Hello community. A few weeks ago we approved a proposal to boost farming rates 2x as a promotion around the USDC launch. This launch & promotion successfully grew TVL very significantly. We then had a vote to extend these higher rates.
Overall this was a very successful program, but we are now in a position where TVL has grown but TRU price is going down steadily as farmers sell their TRU. @tylerw is observing behavior of farmers on-chain and it does look like a significant fraction of the farmed TRU is being sold into the market.
Weāve been in this situation before (high farm emissions, weak TRU price), and the solution is to reduce farm emissions. This should lead to less TRU being sold and potentially a price increase. Depending on how price reacts to the lower farm emissions, actual APYs for farmers could stay the same or even go up. Weāll learn a lot from making this change, and worst case, if we donāt see good results, we can take a vote and reverse it.
If we donāt act, I expect weāll continue to see a weak TRU price and our farms will be stuck in a painful place where they have to keep shooting out lots of cheap TRU rather than a smaller amount of expensive TRU.
We were in exactly this same position some months ago (high farm emissions, TRU price steadily decreasing), and once we took the logical step of reducing farming rates, we turned the situation around. This is the time to do exactly the same thing.
Hence my proposal to reduce all farm emissions by 30%. This is meant to be a significant but not overwhelming change that will give us valuable data on how we want to proceed going forward.
Specification
Reduce all farm emissions by 30%
Update USDT pool TRU incentives from 200,000 TRU/day ā 140,000 TRU/day
Update TUSD pool incentives from 100,000 TRU/day ā 70,000 TRU/day
Update USDC pool incentives from 200,000 TRU/day ā 140,000 TRU/day
Update TRU Staking incentives from 125,000 TRU/day ā 87,500 TRU/day
Yes I agree with the proposal to reduce all farms by 30%
Iām fully against reducing the staking rate as that incentive source is actually well below what weād originally allocated towards it (223,224/day).
Regarding the lending pools, I have less strong opinions, but this change should wait until 13 days from now to keep in line with what we proposed and overwhelmingly voted āyesā on in the post from 3 days ago.
@ryan.rodenbaugh waiting 13 days is a long time when TRU price is dropping this significantly each day.
Staking rate, I can see your point.
Question for the community: what do folks think about this proposal just for the stablecoin farms and leaving the staking rate alone? Both Ryan and DnlKlr in Discord gave good reasons we may want to leave the staking rate alone.
There was ample time to discuss this. The post requesting feedback for longer-term ideas on incentives was made 9 days ago. The proposal to put rates at the current yields for the next 2-weeks and then stick with a 2-week reevaluation cadence was made 3-days ago. There was ample time to discuss both of those posts. This was also on the agenda of our Tuesday internal sync and I asked everyone to spend time thinking about the proposal and offer feedback.
@rafaelcosman I push back against rushing to implement this. TrueFi should be a place where lenders āset it and forget itā ā making hasty and/or unexpected changes to incentives could hurt our reputation here.
I donāt draw a close link between TRU incentives and TRU price. Sure, TRU price is down 14% over the last 7d ā that puts us right in the same camp as UNI (-15%), COMP (-17%), AAVE (-17%), ETH (-12%).
Iām fine with reducing lender incentives in 13 days, but thatās because I think finding long-term sustainable incentives rates is important ā not because I think itāll boost TRU price.
I do understand Rafaelās impulse to tweak whatever knobs one has at their disposal when things look like theyāre out of wack, but I think Ryan makes a pretty strong point about breaking trust with lenders. However, we definitely need to reduce emissions in two weeks. At this point Iām agnostic on whether or not to reduce staking rewards as well, inflation and max supply remain unresolved structural concerns.
Interesting point, but what does this look like when we go back all the way to when we boosted the rewards? I think by only looking at 7 days we may be missing the full picture.
Hmā¦ smart people making good points against meā¦ I guess thatās what a good team and community does
I donāt support this - I think TRU price is correlated more to the overall market than by circulating supply increasing. If we could prove with evidence that TRU farming is the primary cause of price decrease, it could make sense.
Iām more in favor of reducing rates by 5-10% every 2 weeks for a month, so that we find a good balance of TVL and let lenders find the yield they expected to get when entering the pool. Iāve seen dozens of protocols drastically cut rates only to see their TVL flow out within a day - I still think TVL is a really important metric.
One last thing - cutting staking incentives might have an opposite desired affect, since staking TRU locks more TRU than is emitted, people might unstake and sell rather than stay in the pool.
Iām against an abrupt reduction of emissions as well. The inflation on top of the market conditions isnāt ideal, but TRU will recover. Iām in favor of sticking with the original proposal to reevaluate every 2 weeks.
I donāt think these types of things are obvious at all. Thereās a reason smart people are on both sides of this issue. In this particular case, Iām for it, because there are some reasons I think token price in this particular phase is important (even though I recognize that weāre in a major dip for DeFi and so most tokens are down).
Would appreciate if you could vote. I trust folks to vote based on what they think is best for the protocol, and I think respectful disagreement on these complex questions is quite healthy for us.
Iāll also be the first to learn from this experiment (if we do vote as a community to conduct it): If we see a large drop in lending-pool size, boosting TRU emissions back up again might be very appropriate. Youāve heard me propose emissions boosts in the past and I fully expect to propose them in the future again. I believe different situations call for different responses.
