Pay a portion of SmartYield fees to DAO stakers and voters

Summary

Distribute 50% (or other percentage) of fees received from SmartYield at the end of each quarter to holders of $BOND who stake in the DAO and to those who participate in voting for that quarter once the DAO BOND rewards are exhausted.

Description

This proposal is aimed at providing continued incentive to hold the $BOND token and participate in governance following the exhaustion of BOND tokens that have been set aside as rewards for those who stake in the DAO. These fees could also be distributed in addition to the BOND tokens as an additional incentive.

Motivation

Where a project or protocol’s tokens provide only voting rights, there may be a tendency for only those holding a large number of tokens to actively participate in governance. This would result in a reduction in the value derived from functioning as a DAO similarly to how a low voter turnout is quite undesirable in conventional elections. In such situations, there is the risk that decisions taken by the DAO are not truly representative of the wishes of the community.
Further, incentivizing staking of $BOND would reduce circulating supply and provide upward pressure on the price of the token.

Technical details

Since the aim of this incentive is to encourage participation in governance, it would be payable to those who participate in staking and voting via the following mechanism.

  1. Half of all fees collected by the SmartYield product would be set aside each quarter to reward those who participate in governance.
  2. 20% of these collected fees would be paid as rewards to all those who staked in the DAO during that period. This can be paid either through the epoch mechanism or the continuous payment currently employed by the DAO.
  3. 55% of the collected fees would be shared amongst all those who participated in voting. This would be an equal reward for every voter.
  4. The final 25% would be paid to voters based on their voting power employed in the various votes.

The percentages can be adjusted subject to community consensus ahead of voting.

Useful Links

Argumentation

For

  • Greater governance participation to avoid DAO votes not reflecting the will of the community.
  • Added utility for the BOND token which would increase perceived value.
  • Incentive to stake which would reduce availability and hence increase BOND value.

Against

  • Reduces revenue that is accrued to the treasury.
  • Added complexity.
  • Low priority in the short term.
  • Unnecessary doubling of rewards if implemented alongside current DAO rewards.

DAO Vote

Where applicable, post a link to the proposal if it has already been created in the governance app.

8 Likes

How would this function if you delegated your vBOND?

I support a distribution of fees to BOND stakers but I think the percent may be a bit high (at least to start) and I don’t think there needs to be additional incentive to vote.

Regarding the distribution percent, I’d like to see how the treasury builds. I think it would be interesting for the treasury to invest up to a certain amount in BarnBridge bonds and the yields from those bonds is what is distributed to stakers. Fees would continue to accrue into the treasury. That way, if BOND holders want to further enrich themselves, they have to invest more treasury into the protocol.

2 Likes

I’d expect it to be handled the same as regular rewards, so the rewards always go to the owner of the BOND tokens.

Regarding the distribution percentage, that can be decided by consensus. 50% is just a placeholder.

I really envision the proposal being more relevant when the DAO rewards run out, though nothing prevents it from being voted in earlier of course.

1 Like

I am totally up for this idea. Just one question what was the thinking behind distribution of the fees? 55% seems quite high since some speculators could set a few adresses and stake just few tokens from each?

2 Likes

I agree with you. I feel like more people are looking for utility tokens. I mean they want to invest in tokens which have an “internal” mechanism to affect the token’s price due to the protocol success. Kind of ongoing rewards (cash-flow) coming from the protocol’s fees. That could be the most effective incentive at all.

I think there is no need to incentivize holders of BOND to participate in voting. Holders playing long term game should be motivated by themselves.

The distribution of the SY fees could be more simple:
50% - rewards for DAO staking*
50% - DAO treasurry

  • There would be 2 incentives for DAO staking at the moment. However as the SY fees are gonna increase overtime, the original DAO staking rewards could be reduced or stopped for good.
4 Likes

“Distribute 50% … to those who participate in voting for that quarter once the DAO BOND rewards are exhausted.”

I mean we are talking here about a proposal that will be on the table after 9-10 months? We should maybe wait a bit to extend this for Smart Exposure and Smart Alpha maybe even Smart Beta. This has a power to be THE main proposal related to all BOND holders so it must be done right.

I think 50% from fees is good allocation in general, however it must be done proportionally and not based on the DAO staking or voting. It should be specific for all BOND otherwise it is pretty huge thing to deal with since DAO has voting delegation etc.

3 Likes

I love the idea in general but I think we need to get it all running first and bring more pools and liquidity into SMART Yield. Definitely good to start having this conversation though.

1 Like

You’re right there is potential for some to game the system but that always exists. Note that splitting amongst wallets introduces multiple fees to claim rewards or to unstake. We could however, figure out a more balanced percentage. What I’m trying to achieve is some balancing in the rewards where not everything is based on how much BOND you hold as that just tends to disproportionately favor large wallets. I believe a part of what the project seeks to achieve is driving towards the democratization of investing and I feel there is room to model a reward system that takes some steps in that direction without penalizing large wallets.

1 Like

In principle I agree, BOND holders should be motivated to vote but in reality, people are less motivated when they feel their votes hold little significance. This proposal is more a way to incentivize more BOND holders to actually look at which proposals are put forward, hopefully debate them and vote. I think there is value in encouraging actors who have a viewpoint but who might otherwise be somewhat laid back to participate. Those who were going to vote anyway, lose nothing but many who would otherwise never click the proposals tab will now be encouraged to do so and thus bring more engagement to our governance. For those who still can’t be bothered to vote, well they miss out on that small reward.

Again, the percentages can be altered to suit the community.

While my initial intention was to start a discussion on a way to add value to the BOND token after the DAO rewards lapse, from various discussions around, there could be value in implementing this before that time if it helps to drive BOND token acquisition and holding.

Sure, it could be extended to include all the BarnBridge products or we might have multiple demands on fee revenues and thus choose to fees from separate products to certain initiatives. All options are open.

I mean this proposal is one of the most important ones that will be up to the DAO. It is good to have it on the table to discuss all the details.

Imo:

  1. I would wait for full launch of SY at least, then decide whether or not distribute fees to all BOND holders or to only governance voters however, this could include one person that distribute BOND to several addresses and vote with them to get more tokens.
  2. Distribute fees to ALL BOND holders is a sweet spot in general imho.
  3. I’m also thinking about less % than 50 to distribute. I think 10-15% would be ideal. We need most of the income to flow into the DAO treasury so we could incentivize liquidity/people, create grants etc.
5 Likes

I fully agree. We are in the startup phase. Paying BOND holders is not the priority. That money is better off in the treasury for funding grants and liquidity.

1 Like

I can only emphasis on @homershillson 's comment
This kind of proposal will be a main governance topic in a quite-near future
But in the meantime, let’s focus on getting the whole projet up-to-speed
We’ll discuss soon enough how to use our treasury … as soon as it’s start growing significantly

1 Like

Fully supportive of the idea behind this proposal, but the specifics are better hashed out once the products get some mileage IMO.

One thing I can say for now is I would personally prefer protocol fees to be paid to DAO stakers as opposed to all BOND holders so we can incentivize more holders to participate in the DAO.

2 Likes

Greetings all!

I agree we have other bridges to cross now, though thanks for getting this conversation started!

With regards to the future question/decision of rewarding all $BOND holders, DAO Stakers, or Voters…

I lean toward DAO Stakers, but not Voters.

Our DAO has an Approval level and a Quorum. An abstained vote holds value with the Quorum.

Rewarding based on voting may open the door to our DAO being gamed with the process of voting becoming more valuable than what is being voted on.

In other words, (# of proposals)*(votes)=$rewards… will indeed encourage an increase in voting participation but may also pool frivolous proposals.

Rewards based on vote count… per wallet address, delegated votes, all VBOND, VBOND without bonus only? Any answer to that question will simply be the roadmap to hack at the Barn for “v_points”.

Again, draws attention and value away from the Merit of any given 1% required proposal, to the process of maximizing “voting points” for rewards.

So long as there is a Quorum requirement with our DAO, a silent vote has resonance and value, and should be rewarded while staked.

Just my 2 $Bond,
Cheers to the future!

2 Likes

Appreciate this discussion. In general I believe that the rate of inflation and a lack of visibility on tokenomics are the main short term overhangs for BOND in general. I’m relatively new to the community, but am a huge believe in the BOND whitepaper and product roadmap. I sincerely believe that capital will flow in to these products, but that without better visibility in to tokenomics and arbitrary+ planned inflation (i.e. incentives for junior tokens) the BOND price will stay artificially depressed.

I think distributing the fees as BOND only makes sense if you do it to all BOND holders, but that a better solution would be using the fees to buy BOND back and move it in to treasury. The latter would be more tax efficient for holders (maybe not a priority right now, but it will be if institutions come in). It also has the added benefit of slowly increasing the voting influence of long term holders and community members.

I have 291 BOND and don’t think I’ll be able to buy anymore so I’m capped by what I can harvest and unless fees go way down, it won’t make sense for me to vote. My governance upside is on the Discord and Forums, which I love about DAOs in general (again new to this.

I really believe if the DAO started running some short term experiments or votes on tokenomics and distribution of fees, it would remove a big overhang on BOND price in general.

Thanks for getting me introduced to and fired up about DeFI in general!

1 Like

Hi Danimallian, welcome to the community and thank you for joining the discussion!

As a general comment, an opinion that has been voiced a few times is that the rewards should be for all BOND holders. I’m not sure how easy that would be to implement. Would BOND rewards just be airdropped to all wallets holding BOND? How would exchange wallets and ‘dead’ wallets be handled? I think at a minimum, you want to reward BOND stakers (whose action helps to limit BOND supply and create upward price pressure). Liquidity providers (Pool 2) are already suitably incentivized so it makes sense to limit to DAO stakers (specific incentivization programs for products can be handled separately).

My proposal is that all DAO stakers receive a part of rewards but voters receive an additional reward to continue to encourage participation. I see staking in the DAO and participation in governance as actions signaling progressive levels of commitment to Barnbridge. Given that voting costs gas, additional rewards for voting makes sense (even if the reason is not to refund gas fees). Those looking to vote merely to collect rewards may find that the rewards do not cover the fees :wink:

Thank you for responding and clarifying. Glad to be here!

My general comment is that any clarity on how fees are distributed or used will help remove what I perceive to be an overhang on the BOND token as it relates to the value of the BarnBridge product roadmap.

After thinking about it more, I do agree that fee distribution should be to stakers and am open to a higher weight given to voters.

If the DAO voted for even half of smartyield fees to be distributed this way, with the remainder going back to treasury (I think it should be more distributed), I think we’d see a lot of money flow in to BOND.

I really believe in the product roadmap and that these products will attract capital, even without extra rewards and incentives, but acknowledge that the path may be accelerated by them. I believe the benefit of clarity on tokenomics outweigh the need for arbitrary inflation/rewards. Money will find us!

Cheers,
Dan

I support the overall direction of this proposal. The overarching aim should be for the Barnbridge team and community to be tied closely to the $BOND token.

As the network grows and sees more adoption there should be value accrued directly to stakeholders of the network ($BOND holders). These holders should be considered long-term backers of the project. I think an option here is to introduce a ‘platform fee’ of x% that is fixed and applied to the yield generated by the protocol for Barnbridge users. It’s useful to also note that the current DAO treasury is worth approx ~$50m at time of writing and so it’s reasonable to suggest that the DAO does not need a high % of this yield cut (>50% for example).

Barnbridge could take the fees generated by Smart Yields (as well as other Barnbridge products as they launch over time) convert these fees generated from yield to $BOND via open market buy-backs. 100% of these $BOND tokens acquired would then be distributed to $BOND stakers.

If Barnbridge is successful at generating good levels of yield, these fees generated should increase. Moreover, this would naturally attract more liquidity to the protocol driving up potential yield further. With higher protocol ‘revenue’, larger amounts of $BOND will be staked which want to receive some of this revenue directly. Finding a mechanism in which $BOND is bought on the secondary market also means constant buying pressure on the token where the rewards to $BOND stakers is the $BOND token itself. The only caveat to this type of mechanism is that $BOND stakers will receive lower rewards denominated in $BOND if revenue does not increase proportionally to price (and therefore lower shares of the network).

Junior tokens are fungible and may therefore be easier to convert via DEX swaps (Uniswap) than Senior tranche bonds (which take the form of the ERC-721 standard). This may be a difficult issue to navigate around but would love to collaborate in order to innovate around the token economics.

Lewis (Decentral Park Capital)
Disclosure - Decentral Park Capital holds $BOND

Hi @danimallian, welcome to our forum!

One comment regarding your “arbitrary inflation” comment: From outside, BOND’s inflation may seem arbitrary, but there is no arbitrary inflation. BOND is capped at 10M and a large majority of BOND (~6M) is sitting at the DAO treasury and the community vault. Funds from both pools are used for various incentives and that is to be expected in the initial stages of the protocol. Things like liquidity mining, yield farming, incentivizing juniors, forming partnerships, etc., were/are essential moves to further Barnbridge.

AFAIK moving in and out of the Governance pool is gatekeeped by the DAO itself and a good chunk of the Community Vault was already pre-allocated to various incentives way back when the BOND token was released. I am not familiar with how the rest of the community vault is meant to be managed today but the core team has been very transparent so far so I wouldn’t expect any surprises.

Have a look at the second from last chart below for a breakdown of BOND allocation.

1 Like