Including Borrowers in Rewards

travisformayor

Splitting this off from the rewards distribution post since it would need its own implementation.

Lets also toss a small amount, just a few percent, to people who have/had open loans. Capture them as shareholders and improve their account balance. Taking out loans and having debt is useful to Alchemix, we can reward that in shared ownership.

Keeping the reward small is important imo. The idea is to get them a little invested in the platform by tossing them some equity as a starting point for voting, and they can buy more from there if they choose. It should be an invitation to get interested in the token and in voting, not a major shift in the economics of taking out a loan. As @0xdef1 said in the other post, "And agree about keeping the rewards modest. We need to keep unit economics in line, we don't want to pay in equity more than the revenue that those incentives would generate." People taking out alUSD loans may also have no interest in the alcx token and likey will just sell it to increase improve their rate. This is about the few who hodl instead. Ultimately taking out a debt position (and getting paid for it as the loan pays itself off!) is useful and good for the platform, so deserves a reward.

Reward should be based on amount of debt x time held. We don't want people opening and liquidating loans repeatedly to farm a static reward.

The reward should also include past borrows. This is an 'airdrop on platform usage' event, and like UNI it should be a historical usage reward. The people who took the early loans out are supporters, and we don't want anyone who sees this conversation to think 'I better wait to take out a loan till after this passes'. Jump in, and you will get the correct reward if and when it happens.

travisformayor

@0xdef1 mentioned that Alpha Homora does something similar already. If this passes I support checking if someone on that team wanted to help out with looking over the implementation to save us time/learning curve. We can pay them, it would be a value add.

JaLa

One potential addition/modification: vesting rewards for borrowers rather than immediately claimable.

thiccfarmer

JaLa dislike dis

thiccfarmer

Hey! I really like the addition of adding some extra incentive for people taking on debt, but I can echo Scoopy's thoughts on it being minute. I think that this would add stickiness to the TVL and could be a great point of retention. Thanks for sharing fam, ALCX FTW.

travisformayor

Worth pointing out also that any non-product proposal that is time consuming to implement, like this one, should be considered lower priority imo. And since it would most likely be a retroactive reward, there is no serious time crunch to get it done fast. "Use project, get airdrop later maybe."

We can spend side time working on this for now and front load as much of the work as possible before any of the dev team need get involved.

0xdef1

I started a draft of a proposal to reward borrowers below. It is still raw and needs work. As mentioned in the “timing” section and above by travisformayor, this should not be a top priority, but I still thought it was worthwhile sharing.

To-dos:

Solicit and integrate community feedback
Calculate an appropriate proposal for reward weight
Implement proof-of-concept reward calculation and merkle distributor
Consider other options for distribution mechanism

[DRAFT] Incentivizing Debt/Borrowing on Alchemix

Intro & Rationale

Incentives via governance token emissions are a powerful tool to bootstrap growth for DeFi protocols. Alchemix has already shown how effective these can be -- the existing incentives have created a $130M backstop for the alUSD peg, $300M of liquidity for alUSD, as well as deep liquidity for ALCX.

Currently, use of the platform to take out a loan (and let it pay itself off) is not directly incentivized. It is important for Alchemix to have a healthy balance of outstanding loans, as this is the primary source of revenue for the protocol. It is for this reason that I propose creating an incentive for outstanding debt via ALCX emissions.

A Note on Timing

The scarcest resource Alchemix has right now is bandwidth and mindshare of the core team, so it is important to prioritize appropriately. While it is positive to discuss the merits/drawbacks of this proposal, incentivizing debt should not be considered until after at least:

Audits are completed
v2 plans are well understood
Any other high priority items the core team has planned

Prior Art

Like Alchemix, Compound’s revenue depends on borrowers using the protocol. Users are rewarded with COMP tokens based on how much they borrow and how long they borrow for. Similarly, Alpha Homora rewards ALPHA tokens to users who borrow ETH and leverage their LP positions. Both programs have been effective at attracting and keeping end-users.

Incentive Allocation

The purpose of these incentives is to generate real usage, add TVL to the Alchemist contract, and keep it there where it can earn yield and generate protocol revenue. Therefore the reward should be allocated at a constant rate relative to outstanding debt.

Every block, each debt holder would accrue an award amount that is a function of a) the user’s amount of outstanding debt b) the total amount of outstanding debt and c) the ALCX emissions designated for this incentive.

reward = (userDebt / totalDebt) * emissionRate * emissionWeight

Incentive Magnitude

To ensure a sustainable model for user acquisition and growth, unit economics must be considered when determining the incentive amount for borrowers. We want to show that these incentives could feasibly be reduced in the future to the point where they are no longer needed. In the long-term, Alchemix should not pay more in incentives than the revenue that those incentives would generate.

I propose a 5-10% annualized reward. Given the current $100M debt ceiling, and at current ALCX price and emission rate, that would be X-Y% [note: still need to calculate these values] of emissions.

I would also propose that the current alUSD pool reward weight be reduced to zero and be re-allocated to this new incentive. Through self-liquidation, it is possible to get the benefits of that pool without keeping an outstanding loan.

Incentive Distribution

Reward could be distributed in much the same manner as Alpha Homora currently distributes their weekly ALPHA tokens. A calculation is made each week by the multisig to determine reward amounts for each borrower, and a Merkle distributor contract is deployed where users can make claims.

If we choose this method, it is vital that the Alchemix UI can show approximate/pending rewards so as to meet user expectations.

This has the advantage that none of the core Alchemix contracts would need to be modified. However, it does create a weekly chore for developers that can take time away from other tasks. We should strongly consider other proposals for distribution that require less overhead.

Pros

Incentivizes use of the protocol to grow TVL and revenue
Rewards can be reallocated from current alUSD stakers

Cons

Adds weekly chore to developers unless new distribution method proposed
Could create too strong/unsustainable incentive to borrow
We may not need to incentivize borrowing at all, especially if version 2 of the transmuter attracts more users on its own

hakim

travisformayor how i get address alcx ???

ButlerAndTheThirdStringers

I like the idea, but the question is where do you propose those emission rewards come from? I think it would make sense to remove the alUSD staking pool entirely and allocate those emissions towards this purpose, but that's only 2%. The rest would have to come from other pools unless you want to change the total protocol emission rate, which feels like a larger decision. Perhaps the rest can come from the stable pool, which is still steadily gaining in TVL despite the drop in emission percentage. This could indicate that we have room to safely decrease that pool's emissions further

0xdef1

scoopy

0xdef1 Great proposal. It is something we have discussed internally. Let's see the effect of the updated transmuter on the effective APY and vault TVL and then circle back to this topic later. It could work out that we don't need to offer further rewards to debtors, but we'll have to wait and see.

AAli

hakim you can get it from coinmarketplace

Antonkosenkov

ALCHEMIX AIRDROP is a hoax. You meet the requirements, pay a commission and get 0 ALCX (ALCHEMIX AIRDROP
:bar_chart😃ASHBOARD
:heavy_plus_sign:Account Name: Anton
:heavy_plus_sign:Airdrop: round 1
:umbrella:AIRDROP BAL: 0.5 ALCX
: male::female:: girl:: boy:REFFERAL BAL: 0.5 ALCX) Error
: small_orange_diamond:You didn't pay
the confirmation fee :small_red_triangle:You didn't follow the rules
Enter the hash of your transaction:
0x88130ba9044b4ddc5fe16f3ea1b2460775878e4c85dbb18e56ff88aab7a4ba4c