RFC: 2021-08-19 Updating Tinlake Rewards Allocation & Reward Rate

2021-08-22 - This proposal has reached the polling stage

Hey guys, we are quickly approaching 10 million CFG rewarded on Tinlake which means we are nearing the end of the current rewards allocation. According to the last council proposal, 2 million CFG were minted towards Tinlake liquidity rewards to increase the total allocation from 8 million CFG to 10 million CFG. Currently, 9,850,115 CFG have been rewarded, which means we will hit 10 million CFG rewarded in about a week at the current rate of 1 CFG per 1000 DAI per day.

I am proposing to mint and allocate an additional 1 million CFG towards Tinlake liquidity rewards and reduce LP & AO rewards by 20%.

At the current Tinlake TVL, an allocation of 1 million CFG would provide Tinlake liquidity rewards for an additional 6-8 weeks, therefore giving a reasonable amount of time to reassess Tinlake liquidity parameters in case of market fluctuations. CFG price has appreciated since listing and the current APR for Tinlake liquidity providers is about 45-50%, this is about 50% higher than what the APR was during the previous liquidity parameter update. I believe with these changes Tinlake can continue to maintain a competitive yield while keeping CFG within its intended supply growth as TVL increases.

Would appreciate any of your comments or opinions! :slight_smile: I will put up a forum poll after the community has some time for discussion of this proposal


Hi Ash!

No time for discussion, show us the poll! :laughing:

A 20% reduction results in a reward-rate less than 1 CFG per day and 1K DAI invested? What is the exact number in the proposal?

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So LP reward rate would be 0.0008 CFG per $1 per day & AO reward rate would be 0.00016 CFG per $1 per day :slight_smile:

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Do you expect a withdrawal of investments once the poll has passed and the reduced rewards rates for AOs and LPs has gone live?

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Couple of things would like to understand:-

  1. Any background on how did we arrived at 20% reduction? Meaning it could like 30% or 5% reduction? So what was the rationale and how did we came up to this number keeping long term sustainability prospective of protocol?

  2. As per my understanding, Investors were lured for providing liquidity in pools owing to attraction towards CFG as rewards, though good stable return of around 4 to 10% APY was offered on DAI investment. Hence forth the questions is how are we going to bootstrap liquidity in tinlake with reduced CFG reward rates? And I’f this the case how is this gonna be addressed? The more TVL locked in protocol against MC, the more it’s value is. Isn’t it?

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I agree with proposed reduction.

This is a good question, although I don’t believe that with the said reduction we will see increased number of withdrawals. Reasons for my thoughts are that we already had a couple of reductions so far and both reductions were bigger in size than the proposed one and we haven’t witnessed a drop in TVL after said reductions.
With the said reduction, yield on the CFG rewards still looks really good. Based on the proposed reduction we arrive to 2920CFG per 10kDAI per year which corresponds to 33,5-37,5% yearly return on the CFG rewards alone.

It would be interesting to understand the stats from the moment the decreased CFG reward rate (from 42CFG/$10k to 22&10 CFG/$10k) against the new %TVL tapped during this reduction period? Probably this will give a clear picture of what %new TVL locked vs new CFG reduced rate(22 &10 CFG rewards) along time period.

Given the price appreciation of CFG I believe a 20% reduction still makes Tinlake APR attractive. We could decide on a different number as long as we aim to maintain a competitive yield, and increase Tinlake TVL while not contributing to excessive supply growth. It should be noted that Tinlake APR is higher now even with this 20% reduction than prior to the last proposal for updating Tinlake rewards

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Yeah we completely agree on that front so that CFG inflation is within control while attracting more TVL. Only point is how we can target more TVL growth to let say 3x ~ $100M (an example) by EOY (an example)? Just did a quick calcs to understand in terms of % TVL change against new reward CFG rate. I hope I have not mistaken in calc.