GP12 DeFi Rewards TDR Brainstorm - Messina

The TDR vote for GP11 didn’t end favorable for Messina sadly, but we are motivated to turn that around and create the best, most considerate proposal this time that takes into account community ideas and suggestions for how our Messina product environment can be best positioned to grow Algorand TVL by attracting new users into its DeFi ecosystem.

Naturally, we will again be proposing boosted yield across a variety of assets that relate to our products, with the biggest focus on the mALGO/ALGO LPs, but we don’t want this to be the only tactic and want to allocate a good portion of rewards to other more creative methods that aim specifically at highlighting the spoils and strengths of the Algorand DeFi ecosystem to new audiences, beyond just our own network.

At Messina we’re in a unique position to have our own native bridge solution which helps new users enter the ecosystem quickly and we’d love to hear your thoughts on how you think TDR can be leveraged for this purpose.

Of course, we’d like to see mALGO do well and be supported but a rising ride raises all boats, so if you have any suggestions, share it below and let’s discuss how to go about this together.

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I am personally of the mind that liquid/native Algo pairs (while obviously necessary) are a questionable use of TDR since it is a relatively risk free yield strategy. I won’t go into great detail on that, though, as debating that is not the point of my comment. Instead, my point is more about the need for an ecosystem wide agreement on this issue.

I recognize that you are not operating in a vacuum. You are competing with FF for share of the liquid governance market, which is one of the few lucrative things for protocols right now because you can take fees on it. And, because it is relatively risk free, people will naturally want to go to the platform that offers them more rewards for going the relatively risk free liquid/native staking route. After all, in a rationale market, money naturally seeks the highest risk adjusted return. Thus, it would be highly profitable for one staking protocol to allocate most of its rewards there.

This presents a dilemma. What’s good for the individual protocol is not necessarily good for the ecosystem as a whole, and vice versa. Asking Messina to unilaterally lower its liquid/native TDR rewards is a bit like asking one nuclear power to give up its weapons in hopes that the other will reciprocate. It’s unfair.

So, the point of my long rambling comment is to float the idea that we need an agreed upon ecosystem wide cap to the TDR allocations allowed for these liquid/native Algo pairs. My preference would be for AF to make this formalized rather than relying on handshakes between competitors or for the community to self police after the fact.

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You should focus on stuff that helps messina and not something like Algorai or Algomint (indirectly). Focus on mALGO and the tokens that actually go through your bridge exclusively, so no goXYZ tokens.

Since mALGO is redeemable you don’t need to focus completely on a mALGO-ALGO pool for price stabililty and you can focus on an ALGO and USDC pair for example. ALGO pair is risk-free but only works as an onboard feature to mALGO outside of the sign up period and USDC pairs have decent volumes due to arbitrage.

You should try to get mALGO on Folks and use part of your TDR to increase adoption of it on Folks.

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Very good points. I do still think rewards can be used on those pairs though, but indeed in needs to be within proportion. Naturally, both FF and Messina allocated the majority of rewards to these pools, even DEXs did the same, exactly because it is relatively low risk and will attract the most TVL to their protocol. However what it doesn’t organically do, is attract new liquidity. What we’d like to do, is find ways to utilise DeFi rewards to attract new governors and Algo DeFi participants.

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I don’t disagree although I don’t think Messina ever focussed on AlgoRai or AlgoMint without still touching mALGO or Messina Bridge. goAssets can be bridged with Messina, and the only use case Messina sponsored on AlgoRai was mALGO vaults. You could argue the rewards are more effectively spend elsewhere but that’s what we’re having this discussion for of course.

We’ll have a look at the USDC pairs, although that does introduce impermanent loss risk which many people tend to want to avoid.

mALGO on Folks has been a conversation but that isn’t as straight forward as you’d hope.

A little over a week ago, we bridged BOBO after it won our Token Tournament and was voted to facilitate a move to Algorand. Even with a whale BOBO holder bringing liquidity across, which is always a challenge when bridging tokens new into an ecosystem, the trading pool liquidity isn’t deep enough to let the price settle properly and allow for more consistent trading.

The bridging of BOBO but also PEPE in the past, did show it’s potentially a great tactic for advertising the capabilities of Algorand compared to EVM chains - and introducing new people to the ecosystem.

So how can we utilise DeFi rewards for that purpose on Messina?

My idea is to allocate a portion of Messina DeFi Rewards to supply ALGO liquidity to trading pairs of tokens bridged by Messina. Not just any token, but only tokens voted on by the community like we did with the Tokens Tournament with BOBO as a result. The caveat is DeFi Rewards need to be distributed towards the community. So keeping those ALGOs as liquidity in a pool doesn’t do that. I have two ideas on this.

  1. We work one period behind: DeFi Rewards of GP12 will be liquidity during GP12, and get moved to boost farms for GP13 (or Consensus 1 - assuming the foundation will continue DeFi Rewards also after native rewards have transitioned from Governance to Consensus), and rewards of GP13 take over as liquidity for trading pools. That way the rewards are eventually injected into the community, but with a delay - for the benefit of strengthening the pools to allow more efficient trading.

  2. We create a framework around TVL thresholds for the selected trading pools, and when the TVL of a pool surpasses the threshold, we gradually move DeFi Reward ALGOs out of the pool, and into the farms. For example: We bridge SHIB - and create a SHIB/ALGO pair and allocate 50k ALGO (approx. 10k USD) to the pool, for every 1000 USD organic TVL on that pool grows above $10k we move that 1k to support the LP token farm of that same pool. This way, the starting LP will be big enough to sustain early trading, and as the pool grows organically, we transition the rewards from the trading pool, to support farm rewards.

We still haven’t addressed the awareness and advertising the opportunities, but at least we’re being more practical with rewards than simply boosting yield.

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Right. And I applaud you for that. This is precisely the sort of thing that TDR should be focused on. Bringing in new liquidity.

And I agree that some TDR can still be allocated to the native/liquid pairs. My real purposes was to suggest that this ideal level be agreed upon ex ante, whether by AF formally (preferred) or between the defi protocols themselves (non preferred).

Because, in my mind, you can’t have unilateral disarmament. I don’t want Messina to lose users on its liquid staking just because it did the right thing by prioritizing other areas. Nor do I believe the community has the wherewithal to deny certain protocols of TDR because of poor allocations.

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Definitely appreciate your opinion on this. At Messina, we didn’t get TDR at all previously, so if by making changes to the allocation strategies (even if other protocols won’t) we can at least get our TDR approved - it’s a win win for everyone compared to the current period. We can only control our own actions and it’s up to the various committees to create the circumstances that encourage all ecosystem players to do what’s best for Algorand.

Using DeFi Rewards to provide liquidity for trading pairs of newly introduced tokens, as described in the 2 suggestions above - how do you see that? TDR needs to find it’s way back to community eventually, so I suggest we either work a period behind, or set a TVL threshold at which we’ll move ALGOs from the liquidity pool to the farm rewards as the liquidity pool is gradually taken over by community providers.

There’s also the matter of growing awareness. How’s your view on rewarding community members for specific actions that help raise awareness and attract new users/accounts to DeFi? What if we were to allocate a portion of DeFi Rewards to incentivise referrals? I’d need to research and think about how it would work in practice, but I am not opposed to the general idea of it.

John Woods leaked some news regarding Reti consensus rewards and Governance rewards. It sounds like Consensus rewards will start in Q3 alongside GP 12 rewards as a transition period.

Messina should prepare to migrate mALGO from Governance rewards to Consensus rewards from day one. mALGO would then become a liquid staking token for Consensus.

Keep it simple and focused. 100% of the TDR should be used to incentivize consensus participation via mALGO.

Stacking TDR rewards on top of consensus rewards provides Messina with a competitive edge over other Reti node runners.

If Reti Consensus rewards will not roll out in Q3, then the plan does not change. Allocate 100% of TDR to Governance participation, i.e., stack TDR rewards on top of Governance rewards.

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I see the future in the Token Bridge feature.

When users from other chains want to try Algorand, being able to easily bring USDC without CEX or DEX is a huge advantage and a great UI/UX.

More than half of the value of mALGO is due to the high APR. However, Token Bridge will bring a lot of people flowing in and dropping Bridge fees to Messina if there are various DiFi and NFT services within Algorand.

I think it would be interesting to see Messina play a role in helping with the influx of people, and I think it would be interesting to see them use the TDR to launch a campaign to cover their fees and encourage other chain users to join them.

Stacking TDR rewards on top of governance rewards was very poorly received and one of the attention points by critics during the previous 2 periods. So that’s a matter of opinions. We will not be allocating 100% to boost governance rewards, but we probably will do a portion - depending on the pending rewards calculation.

It’s my understanding from sources at the Foundation, TDR will not be a thing after the move to incentivised consensus. So we won’t be having this activity anymore then.

Hey! Thanks for your contribution!
I don’t completely understand what you’re suggesting though.
You’re saying we should drop fees, promote DeFi and NFT opportunities on Algorand, and use TDR to sustain the campaign and bridging operations?

My intent is to use TDRs as a token bridge fee for users, to ease the burden and to attract an influx of other chain populations.

It might be effective to promote a limited time discount service. People are vulnerable to “limited time”. They don’t want to lose money.

From Messina Tokens Tournament #3, I think it would be better to ask influencers from each of the other chains to directly survey and comment, which would be more of a population influx to the Algorand chain.

If the tokens we want to support are there, I think people will flow to them. Even us, if AKITA or COOP is in another chain, we would be more or less concerned and would want to make comparisons based on gas prices and APR.

Once people from other chains are exposed to Algorand’s UI/UX, they will not be able to leave because of its speed, stability, and low gas prices. That’s what I’m aiming for.

I’m using Google Translate for my post, so I hope you can get a good idea of my intentions.

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I like the idea of incentives for newly introduced tokens. But, you need to red team it. For instance, you need some params so that it’s not just bridging dead tokens. Does no good to reward someone for bridging an ETH token they made and that has fake market cap and no trade volume. So, put some thought into what those params are and how it can be exploited.

Similarly, I don’t know if you want to ONLY do new tokens. If you do, then once the prospect of getting rewards is over, you might have people people bridging back. Also, you might be overlooking previously bridged tokens that are bringing substantially more value to the eco.

I think one way to work this would be to make a substantial portion of it based on rewarding most new TVL bridged. For example, if Pepe has seen 100k in net inflows, but new token “X” only has 5k, then I think Pepe adds more than tokenX. Pepe deserves incentives more than tokenX.

So, maybe you do some allocation just for new adds, and a separate that is open to all based on net inflow.

I’m always leery about this. If it can be gamed it will be gamed. So, you need to build a success component into this. If people get rewarded for referrals that actually result in volume, that’s one thing. Incentivizing people to just make fake accounts and Sybil the process is another. And, be cognizant that many people bridging are probably just going to use their own referral. So, going hog wild on this method may not generate as much organic growth as it seems.

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Pooling some TDR to subsidise bridge fees is a very creative idea! I’ll definitely take note of that.

Asking influencers or other KOLs to engage with our postings will be costly unfortunately. Especially chain agnostic “real” KOLs (not those scammy marketing agency’s) are pricey.

Establishing the bridge for a token is step 1, step 2 is having enough community support to bring liquidity from the native chain into Algorand (or have 1 or a few whales that want to commit, or even existing ecosystem projects like Tinyman did with wBNB).

Step 3 is creating use cases and utility for the bridged token on Algorand, and step 4 is promoting those opportunities to the original community on the native chain, and beyond.

Step 2 is hard, but we’re making progress there now with the Tokens Tournament and finding some support. Step 3 and 4 are even harder and this is where we’d need to deploy TDR (funds) strategically so it hits the mark and isn’t wasted.

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I like the idea of incentives for newly introduced tokens. But, you need to red team it. For instance, you need some params so that it’s not just bridging dead tokens. Does no good to reward someone for bridging an ETH token they made and that has fake market cap and no trade volume. So, put some thought into what those params are and how it can be exploited.

You’re right PEPE is a big community and cross chain presence, so creating attractive use cases for PEPE on Algorand makes sense. The suggestion about liquidity for trading pairs of newly introduced tokens is more about having deep enough liquidity to support decent trading action. PEPE doesn’t have that problem because it’s TVL on Algorand is 100k already. So for PEPE it would simply come down to boosting the Tinyman farm on PEPE/ALGO pair.

A problem raised by someone, I forgot who it was, with new tokens - let’s say we bridge SHIB (runner up in the Tokens Tournament), to attract SHIB traders and holders, the SHIB/ALGO pair would need to be deep enough to be able to settle and follow within range of native SHIB price. If it’s too volatile, it won’t be attractive. So deeper liquidity will be needed, not just on SHIB side, but also on ALGO side. So an option is to deploy TDR to strengthen the pair, and gradually move TDR out (and into farm rewards) as community slowly take over the liquidity side.

I’m always leery about this. If it can be gamed it will be gamed. So, you need to build a success component into this. If people get rewarded for referrals that actually result in volume, that’s one thing. Incentivizing people to just make fake accounts and Sybil the process is another. And, be cognizant that many people bridging are probably just going to use their own referral. So, going hog wild on this method may not generate as much organic growth as it seems.

Fair points - It would definitely need to be a robust model. A tool like Zealy can potentially help control some of the growth tasks people could do - although it also doesn’t measure the success itself and whether those actions actually lead to growth or not.

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That’s not what I said. Before replying, please read more carefully.

Consensus rewards upgrade has been postponed to Q4.

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Changing the subject, I offer another suggestion.
How about adding a new utility to mALGO?

If you have a certain amount of mALGO in your wallet, you can get a discount on bridge fees, etc. This feature could be applied to all future fees in Messina.

I know Vestege and Defly offer the same swap fee discount service.

When bridging from other chains to Algorand, I think there could be a popup on the payment screen that says, “If you buy mALGO at the same time, you can get a discount on commissions” to encourage the purchase.

I have more ideas and will post them when I get a chance.
I would be happy if the idea is utilized in a good place and will bring an influx of both people and funds to Algorand.

I would also focus on brand awareness, marketing and engaging the community. Seems to be a lack of that. The Bobo push is where we saw some life of the platform outside of tweeting TDR/Proposal which seems to be what the defi cabal does.

Focusing on mAlgo and creating fun ways to engage existing community, attacking web2 users and creating partnerships outside of the ecosystem to actually make the bridge useful. Pepe was brought over and then we heard nothing more from you guys about it and seems like Bobo is going in the same direction. Probably a good idea to create some Messina memes or content around the tokens you are bridging over. I’m in the Pepe community in Eth and no one know who or what Messina is. Do not expect the community to push your brand for you.

As far as leveraging TDR, not sure how you can leverage the money without creating a gimmick. There already high yields everywhere in algo defi. So important to focus on brand awareness, marketing campaigns and new customers. TDR is not sustainable, short term kickbacks.

Also this is your first time being here? Why is this always everyone’s first time being here but they have been in the grant proposals section before as a company, pact fi did the same thing!?