We recently opened up the cDAI originator for SMART Yield, and will be enabling originators for aUSDC, aDAI, aSUSD, and aUSDT by the end of April. As demonstrated by the cUSDC pool, subsidizing the junior tranche plays a powerful role in attracting liquidity. This post is intended to initiate a conversation on how to best use DAO resources for further SMART Yield TVL incentivization.
There are essentially three possible routes at the moment:
Incentivize one originator per platform
Reasoning: Not all stable coins are viewed equally by the market, and BOND rewards should be reserved for creating a critical mass of TVL in one originator rather being spread thin across multiple.
Implementation: 10,000 BOND weekly for both cUSDC and aUSDT
Argument For: USDC and USDT are the regional heavyweights for the US and EMEA, respectively. Senior tranche purchasers are more likely to have compliance mandates, and so non-USD backed stable coins (e.g., DAI, SUSD) may see less senior demand.
Argument Against: DAI is similarly sized with USDC on Compound; USDC is bigger than USDT on AAVE v2.
Determine uneven weights for each originator per platform
Reasoning: All SMART Yield originators require BOND rewards in order to be competitive against the rest of DeFi, but there are certain leaders worth prioritizing.
Implementation: 10,000 weekly for both Compound and AAVE, split unevenly in favor of USDC on Compound and USDT on AAVE.
Argument For: Attracts enough liquidity to smaller pools such that there are no severe outliers in terms of relative TVL
Argument Against: Spreads BOND rewards thin, unclear whether demand for senior tranches will be similar across different stable coins.
Assign equal weights for each originator per platform
Reasoning: Overall TVL secured might not be that different if smaller pools get an outsized shared of BOND rewards and attract new DeFi participants.
Implementation: 10,000 weekly for both Compound and AAVE, split evenly across all originators.
Argument For: Smaller originator pools would see outsized yields that could attract new users.
Argument Against: Unclear whether users would stick around once the rewards and abnormal yields ended.
There is no associated Snapshot vote on this topic at the moment. The core team is looking forward to this forum conversation and will take it into consideration when AAVE pools are live and we move to put up a DAO vote for the staking rewards.