PGM-12-3 : Extending Liquidity Mining Program (Formerly PGP-12)

TL/DR : We propose to renew the PAL liquidity mining program for four months (until end of october 2023), and suggest an automatic budget reroll if no changes are required by the end of the period.

Context :
This proposal is a follow up on PGM-12-2 posted in May 2022, to report on performances and update the budget for Q3 and Q4 2023.

Over the past 13 months, the DAO has distributed 1,934,089 PAL to incentivize deposits on 4 different pools:

  • Curve-PAL/ETH (PoL farming)
  • Balancer-PAL/USDC (PoL farming)
  • Balancer-PalstkAAVE/stkAAVE (LM) → will transition over this month
  • Arbitrum-Balancer-PAL/OHM (PoL farming)

The program was initially allocated 875,000 PAL for a 6 months period from June to December 2022, and has been tacilty continued for the first semester of 2023. S-2 2022 was more conservative, and the DAO actually underspent the budget due to its inability to fill Quests at the time, saving 297,807 PAL that were returned to the DAO multisig. S-1 2023 was more chaotic, as we had to use these incentives more aggressively considering the extremely negative market for PAL.

In order to foster the project’s network effect as well as expand PAL liquidity on more capital efficient blockchain layers and capture more of the juicy BAL incentives, a PAL/OHM pool and gauge were deployed on Arbitrum on June 12th.

After this whole year of incentives, the DAO still controls 26,500,000 PAL (53% of the supply) without considering PoL (which is of ~2.3M PAL), for a grand total of 58% of the supply.

Rationale :
PoL farming still represents close to half of the DAOs revenue and we believe it shouldn’t be discontinued entirely before the DAO is able to be entirely profitable without it.

As per PGM-12-2 and because the GHO launch is getting closer and closer, we incentivized the palStkAave LP in order to remain one of the largest “holders” of StkAAVE hoping to enable the bootstrapping of Dullahan. Since it was the only net negative emission done by the protocol, we reduced it to its strict minimal efficiency, and will modify to more aggressive parameters once the transition to dStkAAVE is done.

Additionally we would live to move 100,000$ of liquidity from Curve to Uniswap v3 via Bunni and start incentivizing at full 2x cap (expected cost of 1650 PAL / week → 6,600 PAL / month), which will be taken from the Curve incentives. Reminder that Bunni emission efficiency is currently slightly over 2x.

Finally, the budget should remain unchanged for Balancer PAL-USDC, PAL-OHM incentive campaigns.

For this reason, we want to renew the campaign, with 100,000 PAL / two weeks (vote incentives round).

650,000 PAL

This program will come to an end as PAL tokenomic v2 is released by the end of the year, every non-spent asset will be returned to the DAO treasury.

Voting options:
Yes / No / Abstain

Community poll:

  • Yes
  • No
  • Abstain
0 voters

We support this proposal to extend the liquidity mining program, specifically in view of the proposal’s strategy for leveraging the program to create value for Paladin. The specific plans for this program show that this proposal looks at what didn’t work previously and is looking to iterate and improve with this program renewal.

1 Like

If no further comment arises, we will push the vote tomorrow

Thanks for posting this proposal and sorry for my late reply, EthCC was an intense week haha

A migration has been mentioned several times, however it’s still unclear how it will happen, if the pool will remain on Balancer or not, or which amount of incentives will be allocated to it, and I believe this should be included in this proposal.

POL farming strategies shouldn’t be discountinued at all & even needs to be improved, no matter the protocol revenues.

The situation here is problematic; incentives voted shouldn’t be changed without community considerations, but it happened on the palStkAAVE incentives, reduced by 3x over the past months (from 60k to 20k veBAL votes). Agree that the DAO doesn’t have POL on this one so it’s a real cost, but it’s also what try to keep AAVE waiting for Dullahan.

Additionally, several community members are LPs in this pool adopted the most synergistic behaviour possible by locking strategic assets to aquired enough vlAURA to reach the quorum and enable anyone including small LPs to vote on the Quest as well. The PAL received by filling the Quest are max locked or deposited in LP.
Saying this is a net negative is not true, because even if indirect, this voting power accumulated will transition to support the new dstkAAVE pool if deployed on Balancer.

However, once the community finally aquired enough voting power for the Aura quorum (currently worth ~ 53k$) & filled a majority of the Quest leading to filling it at 100% & additional votes were unpaid: the quest wasn’t increased back despite several requests, because Dullahan migration was soon (while actually based on GHO release deadline known 1 week ago)

If we have to keep managing Quests budgets manually for now, we should work on a framework & communications about these changes.

Agree with this, it make sense to diversify on this front, especially for a more efficient liquidity.

Considering dstkAAVE budget will change from the PalStkAAVE one, more details are needed imo, otherwise seems ok to renew the program until tokenomics are fully shaped.

As we’ve experienced over the past twelve months, a fixed budget for Quests is simply not effective. Instead, we have opted for a dynamic input depending on token price, state of pools, as well as efficiency of the Quest.

Considering our emissions on the upcoming tokenomics revamp it makes no sense to increase emissions (up to 50,000 PAL / week). The goal is to create a boosted pool (pending confirmation of Balancer) and incentivize a dstkAave 80-20 pool.

We haven’t mentioned discontinuing it for the time being. The tokenomics rework is exploring a dynamic system where we would be able to embed PoL farming in the process.

Simply put: token price lost close to 60% of its value, making incentives 2.5x more expensive, Dullahan was upcoming, the DAO had 0 incentives to attract more users in the meantime. We had a mandate to manage a budget as efficiently as possible and made the best decisions we had at hand.

This is simply untrue as TVL was down only on the product despite the large emissions. Only a handful of users were benefiting from excessive APR. As you can see in DeFi Llama, the change in program in January and March had next to no impact on total TVL:

Furthermore, do you expect a program created at 10M$ + TVL and in a bull market is still relevant today?

Sure, what do you have in mind? Bear in mind it needs to be lean and we can’t ask for the approval of DAO members each round. Especially not if they are a large LP + arbitrageur + voter, it creates heavily distorted incentives.

Also would love to see more attention on the tokenomics proposal

Great to know ! Any ETA on this ?

It does as long as ppl are voting for the DAO budget (which doesn’t earn anything compared to voting for external Quests which might receive bribes). It means that the POL budget will only get diluted over time, highly affecting the treasury strategies profitability.
Imo it needs some rework to avoid this part.

No & it wasn’t the ask made. The request was to go from 20k votes to 25-30k to begin with, not go back to 60k.

No specific idea yet, I can think about it but not sure how to do it if the DAO can’t have its say about it …

Sure, it was posted before EthCC week so probably not the best time to ask for feedback. I’ll share more thoughts on this topic asap

~1 month (currently writing the wrapper contract), then need to check with Balancer, seed the pool and get the gauge WL.

So you’re saying most stakeholders wouldn’t see this as the optimal strategy on the long run?

This is not possible considering the price action without hindering the PoL Quest which actually bring money to Paladin. Do you expect us to sacrifice profitability for, what exactly? TVL stickyness on a product we should avoid stickyness until Dullahan? I do not follow the logic.

It will with the tokenomics proposal published last week. This is a temporary measure.

All in all, you’re asking for the DAO to have more oversight on emissions, without justifying why they are bad or changes are necessary or even offering an actual solution. We cannot stay in governance limbo. What I can offer is we will publish bi-weekly a report on the targets for each pool here.

I’m saying it’s not optimal for DAO treasury management in the long run.

Not with your current design, this just slowly rekt the DAO budget to incentivize external quests which might increase PAL selling pressure, with hPAL lockers hoping to get bribes for it but we don’t know yet how its going to be priced.

I’ve explained this above & many times to you but either you don’t get it or you pretend to. You’re against treasury management & optimization in the long run which doesn’t make any sense, no matter the protocols revenues. This leads to a lot of argumentation which is tiring and often leads to you blocking the strategies proposed.

Reports will not change anything if the community has no power to update it because the decision is centralized, or if the new tokenomics proposal remains bad for treasury management.

Anyway, would be good to answer about the budget & parameters aimed for the new dstkAAVE once live and remind the current budget & parameters mentioned as unchanged for context, so we can move forward with this proposal.

I am not against treasury optimization, I am against YOUR view of treasury management which is:

  • Too risky (ie: degen buying unproven assets like MAV, farming PoL even if diluted by other farmers, giving out emissions on non profitable programs just to let DAO members farm in hope they vote for positive strategies)
  • Too complex (ie: asking for 12 person multi-sigs, pushing for DAO votes on too many topics, asking for heavy bureaucratif upgrade on an organisation that is way too small / poor for them).

So yes, we argue, because we disagree on how treasury should be managed. And yet, I often come around and take up on your recommendations, this is the whole point of governance. You have a view, I have a view and we try to find an optimal path. Your view is not absolute.
I agree, these fights are not efficient, and it drains me probably as much as you, which is why we are suggesting to move on permisionless emission control. If you aren’t in agreement with me, you can just convince other DAO members to direct emissions elsewhere. You’re basically admitting no one will have an incentive to vote for PoL system but expect to vote in favor via governance? How does that make sense.

I cannot predict the market price for emissions in a month. Likely we will push to 10-15k PAL per week the pool at market price. I don’t know what more you expect from this statement

Always a pleasure to contribute to Paladin.

Yes I proposed a DCA on MAV which makes sense considering the potential, however I want to improve POL farming strategies by using our voting power properly to reduce emissions over time.

You’re over exagerating (as always) and spreading wrong informations.

  • I didn’t pushed for 12 ppl multisig (and I’m handling most of the monthly tx as well as pushed to implement Den which simplifies treasury management),
  • I’m pushing votes for topics that are included in the governance framework, not my fault if you don’t follow it
  • I’m welling to do what you call the “bureaucracy” myself but you refuse to give me admin rights on the forum, so I gotta ask someone from the core team to update everytime ppl don’t follow the framework …

The governance framework created is simple to understand if you just read the recap table.

This is your design that doesn’t make any sense as it’s only hoping for voting rights gifted from the community to have a chance of continuing the POL strategies, which means that with the current tokenomics design proposed, the DAO will get rekt if there isn’t an alternative budget recycled with the strategic voting power used properly.

Was expecting just an estimation. Since you’ve been saying no worries we’ll push a lot the incentives once the new dstkAAVE goes live, I was expecting a higher amount than this. 10K/week is basically the current reduced rate for palstkaave. 15k/week would indeed be a small increase, but seems the amount of votes expected will remain low.

This is a very naive take, consdering the core team locks most of their vesting and will vote for the PoL strategies until unecessary. But as we mentioned any feedback is more than welcome.

We’ve requested 50k PAL / week, there are two options if you want a bigger budget for the launch of Dullahan:

  • Raise the total bribe budget;
  • Decrease PoL farming;

I feel none are wise considering the current token price action

It’s only a temporary solution. What’s naive and dangerous is to rely on the core team’s voting power and appetence to not receive bribes for their token locked as everyone else for the perennity of the POL farming strategies.

Still thinking about the details but the beginning of my feedback/idea, as mentioned above is to have a side budget recycled for POL farming using our voting power, in addition to the projects Quests emissions.

Do you have anymore feedback on the actual proposal or we can push the vote?

No I got the answer needed about dstkAAVE estimated emissions, probably better to focus efforts on the tokenomics emission topic so should be ok for this vote thanks

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Vote is now live: Snapshot

Quorum PGM-12.3: 591 487 votes