[PIP-65] Staking rewards compounding to veDOUGH

Aside of the ongoing discussion on the composition of the Initial Reward Pie, I’d like to relay here a very interesting proposal put forth by @DarkMattereum on Discord

Here below a recap:

  • Option to have veDOUGH as a form of yield distribution from DOUGH staking
  • Inspired from Alchemix v2 roadmap mentioning allowing users to forfeit the yield gained on their collateral to the transmuter in exchange for ALCX and I’ve been thinking it could apply well to veDOUGH. The idea would be to allow the treasury to compound your part of the farming yield/fees in exchange for more veDOUGH.
  • It would benefit all veDOUGH holders because it would make the treasury grow faster (some of the 60% given to veDOUGH holder would be compounded instead of distributed)
  • It gives a choice to veDOUGH holders to get their yield in veDOUGH itself, auto-compounding if this option is chosen.
  • This proposal would not be mutually exclusive to the ones currently being voted in PIP-64. Having rewards as BCP/PLAY is a good way to increase TVL with rewards but does not achieve the same goal so it should not be seen as an equivalent alternative. These propositions would be addressing different needs.

While an auto-compounding solution may require some development, a practical way to provide this veDOUGH compounding option starting from the first distribution occurring in November would be the following:

1) Any active DAO member willing to compound to veDOUGH could claim his/her SLICE, and send it to the DAO multisig

2) The DAO multisig would be whitelisted in the staking contract in order to be able staking DOUGH on behalf of 3rd parties, which would be receiving the corresponding amount of veDOUGH (36 months staked).

3) On a weekly basis, the core team would publish a SLICE/DOUGH conversion rate (based on 3days average DOUGH price and SLICE NAV) and mint to each address sending in SLICE an equivalent amount of veDOUGH + some additional veDOUGH as a lump sum to cover the gas spent on the 2 transactions to claim and send the SLICE in

A snapshot vote will be shortly available for everybody to express a preference on this option.

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Longer term it would be ideal if we could choose which portions of our SLICE are allocated where so that users are able to adapt to the market and not rely on a snapshot vote each time.

An example idea I’m thinking would involve choosing allocation among PieDAO products, to keep things simple my example is just having 3 products covering most common use cases:

BCP aka ‘Bullish allocation’
USD++ aka ‘Bearish allocation’
veDOUGH aka ‘Compunding allocation’

User selects rewards allocation based on % (maximum once per month change)
Then let’s say a user has 30% BCP / 30% veDOUGH / 40% USD++ for their preferred SLICE allocation, each month the 3 batches are minted based on total allocation for that given month and distributed as per user requested weightings.

Thoughts?

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Thank you for writing this up @gabo !

Just to reiterate why I think this is beneficial for all parties (veDOUGH holders, auto-compounding or not; pieDAO itself):

  • Allows veDOUGH holders to either hedge their investment by earning tokens unrelated to DOUGH (SLICE) or go all-in in PieDAO by auto-compouding veDOUGH: more flexibility.
  • Faster growth or the treasury means faster increase in APR for veDOUGH: allows to scale up veDOUGH staking faster, which is good for both veDOUGH holders and PieDAO.

I did a rough calculation of the DOUGH emissions required at current prices, estimating 20% APR on treasury farming and 50% of veDOUGH auto-compounders. That would amount to roughly 125kDOUGH/month which represents 15% of current DOUGHpamine emissions (for comparison).

I want to also mention an alternative, and very interesting, method of auto-compounding that was mentioned in discord: Buy DOUGH from the market with the SLICE rewards instead of keeping SLICE in the treasury and emitting DOUGH. I think Abracadabra does something similar with their sSPELL (buyback SPELL and distribute to sSPELL holders). Here are what I think are the pros/cons of each method:

Method 1: Keep SLICE in treasury and emit DOUGH
Pros:

  • SLICE compounding in the treasury allows for faster scaling of veDOUGH staking

Cons:

  • DOUGH emissions from the treasury makes this unsuitable in the long term. Would need to be revisited later on.

Method 2: Use SLICE to buyback DOUGH from market
Pros:

  • Constant additional buy pressure on DOUGH on the market
  • Viable in the long-term as it requires no DOUGH emissions from the treasury

Cons:

  • SLICE rewards corresponding to the auto-compounded veDOUGH are not compounded into the treasury. Slower treasury growth than method 1
  • Just a gas saving feature in the end as users can do this themselves with their SLICE rewards.

I think both approaches have their benefits. While the first snapshot vote can be used to decide if there is interest in veDOUGH auo-compounding and start it with the method described here, it could be interesting to have a 2nd vote to decide between DOUGH emissions vs buyback.

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When auto compounding is developed will there be an option to choose how much Slice you want compounded?

Initial Slice distribution compounding lets us choose how much to send back to compound and would like to not lose that ability.

As for emissions vs buy backs, I think growing the treasury matter more than the Dough price. If I’m locking up for 3 years I would want a greater payout monthly. Also higher payout would create buy pressure as well. Hopefully I’ve thought this through correctly.

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This is really interesting proposal! Thanks @DarkMattereum!

Getting the compound effect rolling out!

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This is an interesting point here @richandcreamy. Although in this case its feels like a secondary affect compared to direct action to apply that pressure, but is definitely something to consider when evaluating emissions V. buy-backs

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I would really love for this to exist but not sure its possible currently.

With the current route from my view wraps
claim BCP,
transfer BCP to a whitelisted contract,
contract releases DOUGH issued but not in circulation.

So imagine claim, transfer to oven which is whitelisted to deposit on behalf of others could be an approach, but clunky.

The claim contract likely cannot support distinguishing between multiple reward types.

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Here a recap of the current compounding feature proposed.

How to compound

  1. Claim your SLICE
  2. Send it to the Treasury (0x3bCF3Db69897125Aa61496Fc8a8B55A5e3f245d5)
  3. That’s it! On a weekly basis, it would be published a SLICE/DOUGH conversion rate based on 3days average DOUGH price and SLICE NAV, and everyone who sent the SLICE will receive an equivalent amount of veDOUGH + extra veDOUGH to cover the gas spent on the 2 transactions to claim and send the SLICE.

Why this way?
It’s basically a trial program to determine the interest people have in compounding. It will give context to decide an implementation of a more permanent program

Can I already do it?
Yes Context: https://snapshot.org/#/piedao.eth/proposal/QmRakdstZdU1Mx1vYhjon8tYnv5o1dkir8v3HDBmmnCGUc

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Please find here below a quick guide for compounding SLICE

SLICE/DOUGH conversion rate will be maintained on this spreadsheet.

Here below the applicable rate for this week.

1 SLICE = 1.110511 DOUGH

Example:
-> Paul sends 1,000 SLICE to the Treasury for compounding
-> 1,000 SLICES = 1,110.511 DOUGH (as per 11/10/2021 conversion rate)
-> additional 110 DOUGH are added to account for gas spent by Paul
-> a Total of 1,220.511 veDOUGH are staked on behalf of Paul’s address
-> Paul will see this new staked position reflected on https://www.piedao.org/#/dough-staking

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Here below the applicable SLICE/DOUGH conversion rate for this week (details on this spreadsheet).

1 SLICE = 1.382948 DOUGH

Every address that sent the SLICE in during this last week will receive an equivalent amount of veDOUGH staked (+ extra veDOUGH to cover the gas spent on the 2 transactions to claim and send SLICE).

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Here below the applicable SLICE/DOUGH conversion rate for this week (details on this spreadsheet ).

1 SLICE = 1.715138 DOUGH

Every address that sent the SLICE in during this last week will receive an equivalent amount of veDOUGH staked (+ extra veDOUGH to cover the gas spent on the 2 transactions to claim and send SLICE).

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What percentage of the gas spent is covered with extra veDOUGH?

Gas refund is currently accounted through a lump-sum of 110 DOUGH, coming from an average claiming cost of $55 to $80, and sending tx cost of $20 to $30

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Here below the applicable SLICE/DOUGH conversion rate for this week, computed as of today Dec 1st 2021 (details on this spreadsheet ).

1 SLICE = 1.991616 DOUGH

Every address that sent SLICE in during the past week will receive an equivalent amount of veDOUGH staked (+ extra veDOUGH to cover the gas spent on the 2 transactions to claim and send SLICE).

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