Staking Locked TRU Proposal

[carlj]

Summary

This is a proposal to allow private sale investors to: 1) stake some of their locked TRU as part of the vesting schedule and 2) use some of their locked TRU to vote on governance proposals.

Background / Motivation

As we all know, a 2 years vesting schedule was put in place for both the team and private sale buyers. It was only close to 3 years after the private sale that this was set up. Although this initiative received support, it was never clarified that locked TRU wouldn’t be able to be used for staking and/or voting on governance proposals. As a consequence private sale buyers have been heavily penalized in the participation of the rewards structure and governance in comparison to anyone who bought in at launch or hereabout, but have also been unable to participate and support the TrueFi ecosystem to a larger extent.

This is a topic that has been at the center of many debates since October/November, and we wish to find a fair solution so that early investors are not as penalized in comparison to later purchasers.

We understand that this topic has raised various concerns and that it has been seen as a risk for penalizing the long term growth of the protocol. We therefore would like to propose a solution that we believe is fair and tries to meet expectations of both opposite views.

Specification

We propose that locked token holders be able to 1) stake some of their locked/unlocked TRU in order to participate in the rewards system fairly and 2) use their stkTRU generated from locked tokens to vote on governance proposals.

Three concerns have been addressed by the community over the last months around this particular subject: 1) allowing locked tokens to generate rewards will create additional selling pressure 2) non private sale investors will be diluted in the rewards scheme 3) in the event of a default, locked tokens could be brought into circulation as a result of the 10% slashing rule.

We aimed, in this proposal, to address all concerns as follows:

1. Additional vesting: in order to avoid creating short term selling pressure, we suggest that all rewards generated as a result of staking locked tokens be similarly locked until a 9th unlocking event in November 2022.

2. Maximum locked staking: in order to minimize the dilution of the rewards from TRU staking, we would suggest that only 75% of the locked tokens be allowed to be used for staking.

3. Unlocked/locked minimum ratio: Additionally, in order to be able to stake locked tokens, we would suggest adding an obligation to maintain a ratio of unlocked/locked staked tokens of 30%/70%. As an example, if you would want to stake 100k TRU, you would need to ensure that you have at least 30k unlocked TRU. This addresses two points: 1) in the event of a default, or multiple defaults, no locked tokens would be brought into circulation as the 30%/70% unlocked/locked ratio ensures that sufficient unlocked TRU can be used for slashing in case of multiple defaults. We would suggest, that in the case of a first default, and that the ratio is brought under 30%/70%, the cooldown period automatically be started until the ratio is brought back up to the minimum required (this may require more technical thinking). 2) as a result of this minimum requirement, additional buying pressure could be seen from private sale investors as to keep staking more locked tokens, one would need to purchase unlocked tokens on the market (so the ratio is maintained) and hence benefit current TRU holders collectively.
NB: This ratio should be adjusted as we go through more unlocking events. Ideally, this should be done dynamically (going from 30/70 to 100/0 linearly until November 2022) but we believe this could be implemented as a static one to start with and be adjusted accordingly as we go through the vesting process.

4. Giving back to the protocol/community: as a way to try and meet expectations from both ends and benefit the long term growth of the protocol, we would like to propose that 25% of the rewards generated from the locked tokens be either: 1) burnt, 2) added to the SAFU, 3) given back to the pool of rewards (may have technical limitations), 4) used for marketing purposes (such as for an influencer fund), 5) a mix of those.

We believe this is a fair proposal that addresses all previously mentioned concerns and would greatly benefit the TrueFi ecosystem if implemented as well as involve further private sale investors in the participation of building a long term successful protocol/ecosystem.

[orion.da]

I support this proposal. I’ve talked with Carl and others about this going back to last year and Rafael said he liked it in the Discord group. I think it’s pretty simple:

1. I want to re-engage the original “whale” investors from 2017 and 2018 like a16z & Blocktower, & others so how do we do that, let’s incentivize them to 1) pay attention again 2) farm, and to 3) become more active in governance.

2. This could create a huge amount of aftermarket buying from these original VC and whale investors who will have to buy large amounts of TRU on the open market in order to stake their TRU.

3. This should cause our TVL to go through the roof, and maybe we climb up on Defi Pulse, thus getting us more exposure and more demand for the coin. In fact it could send our TVL up by a factor of 2x to 3x unless I’m mistaken.

Overall seems like this could re-invigorate the original strong TRU community that backed the TUSD stablecoin, while limiting the effects of dilution. This could be the steroid shot that TRU needs right now.

[JupiterCapital]

I support this proposal 100%. This is a very solid write up and should address others in the community who may have concerns.

• This should immediately increase our TVL which gives tons of exposure especially on Defi Pulse.
• I know a few pre sale investor who dont plan on selling TRU anytime soon but have no idea how quickly the protocol has grown and the potential opportunities available. This will help re engage them.
• Good for marketing that the Truefi team has thought about original investors and at the same time, shows that the original investors continue to support the project.
• Part 3 will entice existing investors to HODL!

Thanks for this amazing proposal Carl. This is a great step forward to addressing this issue.

GO TRUEFI!

[Kia]

This proposal takes a balanced approach and looks fair to me. Especially the 70/30 rule for staking. Firstly, thanks Carl for this proposal. Agree with Jupiter capital that this will increase TVL and gives a boost in DeFi pulse. And finally love point 4. Anything that helps in burning tokens or increasing the contribution to SAFU will be super useful for the overall health of the TrueFi ecosystem.

[spidey]

Thanks @carlj for the proposal. I like this proposal and want to extend my support for this completely. I think its a well-balanced proposal which outlines clear benefits of staking locked TRU to the existing TrueFi community. Some of the points which I feel are quite good and should be mentioned are:

1. TRU emission from the staked tokens is locked for additional 3 months post Nov 2022 unlock and hence it doesn’t dilute the current TRU supply at all, removing any additional sell pressure from stake TRU earnings
2. Most presale investors believe in the long-term vision of TrueFi but have no way to support the platform directly with their locked tokens. The unlocked/locked ratio allows the long-term presale investors to stake their locked tokens and use them for voting but imposes on a fixed ratio of unlocked tokens they have to hold and stake all the time. The strategy proposed by carl for a fixed/dynamic unlocked/locked ratio is one of a kind but also quite brilliant as it benefits both Presale holders and TrueFi community for a couple of reasons:
   a) it removes unfair benefit from staking only locked tokens as it imposes a ratio of unlocked tokens needed alongside all the time
   b) it ensures that even in the case of 3 consecutive defaults(30% remittance) the TRU emission into circulation will be from the unlocked staking stash of every investor
   c) 25% of emission from staked pool contributes directly to the SAFU fund/burnt so it either quickly fills up the SAFU fund or reduces the circulation supply continuously introducing a constant burn mechanism which directly benefits existing TRU holders
   d) Imposes a buy pressure from the early investors who want to stake more, thus creating a steady buy pressure as more tokens are unlocked.

I think this will increase the involvement of presale investors more and more and also incentivize them to hold long while allowing them to secure the network by contributing to SAFU fund or token burn. Most existing projects like Avalanche, Flow, Solana, Casper all allow presale investors to stake tokens as well, and hence I think this proposal is a great way to allow TRU holders to stake their locked tokens while securing the TrueFi network directly.

I think noticed @rafaelcosman also mentioned support for this proposal in the discord recently so it looks like this proposal has been drafted taking into consideration recommendations from the team which gives me more confidence in this.

[Kenny]

100% support this proposal. It makes sense and I believe this provides a nice tradeoff between HODL and giving long-term TRU holders an incentive to keep holding.

[benjamincosman]

I’m against this plan, much as I would like to farm my locked tokens.

First of all, it feels mostly zero-sum - other than the part about using 25% for SAFU/burn, it’s just increasing the share of rewards going to locked-token holders by reducing the share going to unlocked-token holders. And I think this is unfair to the unlocked token holders - when they bought those tokens they thought they knew the distribution schedule, and now we’re proposing to flood the farming with tokens that they thought wouldn’t exist yet. Yes I know this same “they thought they knew what they were buying” argument is precisely why this proposal exists in the first place: presale purchasers thought they were buying unlocked tokens. I’m just noting that in trying to rectify that, we’re proposing to do the same thing to others.

Second, I’m not sure it’s actually a good thing to incentivize presale folks to hodl any more than we already are. Since most TRU tokens start out in the hands of someone with locked tokens (presale or company), every token that they sell to someone outside that set is furthering the cause of decentralization. Not that I’m planning to sell mine any time soon but I feel like it might actually be good for the protocol if I did.

Third, this looks to me like it would require LOTS of engineering work. Which means even if my first two points aren’t quite enough to convince me this proposal is a net negative for the protocol, they’re definitely enough to convince me that this isn’t enough of a net positive to justify putting this anywhere close to the front of the engineering queue - I think they have many months worth of stuff planned that I’d rather see first, including at least all the v3 goals like multi-asset support, on-chain credit modeling, and lines of credit.

[Maze]

Hello

I am new to TRU but i would be in favour of any proposal that supports token burns given the high total supply… contributing to a SAFU fund is also interesting.

The proposal seems fair overall

Regards
Maze

[dnlklr]

Thanks for the thought that went into this, Carl. I understand your motivation and reasoning and I do think it’s an overall balanced proposal. Also, I appreciate that you took some of my feedback into consideration. However, I still share some of the same concerns as Benjamin. I’m not sure that the proposed burns/safu are enough to fix the underlying drag that the ICO tokenomics model has had for the growth of the protocol. Most of all, I am worried about the negative optics of choosing to allocate scarce engineering resources to something that will exclusively benefit insiders and impede decentralization. In my ideal world, there’d have been no presale at all. On the other hand… of course I’d love to earn some yield on locked tokens. So, I guess I’ll just abstain from voting.

[leecrowhurst]

This proposal has been well thought out, addresses the (my) obvious concerns, and I believe has the best intentions of TrueFi in mind. I’m commenting here as someone who is NOT an early investor and therefore NO locked TRU in play. I purchased my TRU post go live. The success of this platform will be the self governance and risk assessment of the community. The more people and more TRU in active play only helps accelerate this. Although short term I’d lose out with this change - as my % of the daily staked TRU rewards would drop - accelerating the growth and sharing the loan default risk will only increase the TRU value. Allowing their TRU to be used on the platform but not sold in exchanges avoids the risk of whale dumping. Also having their TRU rewards locked stops these being sold too. Finally, having their TRU in play - if there is a default, their TRU will also be slashed - sharing the risk more widely.

[white_tiger]

As a frequent user of the TrueFi platform and as someone who is not an early investor, I can see the value in this proposal for the TrueFi community. I think the 30/70 locked/unlocked ratio for staking seems fair, it would create sufficient buying pressure and benefit the current TRU holders. Increasing the TVL and getting visibility on Defi pulse would also definitely help the platform

[maaaa]

• I’d be keen to see some example math on the impact of the current proposal on the current apy and on a default.
• being an open community I’m keen to know (as we all are) of those voting yes should be clear if they have a vested interest (ie hold presale)

[dnlklr]

@dnlklr

Most of all, I am worried about the negative optics of choosing to allocate scarce engineering resources to something that will exclusively benefit insiders and impede decentralization. In my ideal world, there’d have been no presale at all.

after seeing the uniformly angry reactions to this proposal in the discord chat, which has completely confirmed my fear about negative optics…I can’t support this. I’ve become convinced that presale investors will be shortsightedly shooting themselves in the foot if we go ahead with this.

[akondagunta]

I think this is a fair proposal that fixes some of the misalignments in token vesting/staking for the TrueFi team, private sale investors and current token buyers/holders. It can also help ecosystem growth by involving private sale investors in staking/governance. I support this proposal.

[Ronda]

I am against the proposal as presale investors have already enjoyed the price benefits of the token prior to public sale and therefore have already been / will be duly rewarded through token price appreciation. Current buyers of TRU or TUSD lenders do not have the pre-sale price benefits and can enjoy staking benefits instead. You can’t have your cake and eat it too.

[nic]

I agree with @dnlklr - this doesn’t seem to me to be the best use of resources. I’d be more interested in seeing work that is focused on increasing the value of TRU for the long term and for all holders. It seems to me ultimately the value of holding TRU will depend on things like the origination fees earned from loans, not the farming rewards.

With that in mind, it seems more important to focus on work like expanding support for other stable coins to increase the size of the loan pool, adding L2 integration to make it economical for retail to loan/stake etc.

[Fred]

I do not support this at all. I agree with @dnlklr and what he says.

[LOKI]

A lot of opinions have been voiced already but I got asked to voice mine as well. I’m sharing my views being a retail investor.

Let me start by saying that I understand the perspective of the presale investors. You invested early, showed confidence in the project and in an ideal scenario want to be rewarded for that in every possible way.

But ask yourself this question, why did you invest? Part of that decision-making process surely must have been that you believe in the fundamentals of this project. The decentralised nature of governing it with all types of investors. You want it to succeed, grow, be looked upon as a solid project in the cryptospace, build up a community where FUD is not an issue caused by well thought out decisions. To achieve this you must avoid anything that can jeopardize the credibility and transparent nature of the project. If retail people invest in the offspring of a company called >TRUST<token then the last thing they will accept is last-minute tinkering with distribution favourable to presale investors.

If presale investors were promised staking for their locked TRU then that promise should be kept. Period. Breaking that promise would also tarnish TRUSTtokens credibility.

If that’s not the case I believe presale investors should be happy with their current (nearly) 5x return and the possibility to stake their already unlocked TRU. The amount of TRU that they can stake will increase periodically just like a retail investor might increase their position in TrueFi over time.

Furthermore the most fundamental problem with this project is the total supply and the rate in which it will be unlocked. That is already being looked into and might be improved. Allowing staking for locked TRU will put an extra spotlight on these legacy tokenomics (reminiscent of moneygrabbing in the 2017 ICO craze) and will add an additional distribution issue (centralisation of TRU) into the mix.

The 30/70 proposal might lead to some short term buying pressure (if retail doesn’t counter it with selling pressure as a result of this proposal being accepted) but the long-term damage will be irreparable.

I’ll finish with what I’ve written in discord to show how things could play out for the average retail investor buying TrueFi. But in the end going ahead with this proposal would negatively impact the reputation of the entire project and all parties involved.

What I wrote on Discord:

'Just imagine buying today at 4,5 times presale price. You fork out the hefty gasfees and binance fee for withdrawing to stake. You are planning to hold long term anyway. Now, as a new TrueFi enthousiast you are not aware of the proposal at the forum. You forget about your staked TRU for a month and open up the True Fi ‘app’ to check how your 60+ % ROI has been doing. BOOM, yearly ROI has dropped to 15%. You check YouTube to see if anybody made a video recently about TrueFi. You find a paid influencer with a huge following talking about the positive parts of TrueFi. Then you scroll down to the comment section. flushed You see 1500 comments of pissed retail investors not only commenting about the enourmous total supply but even more so they are fuming about the recently changed distribution of that hefty supply towards presale investors. TrueFi has just paid a large sum of money to an influencer for horrible publicity.

Long story short. Pissed of retail investors are way more vocal and potentially detrimental then I think the team is aware off at this point. I won’t be one of them, I will move on calmly but right now I feel I should speak out while nothing is lost yet.

Please reconsider before this will blow up in everybody’s face.’

[rayanami]

I support this proposal in philosophy though I am concerned about the dev resources and additional complexity (auditing, maintenance, security, etc.) that such a system would introduce.

I am also a private sale investor and would personally benefit from such a system existing.

Despite that, my view is that all TRU holders benefit if TrueFi meets its 2021 roadmap goals. When I assess what is better for the entire ecosystem (investors, liquidity providers, loan recipients, stakers, TrustToken team) - implementing this feature vs adding USDC support / building a SAFU / integrating with layer 2 to reduce fees. It seems pretty clear to me that the latter has a much higher chance of being a huge impact.

I would support & contribute if the community reaches a governance quorum, writes the smart contracts, hires an auditor, and submits a pull request to the TrueFi team. I do not support this feature if it pulls the TrueFi dev team away from the 2021 roadmap.

[Codeknight]

We should be using TRU to bring in new users, particularly to the loan fund. This proposal primarily benefit long established users of the platform and arguments that this will somehow trickle down to new users feel hollow. I find it concerning how many resources we are giving in general to people who hold TRU, when the loan pool is growing so slowly and that is the only source of revenue for the platform.

I would also note proposals like this have a serious conflict of interest. The people developing the platform are going to profit significantly from being able to stake their vested TRU and from burning TRU they didn’t have access to anyway. That looks bad optically.