Continue boosting the staking APR for another 8 weeks using CVX generated bribes

Continue boosting the staking APR for another 8 weeks using CVX generated bribes

Proposal

Swap the generated CVX bribes into ROOK and use to boost the staking APR for another 8 weeks beyond the end of the current boosted staking program on [DATE]. Revisit at the end of the program or sooner if desired and needed, if we should:

  1. End it
  2. Extend it
  3. Adjust it in any way

Argument

Staking is a core aspect of any project. It generates yield for stakers and signals that people believe in the project and are not here just for a swing trade. People that stake are much more likely to stay around and not sell on the first market drop.

The amount of ROOK staked has been growing because the current boosted APR is attractive. The upcoming end to the boosting program is a potential risk to this growth given that current protocol revenues are not enough right now to give an attractive yield to the nearly 240,000 (as of May 5, 2022) ROOK tokens staked. While stakers might be happy with a lower APR, Pai-Sho has confirmed that without the current boosting program, the APR would be less than 1% right now. Even with the next integrations it will take time for the volume to increase enough for a good APR. If we do not act quickly to make sure that the APR will remain attractive people may unstake and eventually sell their ROOK.

Until more integrations come, we should make sure that we have a good continuation to the current boosting program and avoid as much as possible a sharp drop of more than 90% in APR.

Using the CVX bribes to boost the APR for stakers for a limited time has several potential benefits:

  1. keep the ROOK staked amount high, decreasing the liquid supply which translates to upside potential for the ROOK token
  2. be constant buy pressure for ROOK both because of new stakers and because of CVX bribes swaps
  3. keep the community happy and satisfied → the best marketing and way to growth
  4. generate a constant buying pressure of around 750ROOK per week

Background

APR right now: 26% (as of May 6, 2022)
APR after the current boosting program is over: currently 0.5% - expected to be around 1% by week 8
Average worth of CVX generated bribes per week: $75,000
ROOK currently staked: ~240,000 ROOK

Assuming the current CVX bribe revenue, a slight increase of 250,000 in staked ROOK by the end of the current boosted epoch, and a ROOK price of $100:
Annual bribe revenue: $75,000$ * 52 weeks= $3.9M
Dollar amount staked = 250,000ROOK * $100 = $25M
Boost to APR = 15.6 percentage points

Specification

Every 2 weeks, swap the generated CVX bribes into ROOK. Split the amount evenly and use to boost the staking APR for the next 2 epochs (1 epoch = 1 week). Repeat this three times for a total period of 8 weeks, then revisit the program…

This leaves the question of when to put this KIP into effect. The proposal for community consensus is to go into effect after the current boosting program ends. Pai has suggested that in the meantime we use the current generated bribes to accumulate ROOK and use it for a later boosting program maybe when the Swaps launch. To be discussed.

This kip should go into effect either right now or after the current boosting program ends (feedback is welcome).

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To mention that if it goes into effect after the current boosting program ends we have to decide what do we do with the CVX bribes generated until then.

These could be saved for another future boosting program, perhaps when swaps are launched

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I think this is a good start, but ideally I’d like to see a more generalized framework for the process of directing yield to stakers which is agnostic of CVX. Whether or not that should be implemented now or later is a different question I guess

Good idea, saving them for a future boosting program makes a lot of sense.

Agree, I think we could def create a much more generalised kip at a later point when we have all the yields on the table and see how much revenue we generate from everywhere. I think that this will take time and until then we could go with this solution.

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Thanks fpr putting this together AlCapp + Pai-Sho

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Great job Al Cap - appreciate you putting this together.

At a high level, I support this proposal, but for me to fully support this, I would like to see the following included in this proposal:

  1. I would like to see a more specific timeframe for how long we extend this program. Perhaps, I am misinterpreting it, but it seems open-ended. Because we could see a dramatic uptick in volume and thus staking rewards, I would like to have a set time frame where we are constantly monitoring this APR and assessing what is appropriate. I also imagine if the price of Rook appreciate nicely, people might be fine with a lower APR so having a specific timeframe would be good. My gut feeling says to extend it for another 4-8 weeks.

  2. I would like to see some language that still gives us flexibility with our CVX position. I feel by formalizing this plan we are almost forced to keep our CVX in any positions. For example, if CVX does a 10x, we should be able to rebalance some of that position of the community agrees. Again, this is not a CVX thing, just making sure we have flexibility with every position we own.

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I’d also support this KIP if the timeframe was clearer. Maybe we could use CVX revenue to keep the APR at a minimum of 20% with 250k rook staked? As the CG volume picks up, a lower and lower fraction of the CVX revenue would be used to boost the staking APR and eventually we wouldn’t need the CVX revenue to boost the APR at all. Just an idea.

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Special thanks to JasonW for the several suggestions he gave to me regarding the overall structure and content of the kip. Now, the proposal it’s much more cleaner and organised.

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Re: timeframe … Good idea to make the timeframe contingent on whenever CG volume picks up to make the CVX revenue boost unnecessary. Flexible, yet defined.

Great job formulating this KPI AlCap. I support the proposal.

  • It makes sense to reward the early stakers with a decent APR and reduce any potential selling pressure. The number of staked Rook shows the confidence of the holders in the protocole.
  • APR is the proof that Rook is generating cash flows.
  • The more Rook are staked, the more the burn mechanism will have an effect.
  • I like the idea of defining a target APR range which will be adjusted depending on the trading volume. The higher the volume is, the less bribes are needed to incentivize the APR. In this case, they can be used to incentivize new sources of volume or developments.

Community feedback from today’s (5/13) town hall: recommendation to put this proposal on hold given the disruptions to markets, and to lending pools, from the UST implosion. The community wants to monitor and gather data on how this will affect yields and bribe fees, and also possibly use this time to gather data on ROOK staking participation. To revisit in the near future.

Will work on getting those analytics this week. In my opinion if we do extend this, we should be targeting a much lower APR than 20%. I think something like 10% is more reasonable (not to mention sustainable) given current market conditions/overall sentiment

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