Adding Voting Rights + DAO Rewards for LPs

Summary

Make staked BOND/USDC liquidity providers in pool 2 eligible to vote with BOND held in their LP token and accrue DAO staking rewards without leaving the liquidity pool.

Description

Currently, if an LP wishes to participate in the DAO they must withdraw their LP token from pool 2, withdraw their funds from Uniswap, return to the DAO and stake their BOND tokens to either vote or accrue DAO staking rewards. Then reverse the operation should they wish to return their funds to pool 2. This proposal is simple, make staked BOND/USDC liquidity providers in pool 2 eligible to participate in governance and accrue LP + DAO staking rewards simultaneously without leaving the liquidity pool.

Motivation

Ideally supporters of a protocol shouldn’t have to choose between providing liquidity and participating in governance, especially when staking/LP rewards are available. This modification would provide additional utility (voting rights) and rewards (DAO Staking) to liquidity providers in pool 2.

Technical details

To be clear, it’s only BOND tokens in pool 2 that would be eligible for voting/staking, USDC should be ignored. A simple calculation of (Current LP token price/2)/(Current BOND price) could determine the voting power of an LP.

Alternative solutions below should dual reward accrual not be attractive to the community.

  1. Staked LPs earn pool 2 rewards + 100% of BOND held in LP token eligible for voting rights.
  2. Staked LPs earn pool 2 rewards + 50% of BOND held in LP token eligible for voting rights.
  3. Staked LPs earn pool 2 rewards + 100% of BOND held in LP token eligible voting rights + DAO staking rewards if their LP token is locked in pool 2 for 3 months.

Argumentation

For

  • Greater governance participation.
  • Added utility for liquidity providers.
  • Dual staking rewards.
  • Locked LPs could provide significant support for the protocol.

Against

  • Dual staking rewards.
  • Users can withdrawal LP tokens and stake in DAO currently.
  • Added complexity.
  • Low prioritization.

DAO Vote

N/A

1 Like

I’m sorry that I don’t quite agree with this plan. I think it will be two different functional divisions, and they can’t participate in it at the same time. If so, it’s ok to use snapshot voting directly, so there’s no need to do a DAO function. We cannot satisfy that every BOND can go to vote because it is free.

3 Likes

I’m don’t have an opinion at this time without any data, but is there a value-add for a “DAO function” vs. allowing all BOND holders, whether it’s staking on Aave or in an LP or anywhere else for that matter?

Pool 2 is already well compensated with rewards and does not need further additional incentive/rewards. I can see the rationale in allowing Pool 2 voting rights, but the “rights” of Pool 2 will get very confusing if we consider them a part of governance. If there are fees rewarded to DAO stakers, is Pool 2 entitled them as well? What about liquidity providers on other exchanges? Why do only liquidity providers on Uniswap v2 (layer 1) get voting rights?

2 Likes

While the proposal is in good spirit, I think the LP pools can be quite susceptible to manipulations in the initial stages of a project. Someone having huge voting power because they provide a lot of liquidity can create a conflict of interest, in my opinion.

In fact, it seems to me that avoiding such very scenarios is the founder’s decision to make vBonds earned only through locking $BOND and not being tradable.

Playing devil’s advocate here. As someone who is personally in both pool 2 and has tokens staked on the DAO, I like that it is a tough decision whether to stake in the DAO at a lower APY or subject more capital to impermanent loss in pool 2. I would love to see more people leave pool 2 to become more activity in governance as it would benefit the community and would subject my holdings in pool 2 a higher APY. It forces token holders to state what is most important to them (governance voice / no IL versus a higher APY). That is importing because it supports my assumption that the general sentiment of DAO stakers are generally more bullish (long term) than holders on pool 2. Pool 2 holders would be more likely to vote with a short term perspective with regard to treasury assets, partnerships, etc. Further, a higher pool 2 yield could attract more capital that is solely participating in the pool to farm which would be the last wallets we would want to have a strong voice in governance.

Overall I think the team’s decision was well thought out and currently is aligned with where we are in the project and the maturity of governance.

3 Likes

I don’t support the double dipping concept.

1 Like