I like this critical thought because the initial idea behind the Tinlake rewards program was to incentivize early Tinlake investors and to gradually decrease the rewards issuance over time to keep the yearly inflation stable.
As the protocol and pools matured since the inception of Tinlake, I support the proposal to stop emitting CFG-for Tinlake but as a pre-step I have the following suggestion:
Reduce the rewards rate for both TIN and DROP for the last time to 0.00015 CFG/DAI per day and make the announcement in advance to stop the rewards program after the minted amount has been consumed.
This would lead to a smooth transition before the issuance ends.
I think questions / discourse are actually the wrong direction here @Rhano
I know thatās sacrilege when it comes to DAO forums, but thatās my take.
We need data here.
I got a feeling our community or external partners could do a quick analysis and tell us the impact of rewards on investor behavior over the last 18 months.
Good day @ctcunning
Thank you for your comment.
I think that could be an interesting proposal and could be an option for the future, but the decision to cut off the rewards should be communicated in advance and required more input and discussion.
Weāre talking about minting another 3M tokens, which is not insignficant.
Why canāt we have this conversation now? Has the RFC passed? Has the Proposal been voted on-chain?
Itās never too late and Iām communicating it now and letās all (the community) put in more input and discussion and get to the right outcome.
My sense is noone has a good reason for continuing to extend the rewards, and weāre simply extending them based on past behavior and because itās tradition.
Iām trying to challenge that and motivate our community to allocate tokens in a more responsible manner.
Token rewards are very helpful to both issuers and investors, I have summarized the ways they help:
Helps issuers pay gas, which can run into thousands of dollars per month
Helps offset the cost of time in terms of working with Tinlake, which for us is very significant, it takes time to open and close new loans, work through various technical issues. We have done over 300 assets on chain
Keeps Centrifuge competitive with every other major Defi protocol, a lot of others offer rewards
Based on past observations, does not effect token price in a major way
For us specifically, rewards have been factored into the yield we promised investors, we have been conservative and used previously approved TVL-based reward levels, suddenly removing rewards altogether would not be in line with what has been discussed in the past. I believe others have similar situations.
Provides additional incentive to investors to invest in Tinlake
We would be very much against this drastic and unnecessary move. I understand rewards may not mean much for some team members, but they are very helpful for issuers and investors.
We certainly can have the conversation now and if the general consensus is that the rewards should be removed altogether by the time this proposals moves on from this RFC, then the community can vote on that in the off-chain vote as a temperature check before it is submitted on-chain.
I personally would welcome to start the discussion, and I think it is an important one, but I also am of the opinion to not remove them abruptly, but lower them gradually and announce a removal in advance.
I fully agree with you here; we need to understand all the implications before making a decision to propose to remove the rewards, so in addition to what @prankstr25 is writing I think we should hear from more community members.
A quick look into some of the other big lending protocols shows that both Maple and Goldfinch offer native tokens in rewards, in addition to the APY, so my first thought is; would a removal of the CFG rewards affect our ability to stay competitive?
Hereās a better question: has us giving out rewards over the past year given us a competitive advantage? Was it compelling for Blocktower? Is Maker earning those rewards? Was that partnership through centrifuge dependent on our current rewards?
I would like to do the off chain temperature vote as soon as possible
Iād argue we should eliminate the rewards and use that language and ask people to step in and prove with data why we shouldnāt do that.
Again, I think weāre extending rewards out of precedent and not thinking critically or strategically or using data to back this extension.
Thatās worrisome when weāre talking about another 3M tokens given market conditions and the importance of protecting our treasury for current cfg holders and future needs the community may want to use that cfg for future proposals and grants.
GCG proposed initially to min 3m CFG rewards (the details you can find in above), but after receiving feedbacks from community, issuers we are trying to find the trade-off between the TIN/DROP rewards rate and minting less rewards.
Centrifuge Tokenomics has separate tokens allocation for Grants which is mean that minting is not the case for this purpose.
What about the future needs this is the area of the Centrifuge Council and Centrifuge Treasury.
With CP6 - Block Rewards - the Centrifuge Treasury will receive 3% a year of Total Supply ( * Activate block rewards and mint 20096 CFG each epoch into the on-chain Treasury ).
We have different minting solutions now:
3M CFG with keeping the same rewards rate for TIN/DROP
1.5M CFG with lowering TIN rewards and keeping the same DROP rewards
Reduce the rewards rate for both TIN and DROP for the last time to 0.00015 CFG/DAI per day and make the announcement in advance to stop the rewards program after the minted amount has been consumed.
I agree with @prankstr25 that CFG rewards help to cover gas fees (which could be very expensive). I invested in Tinlake (DROP) and definitely the CFG rewards on top were very attractive to me.
Investing 10K DAI and pay 200-300$ of gas fees technically takes 180/270 days of earning in APY ( just to link some of APY 4.20%, 6.51 % , 5.11%, 7.81%).
For DROP investors CFG rewards are definitely important. And without them + with drastic cancellation of rewards DROP investors could just withdraw their funds and move them to other protocols where they could earn more.
Just some numbers. 28% of daily rewards earn DROP investors and 72% TIN.
Thatās the critical question here: what is the main motivation for investors to invest in Tinlake pools (and prefer them over other protocols)? The APY (which accrues in DAI) or the CFG-rewards? Would be good to have some comments (in addition to what @prankstr25 wrote) from an investor-perspective on this RFC
I can give you some numbers and feedback (thoughts) from my Tinlake experience as a community member:
10000 DAI invested, APY ~5.5%.
550$ earned
Around 400$ in ETH fee paid (onboarding and withdrawal) - which is 4%.
Don`t forget to TAX on top of this.
Let me know please what you think will be retail investors interested to invest in Tinlake without CFG rewards and earn just 150$ (10000 $ deposit)?
Or let me rephrase the sentence:
Would you invest in any DeFI 10000 DAI with 365 days lock for 150$ of profit+ Tax to pay?
I`m really curious to know.
My answer is - No, i personally wouldnāt. But maybe you can provide some arguments in order to convict me to invest? That would be great.
So if we would like to cut 28% of DROP investors and focus on only Partners and institutional investors by cutting off rewards without any communication in advance (which is weird in my opinion and a lack of transparency with our Issuers and investors, IMHO) we should have a good plan how to bring more capital in Tinlake and cover all withdrawal that will proceed after removing the rewards.
I agree, cutting CFG-rewards will make investments for retail investors less attractive but itās most likely still more attractive and secure than leaving your hard-earned cash in a traditional bank
Thatās exactly what I meant with my previous comment
Reduce the rewards rate for both TIN and DROP for the last time to 0.00015 CFG/DAI per day and make the announcement in advance to stop the rewards program after the minted amount has been consumed.
~ 150$ - tax.
Are you sure about being more attractive? So you would invest 10k dai with 365 days lock for 150$-tax?
Hmā¦
For me, personally, this does not make sense the investment like this.
Would you invest in any DeFI 10000 DAI with 365 days lock for 150$ of profit+ Tax to pay?
And what about other parameters? Can you please describe all parameters in order to give a full overview of your proposal?
Love to see how deep this thread has gotten since our governance call. I just wanted to chime in here with my thoughts.
I donāt really understand the tokenomics part - so this is meant to be high-level.
Feel free to take them into consideration or tell me to f*ck off LMAO.
As an active member of the DAO, who doesnāt get paid at all lol, I see an importance for rewarding actors who bring value to Centrifuge.
in my humble opinion, with the scope of knowledge I currently have, I think TIN/DROP investors, AOs and Issuers should all be rewarded in CFG for governance purposes.
These early actors, myself included, have a vision for where the protocol can go and shouldhave a reasonable say in governance.
Without these actorsā¦ Centrifuge doesnāt exist!!
soā¦ after a long winded explanationā¦ here is what I think we should do:
Agree everyone who brings value to Centrifuge should receive some CFG for governance purposes.
Leave the amount of rewards and tokenomics to be determined by data. I would trust the minds of @sirj@devin@cassidy, the DAO facilitators, etc. to give us a direction on the amount per actor (investor, AO, issuer, etc.)
Get back to building!!
I hope this is helpful. We are all in the same boat here. The actors doing the āpaddlingā should be rewarded and have a say in how we steer the boat.
I meant the interest rates in a traditional bank arenāt much higher because of the low interest key interest rates of the last years. Of yourse everyone has a different risk profile and investing is a personal decision. Many investors will prefer lower to medium but more stable interest rates over double digits which are hard to sustain in the long run.
My main idea is to lower the rates for both TIN and DROP (as written above) and allow a smooth transition before the issuance ends. I donāt have a strong opinion about the minted amount because I didnāt calculate the numbers. Does it make sense to mint 3M CFG and let the program run until there are no more CFG-rewards available?
Good day @Tjure07 and thank you for your comment.
It`s clear, after receiving feedback during the Governance Call and during RFC stage, that lowering the rate is the key to decreasing the minted amount and as a consequence decreasing insurance.
We should just summarize all feedback received during the RFC stage and propose the final result.
Also, we can start to think about how to approach and program future rewards ( cutting them gradually by checking the impact or informing about the end of the reward after a specific date).
Great to see the comments and discussion here. In addition to active contributors I would like to invite (retail) investors&ambassadors @Lucrum@hardik to leave their comments on this RFC and how they would like to see the future of the rewards program
