I’d like to do a public analysis of the current Tinlake rewards proposal with the community and just walk through this all together as this goes to vote this week. I’ve answered most where I can but i could some help from fellow community members.
Once we get these answers, I think we’ll begin to be able to shape a collective counter argument to our current Tinlake Rewards proposal.
What’s been the distribution of Tinlake rewards over the past 12 months (from Jan 1 2022 until now)?
What’s the equivalent portion of our Total CFG Supply this consumes?
Looks like our total CFG supply is 492,500,000 CFG, divide by the the 13.1M, let’s call it 2.5% of our total CFG supply.
What is the total $ value of those rewards distributed given an approximate token price today of $0.30?
$3,930,000 dollar value today
Aside from Blocktower, how much have Pools grown in that time? (that were Active as of Jan 1 2022)? Would be good to know where TVL was on Jan 1 2022 and where TVL is today on a per pool basis – @sirj maybe you can help here?
Aside from Blocktower, how many new Pools have launched since Jan 1 2022?
Alt 1 and Flow Carbon, combined TVL today of ~7.3M, which is less than 5% of total TVL of 170M
What % of our TVL is coming from Blocktower and New Silver as of today? What % of that is coming MakerDAO?
116M — Looks like 100M from Blocktower and 16M from New Silver.
80M — MakerDAO is providing that DROP.
Who (or which wallets ) have been the top recipient of these rewards? Specifically, which wallets have accrued the most CFG rewards since Jan 1, 2022?
Issuers / Pools – perhaps you could shed some light on your rewards in this time on both a CFG and $Dollar basis to help us think through this?
Could we separate between Issuers putting forth their own TIN investments (as stipulated in their sub docs) vs non-Issuers (i.e. true investors) investing into TIN rewards as outside investors (not also Issuing the debt)? @devin any data here we can use?
Comparison, If someone invested $10,000 on January 1, 2022 all the way through today…how many CFG rewards would they have accrued? I want to compare this against just buying CFG in the open market at let’s say ~$0.30, which is of course 3,000 CFG tokens. @Rhano could you help here? Maybe there’s a calculator in the Rewards Google Doc sheet that I didn’t see?
@ImdioR could you help us understand 1) the catalyst and 2) the logic behind reducing the minting from 3M CFG to 1.9M CFG over the course of the last 30 days?
Actual Annual Issuance in % with actual TIN/DROP/AO and TVL is - 1.73%. If CP40 will pass the issuance will decrease.
Would be really nice to see Tinlake data:
How many retail investors are invested in Tinlake right now?
What is the average amount of investment?
What is the average period of investment?
How changed the % of retail investors with changing Tin/Drop rewards that happened in the previous change?
Can you please compare Tinlake rewards stable % and tokens for Senior/Junior investment (10000/100,000 DAI) vs other RWA protocols? Just in order to understand if Tinalke rewards are attractive for investors.
Yes, it does make a bit hard to follow. However, if Colin’s intention is to create a new proposal to remove the rewards but wants some more discussion around it first, I think it is ok to create this discussion post for more input from the community.
This post would have been relevant to make in the RFC while it still was active but CP40 has already moved on to an off-chain vote and submitted to GitHub and cannot be changed anymore so maybe better to start a new discussion from here.
I personally don’t think this is the right reasoning for removing the rewards.
We are protocol that finances RWAs and one of our biggest selling points is that we offer stable yields, uncorrelated to the cryptomarket. So if anything, we especially want to attract investors in bear markets.
That being said, I am open to discuss this further - but I don’t think we know all the implications of removing the rewards.
Both @ImdioR and @ctcunning are asking some very relevant questions that I think we should investigate the answers to before concluding that removing the rewards is beneficial for both Centrifuge and the token holders.
So you are confirming with your sentence that the actual rewards rate instead of lowering should be increased in a way to attract more capital?
Wow ! Thank you. But is this not the opposite of what @ctcunning proposed?
Even more, you said that the actual rewards are not enticing enough right now and by removing them we will provocate additional withdrawal.
Bring the world of credit on-chain Connect borrowers and investors Centrifuge unlock capital Centrifuge is the home for RWA DeFi
Looks like cutting the rewards and additional withdrawal will do exactly the opposite of what is written above.
So instead of rethinking and making Centrifuge more attractive and enticing enough for Retail investors we are going to cut the rewards?
Reposting our thoughts here from the original thread, as suggested.
Fortunafi would be opposed to any proposal that removes CFG rewards to pool investors. Furthermore, we would assert that the impact of modest supply increases is significantly less important than creating actual utility/supply sinks for the CFG token. Given the strong utility and value for the centrifuge protocol in the RWA ecosystem, we feel there is an imbalance between the value of the ecosystem and the incentive structure behind the CFG token. At this point in time there is no requirement to utilize CFG within the system and not a strong enough incentive for existing or future ecosystem participants to acquire CFG and hold it long term. Centrifuge is positioned to become a top RWA protocol, and we would love nothing more than to play our part in building that. We believe there are some strong and proven token incentives that can be implemented to fortify the robustness of the Centrifuge protocol, and provide additional protection mechanisms for both pool investors and governance token holders.
Token rewards and utility have the ability to align the incentives of all members of the community if done properly. We do not have a perfect proposal for this, but we would like to start the discussion and contribute a few starting ideas:
Require pool managers to acquire and stake a minimum CFG balance (in terms of tvl) in order for investors in their pools to earn future rewards. This aligns incentives of the pool managers with the protocol, and also could act as an insurance backstop in the case of defaults.
Cap yields for investors that don’t stake CFG into the pool. In order to exceed the cap, investors must stake additional CFG to maximize rewards, dependent upon their contributions to the pool. IPOR has pioneered an approach called “power tokens” that we believe could be adapted for CFG as well. (Power Tokens: Incentives, Done Better | by Dimitar Dinev | IPOR Labs)
Require vesting for newly earned CFG to make deposits stickier and align incentives over a longer period of time.
On the topic of whether to emphasize Tin vs. Drop., we believe that stronger incentives for Drop are necessary in this environment. The CFG rewards make a material difference in incentivizing participation when short term treasury rates are almost equal to the sr. tranches of most pools. Personally we have experienced a significantly higher demand for Tin as compared to Drop. At current CFG reward rates, the increase in annual supply is ~2.5%. Currently, about 60% of rewards are going to TIN and 40% to DROP, due to only 30% of outstanding DROP being non-Maker holdings. If the community is comfortable with the 2.5% supply increase from rewards, then we could allocate all of it to DROP with a reward rate of 0.00075, creating a return enhancement of over 8% at current CFG price. That’s very material, and would put most pools’ total DROP return in the double digits which would help attract investors.
They are indeed great and important questions that we should dig some more into to find some answers.
This is not an option.
The proposal has already moved on to off-chain voting. If there is support to move this on-chain (which there currently is), it will have to be submitted on-chain shortly after the off-chain voting ends - otherwise the protocol is going to be in reward deficit if they are not minted on time.
If the community disagrees with the proposed parameters, they can vote against it. Based on the comments in the RFC, it sounds like the general consensus is that community doesn’t want to remove the rewards completely.
We can discuss this further in the upcoming governance call to give everyone a chance to weigh in.
This is a really interesting conversation, thanks for bringing it to the forum @ctcunning. I’ll admit, I couldn’t think of a straightforward answer here immediately and even after a few days I don’t think I know enough to provide a well informed response. I’ll share some principle thinking I have on many parts of this in the hopes that it stirs conversation, or at least shows why I have difficulty providing a straightforward response. You can skip to the bottom if you want the TLDR.
CFG at its core is a native token for the L1 for RWAs: Modern Centrifuge has been built around the idea that a domain specific chain is required to enable the functionality we think is most important (i.e. tokenization of complex assets and portfolios). This means that CFG is not just a governance token or some indirect value incentive, but an integral utility token that supports the decentralized Centrifuge ecosystem. This also mean the many objectives of CFG tend to compete with each other: it is useful for CFG to be in many hands, it is useful for CFG to have many utility functions, and it is useful for CFG issuance to not be overly-dilutive.
There are two views you can have of token rewards:
Rewards as a distribution mechanism: Decentralized participation is a value driver here for many reasons, and rewards are a distribution mechanism for getting the token into people’s hands and making them holders. It is a positive thing the more CFG is issued.
Rewards as a dilutive incentive: Rewards provide added perceived yield to pools which seems to help issuers and investors alike. Like any good incentive, some part of the value is related to the scarcity of CFG, but that also makes the rewards themselves dilutive. The pace of rewards issued needs to be lower than the pace of the value accrued to Centrifuge as an ecosystem.
So on one hand it’s important to distribute CFG and literally build our ecosystem, but on the other hand rewards do come at a cost that needs to be accounted for.
Thinking through this leads me to three possible outcomes:
If you believe the current pace of protocol value accrual is not positive, meaning you are worried about dilution, stopping rewards until factors change (e.g. the next bull market) makes sense.
If you believe that distribution is important and are concerned about dilution, then modifying the rate of distribution in some way makes sense.
If you’re not worried about dilution and believe distribution is important, then continuing rewards as is makes most sense.
I think it’d be useful to have a vote on just these three outcomes before having a vote on what the actual changes should be. I know personally I am in camp 2 above (I would like to see rewards capped based on time, pool growth, or similar metrics, but still generally continue). Looking at the Governance and Coordination group for some guidance here on how to implement this.
If you are referring to point 2. when asking how to implement it, that’s how it works right now. And the most recent proposal (CP40) is doing just that - lowering TIN rewards and keeping DROP and AO rewards the same as before (0.0003 CFG/DAI per day for TIN and 0 CFG for AO rewards).
I personally think it would be a good idea to get the general sentiment from the community about the rewards and I believe those three options you suggest actually covers the different points of view of the community quite well.
I don’t see any issue with creating an OpenSquare snapshot to get clarification on this. However, I don’t think it would be a good idea to do it right now as there is on-going snapshot for CP40 and I think it would be confusing if both run simultaneously.
My suggestion is this; after the snapshot for CP40 has ended (3rd April), we can create a new one with the three aforementioned options.
Great thread and discussion here, Thanks for kicking it off @ctcunning
I agree, the distribution of rewards was important at the beginning to bootstrap liquidity and to bring the token in as many hands as possible. I do think we already issued enough CFG from the total supply and we are at a point right now where the tokens in circulation outweigh the utility of the token. Why so? I tend to disagree with you, the main utility for CFG at the moment IS to vote in governance proposals (it’s an important one, no doubt about that) but the second main utility to pay for transaction fees is no signifant factor until Pools launch on Cent chain. Until the event of further additional utilities (turning on of protocol fees etc.) the issuance should gradually depreciate.
I am sure we agree, the value of the CFG-token for holders has to increase, and it will once the protocol matures, the TVL in Tinlake goes up and the participation of the community grows in the future
I think we started a great discussion on this topic with a lot of questions that remained unanswered. We should continue in this thread by providing more information and deeper discussion.
I think that starting the additional snapshot immediately after the CP40 without deeper discussion with more information doesn’t make any sense and will be only a waste of time because the actual CP40 cover already 2 points:
Agree with renewal with lowering TIN rewards rate and Disagree with the renewal process.
At this moment the picture of Community agreement/disagreement, for me, is very clear:
We are not even in a situation where we have 51% Aye vs 49% Nay. So what is the point to make immediately after additional temperature checking if the community already expressed their sentiment with a clear result (could be changed until the end of voting and i`m talking about the actual situation)?
We are using 3rd party service - OpenSquare snapshot - a decentralized voting system.
Everyone can vote Aye or Nay for specific proposals which will express their sentiment about the proposed changes.
We defined in our governance Framework how Off-chain voting (snapshot works) - here
GCG announces every governance process (Discussion, RFC, off-chain,on-chain voting, and Treasury proposals too) on Discord, Twitter, Telegram and during the Governance call.
If the snapshot for CP40 votes passes this means that CP40 was accepted by the Community.