[AIP-4] Redirect All Emissions on the alUSD Staking Pool to the 3CRV Pool

ButlerAndTheThirdStringers

In AIP-3 we changed the weekly ALCX staking rewards to better serve the Alchemix Protocol (https://snapshot.org/#/alchemixstakers.eth/proposal/QmedGhedXebdpTbgw67R9A2xSmY2SuJh8swu6sFCsGbTd7) and by all accounts it was a resounding success. The additional emissions towards the ALCX-ETH pool have increased the liquidity of ALCX against ETH which is key for any protocol since ETH is the base asset in the Ethereum ecosystem, and the ALCX-only emissions have helped to curb sell pressure as a result of emissions. Interestingly enough, the most valuable pool may have proven to be the alUSD3CRV pool, for the following reasons:

Creating a stable market of alUSD against the three most popular stable coins helps the peg, which prevents the need for users to redeem using the transmuter, which means more funds for the treasury and more funds to boost actual borrower APY when the transmuter is upgraded in v2
A high APY on alUSD incentivizes borrowing, which increases transmuter TVL and as a result protocol earnings for the treasury and borrowers. Additionally, with a high alUSD APY, users who want to earn on stables are incentivized to liquidate in order to convert nearly all of their collateral to alUSD, which also increases transmuter funds for the aformentioned benefits.

The only pool that has not proven to not be as useful is the single alUSD pool. Although this may help stakers earn APY on alUSD, it does not come with the other benefits of the alUSD3CRV pool, namely creating a more liquid market for alUSD against other stables, and increasing reliability of the alUSD in the broader Ethereum ecosystem. Additionally, the much larger allocation of emissions towards the 3CRV pool as a result of the above snapshot has resulted in a higher APY earned on the 3CRV pool than the single alUSD pool, even with roughly 100m more in TVL in the 3CRV pool. This has effectively rendered the alUSD only pool useless to stakers, and to the protocol. (references below, courtesy of @0xdef1 and vfat)

https://velocity-app.flipsidecrypto.com/shareable/aldai-pool-cIN5fS
https://vfat.tools/alcx/

My proposal is that we redirect all of the 2% emissions on the alUSD only pool to the alUSD3CRV pool. This incentivizes more borrowing and enhances the benefits listed above that we've already seen materialize as a result of directing a greater percentage of emissions to the 3CRV pool in AIP-3. @scoopy has indicated that deleting a pool, or reducing emissions to 0, is not practical from a coding standpoint, but we can reduce it to something negligible like .00000001%.

Thoughts?

aphoticjezter

I guess my only hangup, is that the alUSD pool does give an additional option to people using the vault to mint alUSD. While it may not be the most efficient use of alUSD or the 2% of ALCX emissions, I do see the value in keeping the alUSD pool especially for small stakers who are concerned about transaction fees.
At the very least, until other uses for alUSD come online.

ColdWinterBlues

I totally support the proposal of discontinuing the reward for alUSD or leave it a 0.0001%.

Also I believe the implementation should be easy to do and would not divert resource from V2

Right now stackers in alUSD benefits from a 65% APR vs 67% for alUSD3CRV, so they are getting about the same APR but at a much lesser risk and no utility. alUSD3CRV stackers do have an intrinsic risk with having assets in a stable pool.. i.e. if any assets drop (DAI, USDC, USDT, alUSD) (weakest asset) the stackers will suffer.

scoopy

I'd be in favor of cutting rewards for the alUSD only pool to 0.5% of weekly rewards and moving those rewards to the 3crv pool. Reason being that the alUSD only pool is useful for peg stability in that it is a low barrier to not dumping them. We could further reduce this in another adjustment to closer to zero, but I think doing it all at once would be more disruptive that it needs to be. Also wouldn't mind a slight adjustment away from the ALCX only pool and into 3crv to incentivise more minting of alUSD because a lot of the ALCX only stakers are pulling liq and dumping. docking their APY by 10-20% wouldn't be a terrible thing.
60% ALCX/ETH SLP
19% ALCX
20.5% alUSD-3crv LP
0.5% alUSD

Nyyls

scoopy Even though I'm in this pool rn I'd be ok with alcx only get a small cut too and to cut the alusd rewards. We only need to promote what's good for the health of the project!

RogueItachi

I like scoopy plan here. Especially when we get the transmuter farming, there are going to be a lot of people who want in on the protocol and a lot of new alUSD minted. We want them to have as much of a liquid market as possible to show how awesome and seamless this protocol is. As Butler mentions, if they happen to self-liquidate like true degens to ape harder into those higher rewards, then that will help both the 3CRV pool get more liquidity and the transmuter for farming. I don't think the ALCX only pool pay cut will do any real damage. It's healthier to incentivize that 3CRV pool at this point.

anon3469

scoopy Happy to get your feedback on this. Yes it makes sense. Although I'm staking ALCX I'd rather lower the APY to prevent farm and dump and incentivize the 3crv pool instead.

seanmc-eth

scoopy I support scoopy's proposal and would even be in favor of cutting the ALCX only pool rewards even further (possibly even to 10% and splitting the cut amount 50/50 to go to the SLP and CRV pools?). I think that funneling as much liquidity to the LP pools as possible is ultimately what is best for the protocol and is the best way to incentivize long term investment.

DEFIchad

Would be nice if rewards went to product users

ButlerAndTheThirdStringers

I don't mind the small ALCX-only cut. Maintaining the best yield on a stable benefits the protocol a lot and that should be the priority. A bump from 18% -> 20.5% is a decent raise and I think it would go a long way in incentivizing minting of alUSD. Some math to see just how much of a bump that would be, using this week as an example:

Total ALCX Emissions This Week:

347.63 (alUSD-only) + 3476.26 (ALCX-only) + 10428.79 (SLP) + 3128.64 (3CRV) = 17381.32 ALCX

Hypothetical ALCX Emissions to 3CRV This Week: (based on a 20.5% share)

17381.32 * .205 = ~ 3563 ALCX (increase of ~ 434 ALCX this week)

Current ALCX earned this week per 1 dollar staked in 3CRV:

(~ 3129 alcx per week / ~ 339,803,637 dollars staked) * 1380 dollars per alcx = ~ $.0127 per week per 1 dollar staked
$.0127 * 10,000 = ~ $127 earned this week per 10k staked
$.0127 * 50,000 = ~ $635 earned this week per 50k staked
$.0127 * 100,000 = ~ $1270 earned this week per 100k staked

Hypothetical ALCX earned this week per 1 dollar staked in 3CRV:

(~ 3563 alcx per week / ~ $339,803,637 tvl) * $1380 dollars per alcx = ~ $.0145 per week per 1 dollar staked
$.0145 * 10,000 = ~ $145 earned this week per 10k staked
$.0145 * 50,000 = ~ $725 earned this week per 50k staked
$.0145 * 100,000 = ~ $1450 earned this week per 100k staked

Over the course of many weeks it's easy to see how this could add up to a lot more money, and I think it would give us a nice boost in protocol usage

111altrekt

After a careful review of the proposal by scoopy, i am now 100% convinced it's the right thing to do, with respect to ALCX decrease to 19% by 1% and alUSD to 0.5%, anytime we're ready for vote, we'll be ready:::

anon3469

I'm in favor of it. Well written proposal! Makes complete sense!
Thanks for that

ElB

I agree with @ButlerAndTheThirdStringers, moving 2.5% from ALCX to 3CRV makes sense and provides more rewards to the degens enabling a foundational component of the project. I don't understand the rationale for cutting alUSD rewards, alUSD holders are providing value to the project through funds deposited or liquidated.

If we are making adjustments, I think the ALCX direct staking rewards are too high in comparison to SLP, SLP carries much more risk but only holds a 50% premium (currently 9%/week vs 6%/week). Whereas staking alUSD direct actually benefits the project, the only benefit to staking ALCX is incentivizing people not to directly dump ALCX after it being farmed. Being an ALCX holder I'm happy the price is not seeing large crashes, but I'm also starting to view my SLP risk as less attractive and moving to a stronger direct ALCX position with the current rewards structure. If we are going to adjust, I think we should also make a slight adjustment to ALCX direct to SLP rewards as well, as SLP is much higher risk and adds much more benefit to ALCX holders. Recommendation is slight variation of Bulter's:

Increase 3CRV by 2.5% and SLP by 1%, coming from ALCX direct. New rewards:

61% SLP
20.5% 3CRV
14.5% ALCX
2% alUSD

chillsauce1

I like bingos proposal. Staking alUSD is kinda useless.

RogueItachi

I'm going to amend my first response. I would prefer the weights to be:

60% ALCX/ETH SLP
19.3% ALCX
20.5% alUSD-3crv LP
0.2% alUSD

This would still increase the incentives for the 3CRV pool, yet retain a little more rewards for the ALCX believers than Scoopy's plan. I would think most people are going to use the 3CRV pool if they want to farm with their alUSD because of the much higher rewards, and if not, they will trade alUSD for another stable regardless. The 3CRV liquidity is more valuable than solely holding alUSD in my opinion. And when new uses for alUSD come out, like maybe a Fuse pool or integration with other protocols, people could swap back to alUSD or yeet into the vault more to have alUSD to use in these other projects. The first option could build an alUSD premium and the second will give us more in our vaults and increase our TVL.

metaregular

as a noob who appreciated the alUSD pool at first, when the rewards were cut the first time I forced myself to learn how to deposit into the CRV pool. If I were a new noob coming in I wouldn't want to deposit my money in the alUSD pool and then learn latter that it wasn't capital efficient. I'd rather the protocol remove that decision for me and force me to use the pool that was most productive to the protocol.

Beeptalk_Feld

I don't see the rush in lowering the AlUSD rewards. Since AlUSD isn't very liquid, it gives someone a reason to experience the actual use of the protocol in a profitable way. If this proposal were to pass, I think it should either be gradual, or announced alongside some other things users can do with their AlUSD, imo.

daidai

While I very much agree that making sure we maintain the really good liquidity on the 3CRV pool is extremely important, having an alUSD staking pool with decent rewards helps keep a good portion of those out of the 3CRV pool and contributes towards maintain a healthy ratio of alUSD to other stablecoins in the pool. If we were to see a significant price drop in ALCX, leading to a drop in yield to alUSD3CRV LPs, people would start pulling non-alUSD stablecoins and the ratio could be in danger of putting alUSD significantly below the $1 peg, since even with the transmuter giving out DAI 1:1, there's still an opportunity cost associated with having to wait for it. I don't think it's too farfetched to think that it could trade at like $0.95 or something like that in such a scenario. This would obviously be pretty bad, as it makes it even less likely for other protocols to adopt a supposed $1 stablecoin that consistently trades below the peg. This is why I think just removing all the rewards is too risky while we're still in the early stages and lack adoption of alUSD. Once there's an actual demand for it besides farming the rewards can probably be phased out safely though.

I'm not opposed to reducing the rewards though, but I'd like to err more on the side of caution and keep at least 1% for it. I'm also not opposed to slashing some of the ALCX-only pool's rewards, so with all of this in mind, I would rather see the following distribution:

60% ALCX/ETH SLP
19% ALCX
20% alUSD-3crv LP
1% alUSD

toast

I'm personally not in the alUSD only pool but it currently has the benefit for people to enter and exit easily since we can't withdraw from the alUSDCRV pool to single asset (yet). Though tbf, we probably dont need to adjust for people exiting the system.. unless we are confident that the alUSD is is being used elsewhere.

SathFenrir

So I caught up and my stance is to incrementally disincentivize the alUSD pool until it is eventually fully phased out. Most of the proposed weights are good options, but we should view them as temporary and aim to have further votes on another re-allocation of weights.

D - (Scoopy's choice) Reduce alUSD weight to .5% to boost crv, while also reducing ALCX-only by 1%
ETH-ALCX sushi pool : 60%
ALCX-only staking : 19%
3CRV-alUSD pool : 20.5%
alUSD pool : .5%