[Closed] AFR 004: Community & Team Collaborative Proposal

Governance discussion
#1

Summary

In an effort to increase liquidity and stabilize the token prices of ADEL and AKRO, we will be moving reward incentives from AKRO and ADEL staking to an AKRO/ADEL Balancer pool. The ADEL/AKRO ratio will be set later via signaling in Discord. Moreover, BPT tokens from this pool will be used for protocol the governance (as opposed to just staking ADEL/AKRO).

Advantages:

  •  Most current stakers hold both AKRO & ADEL, so they shouldn’t don’t need to buy additional tokens.

  •  Most of the community are and motivated to reduce volatility, which adding market liquidity via Balancer should help with to a degree.

  •  As both AKRO & ADEL are whitelisted on Balancer, all LPs will get additional yield in the form of BAL tokens (55% current BAL yield for 50/50 pools and 30% for 80/20 pool according to http://pools.vision/).

  •  Additional third party yield in BAL tokens may offset any impermanent losses of the pool or act as additional capital gains for users.

Disadvantages:

  • " This proposal does not increase liquidity for /eth or /usdc pool only increased liquidity for those trying to change between ADEL and AKRO. "

  • " A pool like this would be in direct competition with the /eth and /usdc pools which the community also signaled we should focus on growing."

  • " What are the full ramification of using a liquidity pool token as a governance token? Does it make sense that the fundamental ratio between AKRO and ADEL be worked out on the open market for terms of governance?"

  •  Potential impermanent loss could occur in the case that one currency is more volatile than the other. However, as users hold both AKRO and ADEL, they will benefit from positive price movement of either token. " ( how does impermanent loss effect those that currently hold for the value of having a say in the governance of the protocol?)"

  • It doesn’t fully solve liquidity problem but is a first step in the right direction.

Credits: Alex.eth wrote the initial summery.
" " where used to show things I added (Psilos9).

2 Likes
#2

Just in case I meant to post this here and not there. Here is some pros and cons I see.

Having BPTs as governance votes opens up the opportunity for late coming whales to buy significant voting power. Early adopters could be bought out at prices they would not like to have sold at, which could in turn lead to early adopters not voting or providing less liquidity to the pool. At which point if the governance pool is the highest incentivsed pool (as was mentioned in the DIP002) it could end up competing with the other pools rather than the staking pools as it was intended to.

Having governance in the form of an LP could provide insurance(1) against centralization as well as encourage early adopters to reinvest(2) periodically. Both of which encourage positive price direction, which has been brought up as a concern by some.
(1) insurance against centralization by always being able to buy a bigger share and no one could accumulate 51% and never sell. This would encourage positive price direction as people/entities compete for weight.
(2) periodically reinvesting would become necessary to maintain your weight in governance.

Governance being a pool does open up some vulnerabilities. The Liquidator brought up, what if a new gov token is brought into the equation? I think this could address some of the vulnerabilities.
Facets of the token could include:

  1. non-transferable
  2. accrual mechanism
  3. burn mechanism

A non transferable token would provide some security against vote buying. If paired with being accrued this would substantially reduce vote buying by increasing the cost dramatically. In order to buy the vote equivalent of someone who has held their tokens for 365 days an actor would need to buy 365x the token equivalent if they intended to influence a vote the next day or 52.14x token equivalent and hold them for a week if they intended to influence a vote in a week’s time. This could be used to arrive at how long a proposal is able to be voted on

Burnable would be useful for various things based on implementation.
Auto burn after each vote whether you voted or not prevents banked votes where an actor can set up a proposal they can guarantee they can pass through on their own. Caveat is that if proposals are frequent this reduces the security in place by vote accrual. If on day one a proposal is passed and the next day another proposal is up for vote an actor can buy votes equivalent of anyone else at a 1:1 ratio instead of the 365:1 or 52.14:1

Burn based on participation makes it easier to bank votes. Bank vote issue addressed above.

If no burn, it leaves vulnerabilities for someone exiting the platform and still having a say in what the future holds.

What about a burn based on lifespan? Each token is minted with a lifespan of 365 days, where holders can use it for a year after they made it. This still leaves vulnerabilities for people exiting the protocol, but were they to exit the protocol they immediately stop accruing tokens and their vote begins to dilute at .2% daily.
Or as once again the Liquidator mentioned, what if you burn all your gov tokens when you withdraw BPT. This would allow long time supporters to have heavier weight in governance while allowing new comers to earn their weight over time and provide security against people exiting the protocol.

#3

My 2c.

What if there were 5 pools.

eth / akro
eth / adel
akro / adel
usdt (or pereferred stablecoin) / akro
usdt (or pereferred stablecoin) / adel

All pools with equal rewards.

Voting weight is based on your Akro and/or Adel contributions into the pool (or other alternative governance policies)