SPS Governance Proposal - Reduce SPS:WETH Incentives by 50%
DAO Sponsored Proposal 5
Request from @schachoberhessen
EDIT: Updated per @schachoberhessen request:
This proposal is part of an ongoing effort to rework and adjust our LP incentives to ensure that we're creating value for the SPS DAO and our token. There are pools that some feel are being significantly overpaid for the value that they provide to our community. If a proposal does not pass, nothing will change until if/when a new proposal is made and passed. Please provide feedback during the preproposal phase as it relates to this particular pool's proposal.
If this proposal passes, the SPS DAO will reduce the inflation currently being paid (1,300,000 SPS per month) for the SPS:WETH pool to 650,000 SPS per month.
This proposal is part of an ongoing effort to rework and adjust our LP incentives to ensure that we're creating value for the SPS DAO and our token. There are pools that some feel are being significantly overpaid for the value that they provide to our community. If a proposal does not pass, nothing will change until if/when a new proposal is made and passed. Please provide feedback during the preproposal phase as it relates to this particular pool's proposal.
If this proposal passes, the SPS DAO stop entirely all inflation currently being paid (1,300,000 SPS per month) for the SPS:WETH pool.
As I'm posting this on behalf of someone else and I'm sure I'll get questions:
My personal stance is that if we do this, we should deploy DAO funds on ETH to ensure liquidity. I'm still working on trying to get the SPS:ETH v3 pool with SushiSwap bonds live. That would be the ideal pool to deploy DAO funds in if we're going that route. Just my 2 cents.
My Lord this seems like a slap in the face for those who've faithfully held SPS:WETH during the bear market, enduring severe impermanent loss -- while giving everyone their lovely exit liquidity. I must be misunderstanding something.
Is the hope that removing the one small positive for those trapped in the SPS:WETH pool will help our ever-inflating SPS' price rise? This sucks because anyone not in the pool will have no problem voting for this, while the pool participants will clearly have no chance to compete. Lovely.
This pre-proposal request must have been by someone who doesn't know this pain, and just wants SPS to perform better in theory. This shoves a middle finger at those who've held long term, hoping for some sort of material rebalance -- while also making their motivation for future LP involvement virtually zero.
Just for kicks, I reinvested almost all of the LP rewards into max gold cards, which I rent to help those potentially voting for this compete. A symbolic message like this makes me want to instantly stop all reinvestment to focus on ETH recovery.
As for DAO funds: we should, or we will?
My thoughts are that if we cut this inflation, we should deploy DAO funds on ETH to ensure liquidity. I have no ability to say "we will" as that's a DAO decision. As far as the impermanent loss argument, we've been printing 1.3 million per month to this pool and it's one of the weakest performing we have. I can see why people feel the way they do. I personally was looking for a better compromise option, but I can't refuse someone's proposal request based on my personal agreement. I voted against this for what it's worth.
For those who feel it's a terribly performing pool, wasn't it essentially created during a bear market, and then sustained mainly during a deep bear market? I feel that to be the case, while unsurprisingly few were investing ETH or any external funds into the game. FWIW, I was using the pool along through this time, and with a significant amount of funds.
Bear market performance is generally not the pool's fault, and definitely not a fair shot for judging its value. Many other LPs are between in-game or HIVE assets people slosh around, so they'll naturally perform better. I think those hold significantly less value once real money tries to get in the game.
This was a true external ETH-facing pool (and key to connecting ETH and HIVE assets). This is ultimately where real money can flow in -- versus extremely micro-cap internal LPs that others want to maintain -- presumably because they can keep sloshing their internal funds around for yield. Ironically, we need external pools to be stronger instead...
Removing the incentives here will also simply let those hang out to dry in it in hopes that SPS miraculously catches up and passes ETH price appreciation... all risk and no reward -- just to try to break even. Feels like a bait and switch. People made significant investment decisions based on the reasonable expectation that at least "some" type of SPS yield was issued, not "none" now, if the DAO doesn't support it.
I also interpret this underperformance is a testament to how little our player pool was willing to invest in the game using ETH-based funds during the bear market. Not the pool's fault. In reality, we can't expect lots of new players during this time. Realistically, this probably won't be the same during a real bull market, where price action and marketing efforts are going to drive inflows of legitimate capital.
Wouldn't it be ideal to keep this pool strong and incentivized for that? Killing one of the funnels and hurting those who got destroyed with major impermanent loss from the onset, just because some random person decides to have you put up a pre-proposal that screams "save SPS inflation" since it wasn't a high performer during a bear market. Most people aren't in the pool so they will think for their own bags. Seems like we're simply going to shoot ourselves in the foot. As one of the top card holders in the game -- it makes me need to figure out how to start extracting funds for ETH versus putting more in.
Loyalty should be rewarded. Allowing others to be financially punished after having the reasonable assumption that yield would not be reduced to literally "none," is infuriating.
Thanks for your reply.
I voted against with the little SPS at my disposal. Feels like yet another punition for those that did effort and lost money to maintain the game during the bear, which is unnaceptable.
I'm not involved in it, but removing something just when it might be actually useful as bridge to feed fresh money to the game from ETH feels wrong to me.
I can only support such option with the commitment of DAO funds funding the ETH pool.
It is the primary on/off for me because I'm US based.
Bridge fees have become too expensive to start at BNB and make my way to ETH for use on US chains.
Clearly, it seems most of the current community don't have that problem (perhaps their state allows Binance.us) or they remain 100% in crypto - where BNB is the optimal chain to launch in/out of SPL.
Finally - with the other ETH based pool losing funding, it seems we are abandoning ETH chain LPs, yet a major asset RUNI is ETH based. Seems short sighted.
*for use on US exchanges
Yep, as I stated above, I can't support it without the DAO committing to putting liquidity on ETH. I do think the cost of this pool and it's utilization are extremely poor so I can see why the value proposition isn't there. That said, the DAO could deploy like 500k or a million dollars into an ETH:SPS v3 pool and just earn whatever fees and eat whatever IL. As is, I think this is unlikely to pass.
As discussed on Discord, there are several reasons why I do NOT believe we should change this yet, at least not at the start of a bull run.
But before I go into that, I also wanted to mention one term which has been used a LOT to confuse the community, which is "underperforming". The success or performance of a liquidity pool isn't just measured in volume, it can also be measured in the success of the underlying asset. For example, one could argue that SPS:DEC is the most "underperforming" pool since it has given us the least benefit in terms underlying asset appreciation recently. Using this metric, SPS:WETH becomes the best performing pool. Therefore, I think it is unfair to use terms like that when describing a pool to confuse people who might not be involved in DeFi as much. Simply say least utilized or least volume, which are both technically true, whereas the term "most underperforming" is entirely subjective depending on what metrics you use.
To further explain this concept, the base asset that SPS is paired against is very important. If the base asset we're paired against increases in price, so does SPS automatically without any buy/sell pressure. If we are paired against multiple pools, the best performing one will get arbitraged with SPS being sold and bought back in the worst performing pool. In our scenario, SPS is constantly getting sold on the SPS:WETH pool and being used to buyback elsewhere by arbitrage bots. In fact, since the start of the year around 78 ETH worth of SPS has been bought from ETH pools more than sold, with very minimal changes in base liquidity providers. That means the ETH pool has provided us with 78 ETH worth of buying pressure just in the past ~2 months, currently worth $283,452. Of course no one can say for certain ETH will continue to overperform, but in a bull market championed by BTC/ETH, especially with EIP4844 very soon and ETH ETF supposedly in May, I do NOT want to lose SPS exposure to ETH right now.
The DAO can provide liquidity to ETH giving SPS exposure to ETH, but that means the DAO loses some exposure to ETH itself (through imperm loss). Personally, I'd like to see the DAO provide a little liquidity (in v3 infinite range 1% fee pool) AS WELL AS the community, thus reinforcing our exposure.
Another point is that more utilized pools such as DEC:USDC has a fair bit of volume, but that is actually reason for us to REMOVE the SPS incentive, not keep it. If a pool has adequate volume already, logically people will stay even if there is no SPS incentive since they are earning decent revenue just from LP fees, especially since DECs are stable users can earn a lot from v3 pools. If we remove ETH pool incentive, there will be no more liquidity. We want as much liquidity for SPS as possible, without spending too much SPS.
I actually vote to also remove the DEC:USDC LP rewards using the exact above logic.
I am all for removing the DEC:DAI pool since DAI is stable, it does not provide any appreciation for DEC and it also does not provide us with any volume. That is a no brainer.
For now, I don't think we should change the SPS:WETH or SPS:BNB rewards. I think we should also increase the SPS:DEC pool since it is our primary pool as it is the only pool to incentivize both SPS and DEC, it just makes sense to increase the incentive there. A small portion of rewards from removal of DEC:DAI (and maybe DEC:USDC) can be used to increase SPS:DEC.
I am also all for the DAO providing liquidity, BUT the DAO needs to provide on v3 1% infinite range for both SPS:WETH and SPS:BNB pools. I can go on about why this works on the next proposal but this post is long enough.
Previously posted this via wrong account oops
Solid points.
Thank you for your thoughts on this @cryptoeater ... I have not had time to go through the discord chat, but I would personally like to find middle ground that does several things:
reduce SPS emissions. I believe we pay out more than we need to in total, thus we have become inefficient overall.
work with people that are reasonable and understand goal #1 to find a good solution for which pools to cut and which to keep. I know we have a lot of smart players, and the goal would be to strike a fair balance.
I voted for this preproposal because I'm happy to see movement on making changes and reducing SPS emissions, but I'm also happy to work with you and others to find solutions as well. Whether we keep ETH:SPS or DEC:USDC or any other LP for that matter, I would like to see sincere compromise and focus on delivering to an objective in terms of emission reduction rate.
I believe @clayboyn has set out a target of 50% overall reduction from LPs in total. Whether we can get there or not will depend on us (all of us) working towards a common goal. I know I want a solution where people are happy with what we achieve as well. I don't think rushing or jamming through something that doesn't have broad support is a good way to solve this problem.
So while I voted for the pre-proposal, I am completely open to working with you and others to find a solution that we can live with, and more importantly improving the economics of the whole ecosystem.
If there is any edits proposed, it must happen now.
I mean now now.
Today. @clayboyn
This is not my proposal, so unless the author requests an edit it won't happen. I've made my personal stance clear. I think this is a nuclear option that unless further clarified or defined (DAO committing liquidity to ETH pool or compromising on a reduction instead of flat out end all inflation to ETH pools) then we're going to hurt ourselves with this. I voted no.
Otherwise it's a simple no vote.
Let me rephrase: it is a NO vote
Fine with me.
FYI it has been updated to something more reasonable now. If this changes your mind. I changed my vote as I said I would.
I'm 100% onboard with this goal. But I have made my thoughts clear that I do not like eliminating rewards altogether. I would vote for a 50% reduction in a heartbeat. I don't think this binary choice of all or nothing is a good solution. I will abstain.
It would never pass... every option I pitched that had multiple pools involved had people on one side refusing to support because of preferences. We're going to have to go pool by pool unfortunately.
Some investors would try to make this an opportunity to get better rewards for the pools they are invested in. Thank you for putting in your time to make things better here 🙂
Why would a pool that encourages external ETH-based funds be an appropriate initial target instead of the internal pools that slosh inflation around, with other inflation, for more inflation? It's makes my stomach turn. I've written more detailed thoughts throughout the comment section if you may have not seen them yet, including a direct message to the creator of the pre-proposal, so please feel free to skim over those to see what it feels like to be on the other side.
I will vote NO. I am understanding that you will vote NO as well
I've always thought it is cute that you make DECs plural (Dark Energy Crystals), but you keep SPS singular (Splintershards). Technically, both tokens are already pluralized, so you don't actually need to add the 's' to either.
@schachoberhessen what's your logic of the initial choice you presented of completely removing all SPS rewards for SPS:WETH liquidity pool providers... and then for the 650,000 SPS?
The first thought to kill all rewards for this pool as we enter a bull run where we will be seeking and desperately needing external adoption doesn't feel right, at all. It almost feels like the basis behind this decision was not well thought out.
This is especially the case when blue chip BTC/ETH holders will likely be taking profits and diversifying into smaller and even micro caps like us. Terrible timing! People use SushiSwap and will increasingly do so. BTC and ETH are where the real money flows from. The onboarding is hard enough, so why do we need to hinder a major onramp at this time? People not "in" the pool won't really care because they just want SPS to go up, which is short-sighted.
This is on top of directly punishing those who faithfully held in this pool over the bear market it essentially only existed in until late. Really unfair, especially if you consider the gargantuan amount of impermanent loss longer-term pool holders have endured to provide onramp and EXIT liquidity for those selling off during the bear market. This is the thank you we get? Also, suddenly try to kill this pool will ruin all the SPS whales' exit liquidity when they try to dump if SPS price rises. Was that considered, or is that possibly a part of it -- making it a bit harder to exit the ecosystem through a true DeFi channel?
Moreover, people enter these pools with the reasonable expectation that community members not participating in the pool can drop in and initially and randomly push for their rewards to vanish -- thus, financially hurting others. While tiny HIVE-based pools where people slosh around the real inflation remain unaffected, the ETH pool doesn't seem like the right target. Any tiny help to SPS' value here will be offset by irate pool participants -- people with the real external funds, not generally those stuck and living in the Splinterlands bubble who basically continue to compound what they had from early adoption/inflation. We want and need to facilitate and incentivize gateways that allow external funds to come INTO the ecosystem, not slosh around within it.
While leaving 650,000 SPS is better than nothing, how that number seems randomly assigned without any math displayed remains uncomfortable. The initial thought of completely removing the SPS payouts on this pool caused serious concern. We need more players to buy and use SPL assets, not people trying to manage SPS where it significantly hurts a pool we'd need during a real bull run. Doing this will really have very little material impact on the SPS price. It will however have a terrible impact on the holders and stakeholders -- pushing them away from the ecosystem and game.
Early pool holders have been hurt enough by the bear market, why punish them at all as they try to hold on and dig out of severe impermanent loss as ETH soars?? The pool performance during a bear market is not at fault, it's that the current player base is strapped for funds and doesn't invest a lot of fresh capital. Period.