In other words, rewards can only be reduced in 60 days from decision.
If we did that we’d need to cut rewards for other months heavily, since right now the rewards are at their peak. This could hinder network health on the months after the cut and it would benefit short term stakers at the expense of long term ones.
Instead, I propose holding a vote on this in order to decouple it from the current discussions. More concretely, I think we could parametrize the current proposal (or an updated one) on the number of days that would need to be elapsed until it goes into effect and then vote on the proposal and on that parameter separately.
With that in mind, we could:
Agree on an amount of rewards that is needed for v2
Set the schedule so that each interval uses a relative portion of the total pool left for v1
Poll stakers on when should it go into effect. Choosing a later date will mean more rewards in the near future but less in the long term.
Of course, if the majority already agrees to use a 60d delay we could also just do that, after all I don’t know if my opinion represents anybody else but me.
What I’d like to see better addressed and explored is other areas of cutting, such as liquidity mining rewards.
You are right in that we didn’t consider these, assuming that they’d be used to drive tBTC v2 usage and incentivize the coverage pool, and didn’t do much work on it since that would require strong assumptions on the future price of KEEP, but I agree that this is something worth looking into.
Now, completely cutting these until the v2 launch is not something that I’d support (doing so would make the v1 cov pool useless and on top of that ETH/KEEP liquidity is important to maintain IMO) but let’s assume that we do that and by then we are left with 41M KEEP. With that let’s try to estimate how much the v2 cov pool would cost to incentivize in order to see what would be left for the stakedrop.
Under the assumption that in v2 there will be 1k stakers, a group would be made of 100 of them and BTC multisigs would be 51-of-100, if we want to achieve resilience against ~40% of them turning malicious/negligent we can calculate the amount of deposits that would need to be covered using the hipergeometric distribution (more concretely,
sum(hygepdf(51:100, 1000, 400, 100))*100), which results in 1.25%. That is, if 40% of all stakers were malicious, they would be able to steal 1.25% of the total deposits on average.
Thus, if the coverage pool is able to cover the amount that those deposits represent there should be no loss of capital for users. If we (very optimistically) assume that we will reach the current marketcap of wBTC, that means that the coverage pool would need to have 63M in assets to cover the loss, and, as the security model of the coverage pool is similar to Aave’s security module, we could assume that the same APY of 6% would work here. Thus, all in all, we’d need 3.78M$ per year in rewards to be distributed to the pool which, under the current token price, would be ~11M KEEP.
It should also be clear that with 6% APY not much capital will be deposited in KEEP-ETH LP tokens, so if we want liquidity on that pair (which has been quite beneficial so far) we would need to set aside extra incentives for that. If we continue at the current rhythm of 100k/week that would be 4.8M/yr.
Putting it all together, we’d need 16M KEEP per year, and if we make those incentives last until the end of the original stakedrop we’d be looking at a total spend of 24M KEEP. But this doesn’t include extra KEEP to be spent with the goal of driving v2 adoption (6% APY might not cut it here), so if we assume that we’ll spend the same amount here as on KEEP-ETH, the total comes up to 29M.
This means that we could use 11M extra to spend on the stakedrop, but remember that this assumes that we cut all liq rewards till v2. If that doesn’t happen I could see a significant portion of those 11M being spent by the time v2 is launched.
In conclusion, under the previous assumptions, I don’t think a large part of the liq incentives will be available to be used in the v2 stakedrop.
- We probably won’t get away with 6% APY in the first months (aave is highly trusted but the just-launched pool wouldn’t be) I believe that this will be doable once time-onchain increases and so does trust
- Assuming we achieve wBTC marketcap is very optimistic, I did that to partially counterbalance the previous point. Also, I don’t see it as impossible since that marketcap might have grown by then
- The cov pool analysis doesn’t take into account systematic risks that would affect all stakers such as forks or bugs in the node
- Future KEEP price is impossible to predict
reducing demand for TBTC can benefit stakers through lower premiums.
Curve is no longer incentivized and right now the only TBTC-based systems that are being incentivized with KEEP are KEEP-TBTC and saddle LPs. I don’t think cutting those would lead to an important decrease of TBTC demand since:
Liquidity in TBTC-KEEP is very small compared to curve
I believe most of the LPs on saddle are more interested in pre-farming a possible future token than on KEEP yield
There will still be strong demand coming from the badger crv strategy