PIP-6 : Revamping our fees on Quest to stay competitive in a bear market (Formerly PPP-2)

Paladin Improvement Protocol (PIP) PIP - Approved
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TL-DR: New framework adapted to the current market

Context:
Quest was released at the end of May, just before everything started crumbling, with DeFi going from 160 bn $ of TVL to 50 bn $ of TVL. As such, fees were adapted to bull market metrics, not the current one. This proposal aims to fix this and create a durable framework.

Rationale:
The current framework was split into two situations, a general one, and a dedicated one to the first protocol that showed interest in experimenting with us, StakeDAO.

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The volume of the current bribe market is roughly 2M$ bi-weekly, which means that our framework is impractical. We’re offering to scale the fee sharing metrics according to the current market.

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Ecosystem partners are base protocols (Curve & Balancer) and dapps controlling a least 10% of the veToken supply.

Some of you might consider this is irrelevant since the market has a high chance of bouncing back at some point. Instead of being irrelevant in the meantime, we believe adjusting the framework can create major opportunities for us.
Any community member can post an update request when long tail clients (Minor + Regular) represent less than 80% of the bribe market.

Means:
None

Voting Options:
Yes / No / Abstain

  • Yes
  • No
  • Abstain

0 voters

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You forgot the poll again ser. :rofl:

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I totally agree about our first framework being inefficient with the current market state, which is why I also worked on a update of this program, which i’ll share after.
Just to be sure, can you confirm that the volume mentioned is weekly ?

I believe that this framework can become quite complicated due to several conditions depending on the project, which might lead to a lot of modifications in the future.

The Ecosystem partner reducing the Curve and Balancer fees of 50% make sense, but 10% of the supply owned seems a bit low to include the liquid wrappers in this category, maybe 15-20% is better.

Convex is bribing ~500k/week so they would have the 2.5% fees effective with the following framework anyway, and Aura has 23% of the veBAL supply.

Otherwise, I think we shouldn’t create several conditions depending on if the client is Sporadic, Regular, Major or Strategic, but rather try to make it accessible for as many project as possible, and the more volume the more it gets interesting for the projects to use Quest.

Here is the PPP Framework update I worked on:

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Modifications from V1:

  • Add a lower minimum to be included in the fees sharing to motivate small projects to try Quest (25K vs 50K initially - 4.75% fees paid)
  • Double the fees sharing for 50K and 100K (10-20% vs 5-10% initially - 4.5% and 4% fees paid, same fees than votium from 100k weekly volume)
  • Change intermediary amounts : 75K, 200K, 300K, 400K and remove 250K, 1.2M, 1.5M and 1.75M
  • Reduce by 4 the limit to reach 50/50 split (500K vs 2M initially - 2.5% fees paid)
  • Nearly double the fees sharing for 1M (55% vs 30% initially - 2.25% fees paid)
  • 20% Increase and cap of the fees sharing (60% vs 50% initially - 2% fees paid)

This framework would become accessible for anyone who want to test or actively use Quest, which could bring more projects even if they don’t have a 250K budget (sporadic clients), major clients would have a lower fees cashback up to the 250K milestone (1.25% vs 2%), but higher cashback for bigger amounts.

Fully agree on this point, but I think it would be much simple with this update

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I’m a bit flabbergasted you start by saying the proposed framework is too complex and introduce an even more complicated one… Which feels like just doubling down on what didn’t work except of fixing the issues we have:

  1. The framework is not mobile, just has lower low and higher highs.

  2. Introducing 60% cashback, less than for Ecosystem Partners seems counter-productive

  3. In the current state of Quest, the fee sharing management will have to be done manually, and we cannot afford to waste one whole day per week on this. Having less categories means we can work faster

In our proposed framework we simply wanted to split clients into 3 user profiles and then add recurrence as a factor to reward continuous Quest use. Depending on the market’s trajectory we can adjust easily.

Could you specify why more categories or no recurrence is a better choice?

Ps: why do you feel 10% is not enough of a threshold for ecosystem partner? We should strive to help create these large actors as they create value for governance, drive utility and are really good potential clients.

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It’s not a more complex one, this framework only takes into account the volume instead of also taking into account the longer they’ve been using quest or their available budget, imo this is not a reason for a fees drop, when you start using a dapp long term it’s because it’s better than others.

Yes this is a similar framework than V1, but as you said, the framework was irrealistic for the market state, so maybe we should try with reasonable numbers before saying that it doesn’t work

A framework is not made to be mobile, but to create rules and have a structure.

60% cash back are for projects who would do 2M weeky, which is the current bi weekly bribe market as you mentioned earlier.
It seems pretty obvious that we would not reach this amount anytime soon, but better plan it for bull market days, in case the bribe market is growing again in the coming years.

It seems ok to me to say Ecosystem partners have 2.5% fees no matter the amount and projects with more than the entire market get 2% if they use Quest as I said above, so it would not give more to projects with millions than ecosystem partners, and if there are projects capable of reaching this it’s the ecosystem partners, which would then be eligible for the 2% fees.

Ok this is real issue, I remember that we discussed about implementing an automated way when voting on PPP1, is it still planed ?
Would it be technically possible to have collect all the fees, compare the weekly volume to the framework, calculate and send the fees for each project ?

Agree, and we could eventually remove some intermediary steps if you think there is too much, but same conditions for everyone besides ecosystem partners seems fair.

wdym by no recurrence ? for the more categories, it’s only taking into account 1 variable, their weekly volume, when you proposal also take the time since using quest, and it split clients between rich and poor basically, protocols with big projects will pay less, but a small project who want to discover it will pay the maximum, and could go on votium as they charge 1% less.

Again, we could totally remove intermediary steps if there is too much

Anyone whitelisted to lock can launch a liquid wrapper, a token and incentivize the deposits. In this scenario, it doesn’t seem impossible for me that new projects reach 10% quite fast, but that doesn’t mean that the protocol is safe (not the same thing but I had Mochi in mind, can’t find back how much vlCVX they had at this time) However I do agree that we need to help create it as long as it’s legit.

The risk could be limited if we introduce an Integration request framework as the DAO could vote on new protocols integration, accepted or not as ecosystem partners. I’ve been working on a proposal to update the framework which will be shared in the coming days.

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Not necessarily, it can also be because you have favorable conditions of cooperation. Rewarding long term fidelity is the basics of any business.

yes, I said, “in the current market”, which means we will have the exact same problem the other way around

Frameworks that aren’t flexible die.

I do not understand the point of creating a framework that will be useless in the coming few months, this is litterally what we are trying to amend.

Fee sharing is automated, but here we are talking about a discount / cashback, this is different and cannot be automated for now.

@Kogaroshi

You mean we incentivize high revenue makers to stay ? Damn, what a terrrible strategy =) And Votium hasn’t built anything meaningful since launch, Quest is more expensive because it is better.

I mean sure, we can say that they need to create a proposal to be added as Ecosystem Partner, but no one has ever reached 10%+ except Convex & Aura. Maybe Yearn at some point, but this was over a year ago.

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I like this revised framework. It’s easy to understand, and if it also is simpler to apply for the development team, it’s great.

  • In terms of the time component… would missing a week result in the clients having to rebuild that seniority, or would we consider that they have been regular clients and that once that status is reached it cannot be lost?

  • On the table for the suggested framework, i think there is a small typo (or not enough decimals maybe?) for the Major clients category. Are they getting a 2% cashback like Strategic partners? Or is that supposed to be 1.5%? I assume that that the sum of DAO fees and cashback has to equal 5% which is the fee of the protocol?

  • Final question is the reference to long tail client falling below 80% of the total bribe market… What does it mean when you say that community members can request an update? Would we just consider raising the 250k$ threshold in order to keep the Major Clients and Stategic Partners categories more exclusive?

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1 month is not long term fidelity imo

There is the same issue on your framework too, only for lower amounts. If the bribe bull market is back, a lot of project will have a 250k+ weekly bribe, so a potential big loss of incomes.

Fees sharing or discount/cashback are the same, a projet can get 50% fees sharing or discount or cashback, he’ll pay 2.5% effective fees.
I’ll wait for Koga answer here, but if fees are already automated, I guess the next question should be possible.

My proposition also incentivize big players to stay, as the more they bribe the less they pay, but it doesn’t exclude small projects that we could bring, and which would also make people talk about us even if the revenues on small projects are quite low.

Yes I agree this risk is limited, but no one knows what can happen in the future.

Sharing a revised proposition based on your feedback, with less tranches and including the ecosystem partners. I just wanted to share an alternative, let’s have a poll with both options and we’ll vote on the one selected on the poll
Edit: Updated proposal in the next comment

  • In this new version, I removed intermediary tranches like 25K, 75K, 200K, 300K, 400K, 2M, 3M, 4M, which I agree was too much
  • I also removed the fees sharing cap increase, by adding 50% as max cap even for higher amounts
  • Added the 250K tranche to reduce the spread
  • Added the Ecosystem partner that you initially proposed, so currently including Curve, Balancer, Convex and Aura (and other who reach x% of the veToken supply)

If other players like Frax were to consider Quest, they are bribing 1.5M/round currently, so 750K weekly. With this framework and the current amount, they would pay 3% fees effective vs 4% on Votium and HH

Let me know what you think

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Alright, lots of discussion already, sorry if I don’t answer point by point, I’ll just throw all the infos here (and try to sort it a bit):

  • With both models, a fully automated method is too complex for a quick change into a new framework: for one, the fact that long term commitment impacts the ratio, and the other based on weekly changes of volume, will need to design and code an heavy system (based on oracles, etc …) to achieve the desired system. Plus this will mean trust this new set of contracts to have managing rights on the Quest Chest contracts (the smart contracts holding the fees), which will increase the surfaces of bug/errors/exploits. And finally, even if the contracts are simpler (no Oracles), it will require weekly updates of the ratios/parameters, which will be more maintenance than just doing the repayments via a MS.
    This is why a centralized and MS-controlled system is imagined for now, where the funds will be sent back directly from the Chest to the Quests creators after each period, based on the ratios decided by the chosen framework, which will also allow a bit more flexibility while finding the best framework for Quest.
  • The new system with 1-month commitment was thought to both keep clients are recurring Quests creators (so they don’t lose that advantage if they do not recreate a Quest), but also for clients to try more long duration Quests (4 weeks or more, during a bear market where bribe prices are more constant, or for DAOs not wanting to overbid other bribes, but have a base bribe price)
  • I see a debate for big Bribing Protocols/dAO being advantaged compared to new or smaller actors, which in both case will hardly reach required volume amount to get any cashback, but the framework with increased cashback based on time, those small actors, after testing Quest and in the case they continue using Quest for a short while, will be bumped into a 20% cashback directly, which would offer a more significant cashback that if they keep creating Quest with a low volume (because only based on Quest size, they might never pass the 1st threshold). And in contrary, it prevent big clients coming for the 1st time (and that can turn to be non-recurring Quest creators) to receive too much of a cashback (since we prefer to see a cashback model for Protocols that align with Paladin & Quest).

And yes, small typo on the Framework-v2, for Major clients, it’s 1%/4%

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Thanks for the detailed answer about technical issues, I understand that for now it’s complicated to change the contract infrastructure for it, and that you rather manage it manually until you can find time to build it.

However i’m not sure to understand what would be the weekly updates of the ratio/parameters, can you explain please ?
I was thinking that the tranches would be coded from the start, and that the contract would only have to check the amount deposited on the quest, which would define the % fees to send.

I’ve been thinking a lot about this fidelity approach and I think I found something interesting with @Enerow.eth and @Figue help on the reflexion, which I’ll share right after, but as mentioned I think 1 month is really two low to define the client fidelity

So realizing that my last post isn’t optimal as we would still not be competitive with Votium or HH until 100K weekly, I updated it:

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Modification of the new version proposed:

  • Add the 10K tranche, which will be useful to bring more project and have people talk about Quest
  • Moved the 20% fees sharing/cashback to 50K
  • Removed the 250K tranche (we could add it back if needed)
  • Added the possibility for small projects to pay the same fees on Quest than others marketplace, if the project shows fidelity:

*If a project with less than 50K weekly volume created at least 23/26 quests over the past 6 months (90% of the time), it can obtain the 20% fees sharing (lost with less than 12/13 quests over the next 3 months)
For using Quest over another marketplace, Paladin DAO can advise on the amount of vote to request depending on the budget to remain competitive and market the quest on twitter and Lenster.

In this scenario, we’d be able to bring much more project on Quest as any project with more than 50K weekly volume could pay the same fees on Quest than elsewhere, 4%.
Small projects would pay 4.5%, so still more than others, but would have the possibility to access the 4% after a 6 month period where they posted frequently.
In any way, paying 0.5% more is justified by Quest efficiency for the projects, by allowing to get the funds back if not working.

I think this would allow us to become much more competitive, lmk what you think guys
I’ll post a comment recap below with a poll

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I think several points are important and have been explained in this conversation:

-Ideally, it should eventually be possible to automate this process to save time and be in line with the philosophy of smart contracts.
Kogaroshi very well explained all the problems resulting from the automation of this product.
-The partnership with other actor is a necessity and should allow to have a much more important liquidity. I think these partnerships should also be a way to give visibility to Paladin, which is a small project that is undervalued compared to what it offers.
The fee system must be as simple to understand as possible, even if it means having to make small concessions on earnings for the benefits that this may bring.
-I appreciate the fact that whatever the size of partner, they can be rewarded in the long term by having chosen Paladin. We must have a long vision and create synergies.

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Thank you for spending the time to ponder on the framework.

I’m in agreement with a lot of your suggestions.
Two details:

  • 6 months is too long for crypto, but i get your logic. What do you think of 3 months?
  • bribes under 50k shouldn’t get a discount. We are yet to see a bribe under 10k, this would imply we effectively lower our base cost to 4.5%

I would also recommend quests between 50k and 100k also get to 3.5% fees after 3 months. This would give us a competitive advantage over other platforms.

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@julienperma you basically covered all the questions I had.

@Dydymoon I also agree with @Figue on the 3 month timeline rather than 6. Besides that, thanks for presenting the revised plan which is simplified. Nice addition of the 4.5% for small projects going down to 4% (again I would vote for 3 months not 6, way too long in this space).

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Thanks for the feedback :fire:

Yes agree I thought about it but it seemed too short, people in Defi are locking veTokens for 4 years so a 6 months commitment should be ok but anyway
We could move this to 3 months / 1.5 months, so If at least 12/13 Quest happened over the past 3 months at 4.5% fees, then 4% fees until less than 5/6 quest in 1.5 coming months

Threshold is currently bribing 6200$/week on Quest

The full point of having this long term mechanism is to attract many small projects who wants to start bribing. -50K users would only have a reward if they’ve been loyal for 3 months, and they lose it if they stop right after.

Not entirely as with the current amount (198K T) Threshold would still pay 5% for example, but globally yes it would almost always reduce our fee to 4.5%, but the goal is to have everyone access the 4% at some point

Agree very good point !
It would mean that projects between 50 and 100k would pay 4% during 3 months, then if at least 12/13 quests were done, then 3.5% fees until less than 5/6 quest in 1.5 coming months
So basically the two first tranches could have improved conditions over time, while others are fixed because already competitive by design.

Here is the updated tab

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Also wdyt about the 12/13 and 5/6 ratio, is it good or should we move to 11/13 and 4/6 ?

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Nom this is because they are splitting budget with Votium right now, in total they spend ~15K / week.

Whole framework seems reasonable outside of the discount sub 50k if they haven’t been with us for 3 months. It’s a free discount

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Yes I know, I was only speaking about their volume on Quest.

It basically means to remove the only tranche where there is no competitive advantage, so even if it might seems unfair that project with 50K- move from 5% to 4% vs 50K+ move from 4% to 3.5%, I agree it make sense to remove this tranche to simplify the framework.

Framework update:

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If we don’t have another amendment comment, it will be put to vote starting tomorrow. So we can have it live for next round.

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Vote is up!

https://signal.paladin.vote/#/proposal/0x7bfe37929e8988d95feab78e98230255412210a2dbe12e959c0f95322664a798

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