Request for Comments: CFG Liquidity Rewards Parameter Update

As part of Centrifuge Governance stakeholders periodically reviews the reward parameters for Tinlake Liquidity Providers and Asset Originators. We last discussed these here. After the protocol paying 1M CFG we have to decide how we want to adjust the parameters for the next cycle. At the current rate of rewards we will hit the 1M in awards in about two weeks…

In the last vote, and second stage in the reward program, we collectively decided to allocate 0.42% of the fully diluted token supply to rewards. The rewards were paid out in approximately 45 days.

Since that decision we have made some really big milestones. Our Total Value Locked (TVL) has gone from DAI 3.5M to DAI 6.85M and the number of investors participating has grown from 100 to over 150 investors.

The community needs to decide how to proceed with the rewards taking a few key considerations into account.

Parameters to discuss

Allocation for the next stage

With the initial success of the second stage of the Rewards program, we propose to apply the parameter for the third cycle (the next one million in Centrifuge Tokens (CFG) rewards).

With the increase in TVL and taking into account our future growth, we should aim to set parameters for the at least 30 days. Historically the protocol TVL doubled month over month.

Our current award rate is 28,536 CFG/day. Allowing 100% growth of TVL we would arrive at 60’000 CFG/day in 30 days or 1.35M CFG for that period or over 60 days or 3.6M CFG which should be enough for 60 days.

How much CFG should we allocate for the next cycle of the rewards program?
  • Allocate 1.35M CFG (approx 30 days)
  • Allocate 3.6M CFG (approx 60 days)
  • Different allocation (please comment)

0 voters

Vesting Period

We previously made the decision to lower the minimum period to 30 days as the experience of AOs showed that the protocol could start allowing the claiming of rewards after a minimum of 30 days has been reached.

We’ve had very few large short term deposits and quick withdrawals that could have proved difficult for the pools to absorb.Thus, as this hasn’t been a problem we believe it’s safe to leave the vesting at 30 days.

Should we change the minimum period?
  • Keep it the same
  • Make it shorter
  • Make it longer

0 voters

Reward Rate

Again, the most important topic is the reward rate, how much CFG the protocol awards per DAI invested. The formula to date was very simple and has worked well.

Last time, we decided that for each DAI invested for a period of 24hrs the protocol awards 0.0042 CFG (previously RAD). This was based on the hypothesis that the longer investors provide liquidity or the more liquidity they provide the more they are rewarded. We’re keen to hear your thoughts: how has this been for you? Please comment below.

Given how successful the CFG Rewards program has been to incentivize TVL in Tinlake, I propose to keep the reward rate the same.

Should the community discuss adjusting the reward in this cycle or leave it as is?
  • No, do not change the rate
  • Yes, further discussion on the rates needed

0 voters

Please share your opinion and questions below and indicate your preferences in the poll to make the decision

10 Likes

Is it an idea to add a multiplier to the reward function for those who have funds in the pool the longest?

If you reward those who contribute to pools in a manner that encourages stability, the pools will be more stable.

8 Likes

I would like to see the current reward rate remain the same. Continuing to reward investors with CFG will add to the health of the project and brand by establishing a loyal base of highly committed investors - a good foundation for the asset.

I believe we may benefit from a tiered system of reward that would create fair opportunities to invest among “Centrifugians.” Rather than an “inevitable” reduction in rewards, provide opportunities to pursue current or even higher tier CFG multipliers.

Recognizing not everyone can invest large amounts, a higher rate of CFG rewards should also be accessible to those willing to commit to longer periods of investment.

Incentivizing investors willing to commit to longer investment strategy will provide stability and increased demand/scarcity for the eventual CFG token. Encourage investors to HODL.

Centrifugians who stake large amounts and/or those who stake for longer duration should also have the opportunity to receive multipliers that encourage for long term investing.

Much like frequent flyer rewards - where you earn more miles, if you fly more miles. Providing rewards to investors for investment behavior that benefits Centrifuge should be mutually beneficial to the loyal Centrifugians.

Examples:

Investments > 100K .0050 CFG%

Investments > 10K .0047 CFG%

Investments < 10K .0042 CFG%

Investments < 5K .0037 CFG%

Vesting periods of longer duration with similar incentive multipliers.

Perhaps smaller investments could be eligible after (insert time) .0037, 0042, .0047 etc.

Staking.? …the more you stake the more you earn.

And, just for fun… a “Diamond Hands” bonus for reaching an investment threshold of 3 years. Perhaps a percentage of CFG rewarded for DAI vested or CFG staked or both.

Respectfully.

theWakandan

7 Likes

Love this comment. People who are commited more longer periods should be given better returns.

4 Likes

Rewarding larger stakes with a higher percentage is not the way I think.

It’s better to have a diverse group of investors in a pool, and rewarding larger stakes disproportionately might scare of smaller investors. Also this is imo against the whole philosophy of defi.

2 Likes

Thanks for your detailed thinking @theWakandan!

I like the idea of rewarding those who invest for longer duration - however, not sure how this would work given that CFG allocations for DAI invested changes over time, like with the outcome of this vote…

On the idea of rewarding those who invest more with more tokens, I believe that skin in the game can seed better governance, but there’s a balance between that and the risks of plutocratic gov or governance by :whale:

What do you think?

1 Like

I appreciate the comments about my previous
suggestions regarding CFG reward rates. Here’s my revision.

I also struggle with the idea of rewarding those who contribute more a higher rate than those who contribute less. I would like a fair and equitable distribution of CFT rewards to all members of the group regardless of what they can invest.

By advocating for a higher rate for greater investment, my intention was to incentivize participation; In hindsight, the idea of rewarding someone at a greater rate because they can contribute more does not sit well with me either.

All of us want to contribute greatly to this project. None of us want to miss out on the opportunity to maximize the CFG reward rate.

Therefore, I believe by attaching CFG rewards to time invested and providing the incentive of a multiplier or bonus type of offering would encourage participation and retain investors who want to contribute to the success of Centrifuge.

Example:

If the new rate were .0032 CFG, then after six months vested a multiplier could be applied which would give you the same credit as if the rate was .0037, then after twelve months .0042 - the full reward rate - as if they had always had the .0042 rate. By doing this, you incentivize everyone to remain invested for a greater amount of time in order to maximize their returns; And this provides everyone the same opportunity regardless of their ability to contribute monetarily.

And,… that full rate would remain, as long as they were invested. Then, if the investor were to leave, their rate would return to the “starter reward rate” with the opportunity work back up to the full rate.

Once again, I would advocate keeping the current rate the same while we introduce new investors/contributors to this project. Currently, we have just slightly more than 150 investors while many of us we’re unable to participate due to many pools being over subscribed or lost time to difficulty onboarding.

Personally, I would like to see investors benefit from our/their contribution Centrifuge project by being rewarded with a higher rate for longer duration. I believe a solid base of committed investors will provide stability to the platform and improve the overall product before a token sale is released.

Respectfully,

theWakandan

1 Like

Thank you for you response. You helped me reassess and correct my previous suggestion.

Always Strive for Improvement,

theWakandan

It’s not the way I think either… So, I hope you find my revision more equitable.

Best Regards,

TheWakandan

1 Like

Oo like the idea rewarding based in the invesment you make.As you put more skin in the game… somehow these investors should be rewarded to it. Ad they contibute with much more investment a restriction can be that the invesment should be there at least 3/6/12 months. Or the or the very early heavy investors compensated different way.

Thanks everyone for participating. I think the idea of locking for more rewards is an interesting idea. Given the timeframe for the decision (rewards expire in a few days) making these changes is unrealistic. I think as a community we should re-evaluate the on chain rewards mechanisms after the token has liquidity in the market. I think quite a few parameters will have to change at that point as we have a better idea of what the value of CFG reallly is and because at that point “farming CFG” will change from being only something for people who believe the token will have a future value to something that gives a very clear % APY return when selling the tokens. Thus I would propose we re-evaluate these ideas then.

I believe yearn had a strategy for locking rewards to earn more. I think something like that could be beneficial for us as well as it would align the rewards with those who want to use & hold the tokens in the long run.

As for the changes we can implement right now, we will proceed with the following parameters:

  • Next Reward Allocation: 3.6M CFG
  • Vesting Period: unchanged - 30 days
  • Reward Rate: unchanged - 0.0042 CFG/DAI/day
5 Likes

I think this is a good idea - I will spend some time thinking about the technical implementation of this.

2 Likes

Thank you for your comment

theWakandan

@Cryptopeter interesting concept

Why 3.6 mio actually? I mean based on some logic you choose 3.6 mio for voting and not 4mio for example?

Hi Lucrum. My guess is that this is a rough calculation of the rewards including the increased TVL within this period which is highly likely

Yes, I looked at our current TVL, our month over month growth rate and projected how much in rewards would approximately be needed for 60 more days.

The new reward parameters are going into the codebase as we speak.

Helllo lucasvo, so the 3.6 million reward will run out in 9 days around 05/15/2021 ? In Tinlake dashboard I can see that 3,134,907 CFG has been rewarded already. So the remaining CFG is 465,093 and at 51,565 CFG rewards per day this total rewards will run out in 9 days if everything remains same. Will be rewards be voted again to continue and if I invest in a pool now, so I will get the CFG rewards for 9 days only ?

1 Like

I’m interested in this too. Rewards will continue for how much longer?

The rewards are cap to 5.5M. Team will decide upon TVL and other parameters and the community shall be voting as a part of it

1 Like