KIP-9: Act V Emissions Balance (Effective 11/14)

KIPs Final
#1

KIP-9 Act V Emissions Balance (Effective 11/14)

kip: 9
title: Act V Emissions Balance (Effective 11/14)
author: lapras <lapras@keeperdao.com>
status: draft
created: 2020-11-02

Proposal

Update emissions to reflect taper schedule and account for trading (Hiding Game) focus

Background

Upon the passing of KIP-2 and KIP-4, we have seen a decrease in Hiding Vault emissions and an increase in demand for the ROOK token. For those unfamiliar, KeeperDAO emissions are generally set to decrease every Act by ~30%. At this current time, with KIP-2 having passed, we are already emitting 30% less than planned.

Accordingly, I believe we should emit the same amount of ROOK as we do today (and was anticipated for Act V, before KIP-2). This is 404.25 ROOK per day. This is 38808 ROOK for the whole epoch (~96 days, depending on block speed).

KIP-2 Context

The key tenants of KIP-2, from @whatsthedeetz, were:

  • Hiding Vaults already receive significant benefits from Compound (interest and COMP distribution) and JITU (liquidity buffer). The ROOK rewards should be some (light) icing on the cake.

  • Hiding Vault rewards are not currently motivating users to take positions that create MEV. Until we are able to dynamically distribute rewards to different assets in an effort to dissuade same token supply and borrowing, the Hiding Vault will not be utilized to its full potential.

KIP-4 Context

With the passing of KIP-4, we also turn Hiding Game emissions into buy pressure with the beneath flywheel:

Emission Value → Volume → Revenue → Buy back → Higher ROOK price → Higher Emission Value

Buy Back (Continuation)

We would continue with buy backs until the release of the Coordination Game, as outlined in KIP-4.

Overall, we will see about 30% more emissions (than today) go towards the Hiding Game, which we know correlates to volume.

Allocation

Accordingly, I propose the following be default emissions for Act V:

Name Percentage # ROOK # ROOK per day
Hiding Game 70 27165.6 282.975
Liquidity Pools 20 7761.6 80.85
Hiding Vault 10 3880.8 40.425
Total 100 38808 404.25

I propose these emissions be minted in 102528 block (~16 day) increments. This means every 102528 blocks, 6468 ROOK would be minted as outlined above. This will change with the release of the Coordination Game.

KIPnd Key Blocks

Act IV ends: Block 13617668
Second mint: Block 13720196
Third mint: Block 13822724
Fourth mint: Block 13925252
Fifth mint: Block 14027780
Sixth (final) mint: Block 14130308
Act V ends: Block 14232836

Specification

  1. For the duration of Act V, every 102528 blocks we will emit 6468 ROOK for users of the protocol (consistent with planned emission rate before KIP-2).
  2. This ROOK will be distributed with a ratio of 70% to the Hiding Game, 20% to Liquidity Pools, and 10% to Hiding Vault borrowers.
  3. Continue KIP-4 Buy back and burns with 100% of net revenue
3 Likes
KIP-5: Acquire CVX position
#2

Based on chat in discord, I am removing the poll about fractionalizing buy back ROOK. It is ideal to keep the scope of this KIP tight. Thank you @yungpeso

1 Like
#3

Looks good to me. I especially like the 100% buy back and burn. :+1:

I understand and support the high emission percentage for HG. What’s your reasoning behind 20% for LPs and 10% for HV? Why not 10%-10% or 15%-15%?

#4

I am 100% in support of increased HG emissions relative to LP and vaults, I just want the daily rook emitted at the start of Act 5 to be lower than the daily rook emitted today. ie. Current Daily Rook Emissions = 404.25, At the start of Act V, 283 Rook Emitted Daily (favoring proportionaly larger emissions for the HG)

#5

The act IV emission was 577.5 rooks/day and we plan to reduce that by 30% to 404.25 rooks/day in act V. So we still follow the original plan of 30% reduction per act. You are proposing a much steeper emission reduction.

#6

I see it differently than you regarding that, we reduced vault emissions without Act V in mind and I see the emissions at the end of an act as the “official” emissions for this act I can go more into it on the town hall

#7

The more rook we assign to the HG (not just percentage but absolute value), the more profit we can use for buyback and burn.

#8

That is the question that I ask myself, does the price appreciation from another emission cut accompanied with a relative increase to HG emissions compared to LP and HV outweigh this proposed reallocation without a cut for the start of Act V. I would love to see some actual projections that show which approach is better instead of hearsay.

#9

It actually doesn’t even need modeling (which cannot be done based on a hypothetical cut), to show that this is mathematically supportive of ROOK supply/demand dynamics.

As long as the following hold true:

  1. A non-zero amount of HG ROOK rewards are not sold off
  2. MEV revenue keeps up with emissions (which has been historically true)

we are creating more net buy pressure (because of KIP-4) than HG emissions bring to the market.

Since the other 2 parts (HV/LP) are cut, I think we are good. That is to say, the one part which is not being cut turns into more buy pressure anyways. eg mathematically this is optimized for upwards price movement and an increase in volume.

#10

I think it can, you just look at the rook/usd price chart and measure the avg move post emissions cut, and you factor that “guaranteed” appreciation into the 283 daily rook emissions with a skew toward HG

#11

I see no reason why not doing a 30% to the 404 rook/day and having an emissions boost to the HG in equal USD value to what you proposed in these “revised” HG emissions be equally beneficial to HG volume while also dampening the ability of LPs and HV to give sell pressure to the market. This is why I object to this proposal

#12

You are going to need to be more specific. How much of a boost? What’s the total USD Budget for this?

So you are suggesting a scenario like this:
282.975 ROOK Daily
198.0825 ROOK DAILY HG
56.595 ROOK DAILY LP
28.2975 ROOK DAILY HV

Plus

198.0825 ROOK VALUE IN USDC DAILY HG

Total Daily: 481.0575 ROOK VALUE per day

So you are asking us to raise emissions, while also paying out earned USDC from the treasury?

1 Like
#13

Also, this would effectively turn us into a negative revenue-generating protocol. The HG revenue daily is some small % more than the value of the ROOK emissions for the HG. Let’s just say it’s less than double to be more than generous. By also giving out USDC that equals the value of the ROOK emissions, it would appear that we would be at a loss every day. If we are also buying back and burning rook, that’s us REALLY eating into our treasury on a daily basis.

#14

Lastly, if the crux of this is to supplement the HG to get more volume, I am definitely not opposed, and think there can be a separate KIP to bootstrap what we need.