RFC: Updating Tinlake Rewards Allocation 2023-03

Centrifuge Governance Proposals
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Good day Community! :raised_hand:

Proposal type: CP-4
Authors: Governance and Coordination Group (@ImdioR @rhano)
Contributors: Governance and Coordination Group (@ImdioR @rhano)
Technical/non-technical proposal: technical proposal
Date proposed: 2023-03-01

Short Summary

  • Renewal of incentive rewards forTinlake

High-level objective

  • This proposal is for minting 3,000,000 CFG into the Tinlake rewards account. Keeping the same rewards rate for TIN,DROP, AO as before.

Background

To date, a total of 25,290,526 CFG has been awarded to both AOs and LPs on Tinlake. Currently, only CFG 900,000 is available to be distributed to Tinlake investors, which means we are nearing the end of the current rewards allocation. With the current TIN/DROP rewards rate and TVL, these awards will last approximately for the next 30-35 days. Tinlake Rewards Overview.

The recent partnerships drastically increased the TVL so in order to avoid reward deficit, the Governance & Coordination Group would like to propose minting additional rewards, that should cover:

  • The possibility of onboarding new pools. The additional small margin of CFG tokens will cover any new onboarding or fast-increasing Tinlake TVL.
  • Taking the governance process (off-chain and on-chain voting) into consideration

Detailed description of proposal

We would like to propose to mint and allocate an additional 3,000,000 CFG towards Tinlake liquidity rewards and keep the same rewards rate for TIN/DROP/AO (Council motion 18).

Minting these tokens will cover the rewards for the next ~90 days with the current rewards rate and TVL. It will also both keep the inflation under 2.5% and allow us to remain responsive to external market conditions.

Proposal Parameters

The proposal being put forward is the following:

  1. Mint 3’000’000 CFG into the rewards account

( 4dpEcgqJNczMyoTnUuFTyTLSe5RuoSSoGZMqu3L6fvc8jBbd )

  1. Keep the same rewards rate for TIN/DROP at 0.0003 CFG/DAI per day

  2. Keep the same rewards rate for Asset Originator rewards at 0.0000 CFG/DAI per day

Change or improvement

Mint approximately 3’000’000 CFG into the rewards account.

Responsible

Alignment to the mission of Centrifuge DAO

Minting requested tokens as rewards will help to support the overall goals and objectives of the protocol. For Lenders on Tinlake, this will provide an opportunity to earn a return on their investment, which in turn will ensure that borrowers can still access capital transparently and cost-effectively.

The RFC will be open for a minimum of 7 days.

Looking forward to any feedback and any concerns that you might have with this proposal.

Next steps

If this proposal passes all steps, it will take around 21-28 days for it to pass on-chain and the rewards will be minted shortly after.

If you have any questions or comments, please reply to this post.

Thank you for your attention.

2 Likes
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Thanks for this proposal, keeping the Tinlake rewards at a constant rate is important for the yearly inflation rate and it is crucial that investors in TIN and DROP get their portion of CFG.

One clarification: is this a typo? Because the rest of the RFC proposes to mint 3M

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Good day @Tjure07
Yes, thank you. corrected.

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Agreed to keep things as they are. CFG rewards yield 3.15% as of writing this due to market prices, but I think this is fine. Yields from DROP/TIN are now pretty competitive compared to yields throughout DeFi! And I think we’re in a new era where product / market fit and adoption should be motivate capital to come to the platform, not just pure token rewards like what has been the past model for DeFi.

2 Likes
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Thanks for sharing! I also think that it is great to have the Tinlake rewards to incentivize participation in the pool. One minor question, is the extra CFG coming from an inflation or the reserved fund from the treasury?

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Good day DrCAO
Thank you for your question.
Actually, our Treasury doesn’t have enough funds to cover this request, because the Rewards Block is still not implemented.
Answering your question:

  • The extra CFG will be minted a part, so this means inflation rewards.
    The actual inflation generated due to Tinlake Rewards minting is under 2%:
    image

This information is public and you can find all data regarding Tinlake minting RFCs, Council motions and Referenda here .
If you have any additional questions feel free to ask.

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With Blocktower deploying I think we should expect TVL to go up and model that into the new reward rates. With the Maker deals they’ve gotten we know quite well that they will bring in total roughly $70M in TIN to the protocol which would almost double issuance if the rewards were left as is. I would suggest we consider reducing them to stay in line with somewhat constant issuance of 2%.

In addition I think most issuers agree that finding senior capital is the bigger struggle right now so perhaps leaving senior rewards as is but lowering the junior reward rate would be good compromise?

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Good day Lucas

This is true. In comparison with the previous minting, the requested amount increased up to 66% ( 1,800,000 CFg → 3,000,000 CFG). The reason - Maker Deals and increasing TIN investment (BT pools).
In order to maintain the issuance under 2% the TIN rewards could be lowered and the requested minted amount decreased. A good alternative could be:

    1. Mint 1’500’000 CFG into the rewards account
    1. Set rewards rate for TIN at 0.0002 CFG/DAI per day
    1. Keep the same rewards rate for DROP at 0.0003 CFG/DAI per day
    1. Keep the same rewards rate for Asset Originator rewards at 0.0000 CFG/DAI per day
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In my view and based on conversations with other AOs, its as difficult to get Tin investors as it is to get Drop investors. I would propose the following compromise:

    1. Mint 1’500’000 CFG into the rewards account
    1. Set rewards rate for TIN at 0.00025 CFG/DAI per day
    1. Keep the same rewards rate for DROP at 0.00025 CFG/DAI per day
    1. Keep the same rewards rate for Asset Originator rewards at 0.0000 CFG/DAI per day
2 Likes
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Thank you @prankstr25 for your comment and feedback.
Junior investment right now is much bigger than Senior in Tinlake and decreasing the TIN reward by 15% with keeping the same minted amount will not fit the numbers. I mean that in this case, i think we should mint more than 1.5M CFG.

Would be great to hear the opinion of other Issuers and investors (Senior/Junior).

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I dont like the idea of minting more CFG out of thin air. Need to get the CFG burn mechanism working first.

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This is an interesting argument and we should take it into consideration. @ImdioR could we have a preview of the rewards for the next 90 days with the rewards rates for TIN and DROP proposed by Kirill?

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Good day Jagx7
This was exactly @lucasvo and @prankstr25 discussed.
Lowering of actual TIN/DROP rewards will decrease daily rewards and as a result lower amount should be minted.

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Good day Tjure07
And thank you for your question.
With the actual TIN/DROP ratio and with all BT pools funded + @prankstr25 parameters proposed 1,500,000 CFG will be roughly enough for 67 days. This is mean that after 37 days the process should be restarted in order to keep avoid the rewards deficit.
The minted amount should be increased.

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Good day
In order to find the best reward rate for TIN/DROP investors we would like to invite our Community and Tinlake Issuers: @FortunaFi , @SAM226 , @AleG , @REIF , @Harbor , @JeremyKim , @Fabien , @Stu , @Flowcarbon , @BlockTower on our Governance Call #15:

Where we can discuss and find the best reward rate.

2 Likes
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Look forward to discussing in the community call tomorrow- here is an initial thought:

If we are doing our math correctly, depositors would have been expecting to receive the remaining 900k CFG assessed for about 50M of TVL, for the remaining reward period (~35 days from time of writing). Tapering the rewards for the next rewards cycle rather than increasing per TVL would be ideal.

Instead a proposal could be something like this:
Maintain the current CFG emissions

Since the TVL has increased 3-fold this will achieve a thirdening in the initial rewards (assuming a 150M TVL). This is in line with the community expectation that in the future, CFG token is poised to gain in value. The dollar denominated benefit will likely still remain high even when nominal CFG reward is reduced.

In addition we could evaluate two additional components in the proposal:

  • Making additional milestones for depositors (such as successful completion earning additional rewards)
  • Giving larger incentives in the first batch of TVL that is later reduced for the marginal amounts added.
3 Likes
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Good evening @SYZ
Thank you for your comment and suggestion.
Yeah, let`s discuss tomorrow this during the call.
This is the actual situation:
image

You can check this information here: Tinlake Rewards: Overview & Current Numbers [Public] - Google Sheets

The rewards available are ~ 641,873 CFG ( something less, because the FF pool was not visible in TVL due to issue, but investors continue to earn rewards for all period).

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@ctcunning what are your thoughts on this proposal?

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Eliminate all rewards associated with investment into Centrifuge Pools for DROP and TIN tokens.

I do not believe it’s meaningfully changing investors behavior into Centrifuge Pools, and I think it’s creating a distraction.

The idea that people may want to earn CFG for governance…I’d argue that if you want to govern Centrifuge and participate in a meaningful way, you’d be better served buying CFG on the open market, which would also be to the benefit of all current CFG holders.

Eliminate all rewards associated with investment into Centrifuge Pools.

3 Likes
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Interesting suggestion to entirely remove the rewards. I personally think it is worth discussing more as investors already are earning a decent /sustainable APY on their stables.

I think some important questions are:

  • How much of an incentive are the CFG rewards really, when an investor is considering investing in a pool?
  • Are those rewards actually being used to participate in governance?

Any thoughts on this @prankstr25 @Harbor @SYZ @lucasvo ?

2 Likes