GP12 DeFi Rewards (TDR) Proposal - Messina

We thank all suggestions and feedback on our brainstorm thread earlier. As mentioned in that same discussion, we’re aiming for a more creative rewards distribution model that targets new audiences more specifically with the intention to grow the Algorand ecosystem and raise awareness about its assets and opportunities. With that in mind we have formulated the following first draft proposal which we believe is a good blend of yield boosting, rewarding new users and liquidity providers, and generating exposure for Algorand.

10% 58,351 - mALGO Governance Boost - straightforward fixed sum increase on the mALGO Governance Rewards to make mALGO an attractive liquid governance option for passive returns.

1.75% 9,000 - mALGO / ALGO LP Farm Boost, Tinyman, fixed sum boost of LP farm to encourage DeFi participation among governors

5% 28,000 - mALGO / ALGO LP Farm Boost, PACT, fixed sum boost of LP farm to encourage DeFi participation among governors

3.25% 18,000 - ALGO / PEPE LP Farm Boost, PACT, fixed sum boost of LP farm to encourage PEPE traders to incentivise liquidity in the pool.

20% 110,000 - mALGO / USDC LP Farm Boost, PACT, fixed sum boost of LP farm to encourage DeFi participation and trading of the pair.

7.5% 42,000 - Quest for $GOLD - Collaboration with Meld Gold that will run aligned to Token Wars with $GOLD pairs on PACT and incentivised farms with special Gold and Year of the Dragon themed bonus rewards.

15% 84,000 - Bridge Volume Competition - Top 10 accounts with most NET inflow of USDC to Algorand share reward pool (1st place: 18.18% 2nd place: 16.36% 3rd place: 14.55% 4th place: 12.73% 5th place: 10.91% 6th place: 9.09% 7th place: 7.27% 8th place: 5.45% 9th place: 3.64% 10th place: 1.82%)

37.5% 210,000 - Token Wars - Two-way Cross Chain Token Bridging, LP, and Trading Competition - 1, Encouraging token communities to champion their Algo tokens (tokens to be identified) on another chain and draw attention and awareness to the base network. 2, Encouraging token communities to champion their Ethereum tokens (tokens to be identified) on Algorand. Targeting DEX partners for greater exposure and success of the Token Wars.

With this proposal, the goal is to craft a mixture of boosting yield, and driving new user acquisition along with expanding the Algorand DeFi footprint by leveraging the bridge.

We’re looking forward to further refining and detailing this proposal with the support of the community!

Edit: Added numbers based on the allocation calculations we have received (559,351 ALGO), and updated some allocation items based on user feedback, new considerations, and discussions with partners. We removed the welcome bonus for both mALGO and new bridge users and redeployed mostly towards the mALGO/USDC pair. We acknowledge the welcome bonus’ are too prone to abuse and the rewards are better spend elsewhere.

Edit 2: Removed subsidising bridge fees, and included the Quest for $GOLD collaboration with Meld Gold. We felt more unique collaborative efforts and programs to attract cross chain users and liquidity would be more attractive and beneficial.

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This is exceptional! And I truly hope the community understands the benefits this will bring to Algorand DeFi.

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Really love this proposal - a nice alternative to just boosting pools.

Great thinking Messina team!

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New account and new bridge bonus will be abused. You need to add an additional check. Like linking a discord or twitter account

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Yes, the precise implementation of the welcome bonus is under design and this is a focus point. Linking unique user accounts to some sort of claiming mechanism is a good idea, although people may have privacy concerns. But yes, it’s on the list of talking points.

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I stand on my belief that extra incentives should not be provided for LPs involving native tokens and their liquid staking/governance equivalents (mALGO/ALGO). These are essentially risk free pools whose incentive should come from the fees gained on them because of the volatility associated with other pairings that would naturally result in activity in the pool via arbitrage. I do not see a reason to add extra incentives to these pools.

I also am firmly against providing incentives for the mere act of using liquid staking. That does not achieve anything of meaningful value. It’s at best fake TVL on DefiLlama with no real substance behind it.

Given that liquid staking protocols have an incentive to keep doing however (as this low hanging yield helps steal away users from other liquid staking protocols) I believe the AF needs to set hard caps on such rewards. Until then, or until these protocols disarm unilaterally, I will keep voting “No” on any TDR that involves these incentives.

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Great proposal - but I also want to add a comment about the ‘new user’ allocation. I worry greatly this will be abused hard. It would be trivial to take 100k ALGO, separate it into 100 different accounts and mint 1000 mALGO from each, netting 10k ALGO + the rewards from the period. You’d be effectively paying sybilers extra yield.

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Cheers Fisherman - indeed for the welcome bonus, both mALGO and Bridge, we will be looking to add a claiming process that should prevent abuse or at least make it less prone to abuse. It will probably involve a Galxe or Zealy, because we are anyway looking to set up an environment for gamification activities and to support initiatives like Token Wars.

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I don’t disagree and we’ve significantly scaled down the allocation on these items to favour other areas. Without these allocations though, we can’t keep mALGO competitive unfortunately. mALGO is not an asset that’s heavily traded either because it’s a natively appreciating asset that will increase in value against it’s underlying deposit over time - so people hold it, and don’t trade it. Little to no fees. But I totally understand your point and your position on the vote.

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Perhaps instead of the reward in $ALGO, the rewards could be in $mALGO? If the recipients swap out of it, it’ll boost volume of those DEXs with mALGO-ALGO LPs. If the users hold it, it supplements the TVL and value of $mALGO.

As @KevinV_UC said there will be a level of SocialFi gamification involved as well for eligibility.

Do you see this as a win-win option @fisherman.algo?

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I suppose paying it out in mALGO adds a bit more friction, but not enough on it’s own to make it unattractive for opportunistic people. If someone can increase their APY by sybil attacking the rewards they probably won’t mind needing to do one additional step of swapping the mALGO to ALGO.

Adding Zealy quests as a requirement helps but it makes it onerous on genuine users.

Instead of a fixed 100 reward / 1000 minted - you could use a scale. Something like every 1000 mALGO minted = 100 ALGO in rewards. This way you will not be rewarding sybilers more for splitting up their stake.

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As reference information based on what I know, here are the task services used by other projects:

Zealy - Folks Finance, Day By Day, EXA Market, BARB, Voi

Galxe - Gora

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By making it harder for people that intend to abuse the program, it at the same time also always makes it more cumbersome for genuine users. Can’t avoid that really. I personally think completing a task in a gamification environment to get an immediate 10% bonus on your stake, isn’t too much of an obstacle.

It can even be something as simple as a google form with a transaction ID and an X handle or something similar, even with only the transaction ID - it adds a step that discourages multiple 1000 ALGO stakes. Maybe not 4 or 5, but definitely 100.

Scaling it with each 1000 does stop sybilers and instead rewards those users with a lump sum. But it does still allow whales to simply sweep the rewards. It would require “only” 420k ALGO to drain the 42k ALGO in rewards. My initial thinking was 420 new accounts. But you’re right if we limit the rewards to 100 ALGO regardless of the amount staked, as long as its >1000 - I agree it opens up to sybilers…

Need to give this some more thinking.

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Users can anyway always swap out of mALGO on the Messina platform, so it wouldn’t necessarily boost DEX volume either.

We’re toying with the idea of adding mALGO/USDC to the proposal and move the majority of allocation to mALGO/ALGO pools across to the USDC pairing. As mentioned by @GhostOfMcAfee I think this makes sense. mALGO is not a trader asset by design. It’s designed to hold and earn passive returns, so deep liquidity on it’s native pair isn’t so attractive. Instead, deep liquidity and boosted yield on a USDC pair may perform a lot better.

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And I completely understand why you must incentivize these things so long as a competitor does so (it’s a standoff). I also appreciate what you’ve done on the other incentives. So, I’m not down on Messina here. I’m simply being a squeaky wheel about this issue in general.

My hope is that if we keep having TDR, rules can be put in place on issues like this so that similarly situated platforms can’t try to one up the other in this area.

I’m also keen on focusing on this issue because as we move to a consensus rewards model, it will have implications for decentralization and concentration of voting stake.

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Updated allocations. Removed welcome bonus items, and updated allocations on pairs across Tinyman and PACT. Also increased amount of allocation to Token Wars, our cross chain incentive program in partnership with PACT and CompX.

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Entirely understand and the squeaking doesn’t go unnoticed. We significantly ramped down allocation to mALGO/ALGO pairs, although still present it’s a lot less than in the first version, and we added mALGO/USDC which after some discussion, appeals to us as a much better destination of allocation to hopefully encourage more trading in mALGO against USDC as derivative of ALGO.

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Updated allocations by removing subsidised bridge fees, and added the collaboration with Meld Gold to offer more unique yield opportunities and rewards to attract new users and capital to Algorand.

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