 are overstated. Please poke holes in this.

1 Like

I love this idea, @Jacks! In my opinion, I think we encourage more people to stake TRU by preventing dilution so far…

Support this, @Kenny great idea but the idea is to back TRU, give it more utility, and remove it’s inflationary characteristics so giving out TUSD makes more sense than giving out TRU. TRU would likely be sold on the market just as quickly as it was bought to distribute anyway.

This is a great suggestion. Positive feedback loop.

Why? That doesnt fit. You are rewarding active participants.