Discussion about reworking current and future incentives

Hello @Cryptex Team, Crypt Keepers and Cryptex community,
I would like to start a discussion about reworking the current and future incentives and work out a proposal together.
The goal would be to increase TCAP supply and in the same time protect CTX holders who believe in the project long term, thus increasing decentralization in the protocol.

The Cryptex Team has 740,000 CTX earmarked for future rewards, liquidity incentives for new Cryptex tokens and strategic partnerships.
It should be noted that this amount wouldn’t come from the treasury, it would come from the team multisig.
The Cryptex DAO has a treasury balance of 4.926 million CTX that will remain locked in our community treasury, only accessible via the passing of a community vote for continued DAO initiatives and incentives.

With the launch on Optimism and Polygon around the corner, I think now could be a great time to rework the incentives!

The current state that we have now:
60,000 CTX allocated to SINGLE SIDE STAKING on October 06, 2021 - will run for 6 months until April.
100,000 CTX allocated to ETH/TCAP LP on October 06, 2021 - will run for 6 months until April.
100,000 CTX allocated to ETH/CTX LP on October 06, 2021 - will run for 6 months until April.

In the past few months we were struggling to pass votes because of the 400,000 CTX required for a quorum on on-chain proposals, multiple times we went to 400,000 staked CTX, then below and up again. Currently we are a few hundred tokens above 400’000 CTX delegated to Crypt Keepers.

With the current state of incentives we are giving more rewards to Liquidity Providers than Single Sided Staking.
On chain data is showing that big liquidity providers don’t hold onto their CTX or restake their rewards in the SSS pool, thus not providing any value to decentralization.
If we want to increase decentralization one approach would be to increase the staking rewards for Single Sided Staking.
Additional to that we could add a delayed release of rewards on LP pairs (or vesting), as suggested earlier by @leo130.

Recently we also added LINK and AAVE as new collateral for vaults, in the future wBTC and Matic are planned.
One point we should also discuss would be: do we want to add more LP pools for TCAP (AAVE/TCAP, LINK/TCAP, wBTC/TCAP, MATIC/TCAP) and add incentives for Liquidity Providers?
I think that could greatly increase the TCAP supply and liquidity, especially if we do it straight on L2 and discount the incentives on L1.
This could position TCAP as the main denominator on L2 and bring more users from different communities to the protocol.
With the current incentives only big holders of ETH are incentivised to mint TCAP and I think we should change that for the benefit of everyone. It should be noted that we don’t have to increase the total amount of CTX rewards, the rewards could be split across the different pairs, this will make CTX more scarce and decrease farming and dumping.

I would like to open this for discussion now. Please feel free to share your insight on how much CTX rewards we want to give out and how it should be split between pools.

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I would definitely love to increase adoption on L2s, the only issue that I have, is that CTX moved to L2 is CTX that can’t be used for governance, we can create some kind of staked CTX that is delegated, but who will receive that delegation?

2 Likes

You are right, we can’t have the goovernance on L2 yet, so I would suggest to keep the Single Sided Staking pool on L1 but move the TCAP liquidity pools with the minting to L2.
Later we can use SnapshotX or when Tally comes up with a multi chain solution for governance, we can use that.

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Is there a way that CTX can be earned on L2 but awarded on L1?

Some thought on the delayed rewards is that I’ve seen some other projects release the LP rewards in a 6 months delayed schedule, which may benefit long-term holders vs short-term farmers.

To increase the usage of TCAP, one thing to consider is still to increase the supply of TCAP and increase the arbitrage opportunity. Adding more collateral shall increase the supply anyway.

Are there any other defi projects taking TCAP as collateral? Is this a good direction to explore?

2 Likes

Great topic and writeup!

I agree that the current reward pools, though helping with liquidity, appear to be resulting in farm and dump and that’s not in the best interest of CTX holders.

Do we have any data on what happened to liquidity levels when we went from rewarding 500k CTX per pool in the initial period down to rewarding 100k CTX per pool in the current period? Could we use that to get a sense of what may happen to liquidity if we do another deep cut (or even eliminate) the rewards on the L1 pools?

My preference would be to shift rewards towards L2 – to kickstart adoption there and hopefully engage a broader population in the protocol, those that previously stayed away due to fees.

I also like the idea of higher rewards for single sided staking. As you stated, this strengthens governance and keeps more rewards in the hands of those that tend to be in it for the longer haul. Bonus points if staking rewards could be added directly back to staked pool (to make holding those rewards the most convenient and cheapest thing to do). Double bonus points if staking could issue back a “staked CTX” token that could be used creatively for collateral purposes. Sorry I’m getting beyond discussion scope here (just loved those ideas!) I’ll rein it back into reward distribution.

Not sure if the next set of rewards will come from the multisig or the treasury? And based on that answer, if the current reward amount of 270k CTX per period is a number we need to be targeting again or not. Also not sure what logic went into deciding how the amount was distributed across the LPs and SSS for the current period. Maybe someone on the team could weigh in on these questions.

In absence of that information, just to give us something to poke holes at…

If we assume current budget of 270k CTX per period, what if we were to:

  • Reduce L1 rewards to 25k CTX per pool in the next period
  • Raise SSS rewards to 100k CTX in the next period
  • Allocate 120k CTX to rewards on L2 (need to determine pool split) in the next period

Since the next rewards period doesn’t start until April, perhaps we could even do a more concentrated initial incentive on L2 for the next 2 months to attract earliest adopters.

Regarding delayed reward vesting, I don’t know if that helps or just concentrates the sell pressure (remember October?) so I’d probably say stick with no lockups.

Ok, that’s enough rambling. Like I said, just something to throw darts at. Fire away!

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The rewards are allocated from the multisig, not sure about the max. reward amount available for the next period.

I’m not sure that we need to raise SSS rewards that much, if at all, since we’ve been able to maintain the levels needed for governance now that the volatility has subsided. If an increase is necessary, perhaps only increase it to 70k?