As you may know, Algorand’s Governance Period 6 has proposed a measure to use up to 5MM of the “Boost” for targeted DeFi rewards. This proposal aims to attract new users to Algorand’s DeFi ecosystem by giving DeFi projects more flexibility in how they structure and distribute rewards to their users.
The proposal does not specify how the rewards should be distributed among the community. Therefore, I’d like to start a forum discussion on how we, as a community, would like to see a part of the Boost rewards distributed.
Consider that Folks Finance after calculations will receive 1,250,000 Algo and most of these funds will be channeled to the:
Deposit staking - users that deposit their tokens in lending and do not borrow against them are entitled to additional interest.
Incentivising gALGO paired pools on DEXs.
Incentivising lending pools on DEXs (depending on timeline).
Feel free to share your thoughts, concerns, or suggestions on how rewards should be distributed within the ecosystem. Let’s make sure our proposals are feasible and transparent.
Thank you for your participation and I look forward to hearing your ideas!
" Deposit staking - users that deposit their tokens in lending and do not borrow against them are entitled to additional interest. "
why you do not want to incentivise borrowers?
I do not mean to be rude, but is there actual reason behind this?
I think we need both sides, lenders and borrowers. Without borrowers, what is the idea of lending?
So I think we should incentivise all tokens (in Folks Finances platform) at least a little bit and also both sides.
Some kind of weighting between tokens might be in place, but I hope we do not try to steer too much users or favour too much some tokens over another.
gALGO might need to be excluded from this, because that is or can be considered to be indirect staking reward.
I think Folks Finance has chosen to incentivize only staking so that we also provide more liquidity security to the protocol, since Folks Finance incentivizes staking (which involves not being able to borrow against those funds) it ensures that the protocol has good liquidity. In addition, by having more deposits, borrowing through low APRs is also incentivized indirectly.
In general, Incentivising deposit staking is superior because it avoids any looping issues, so the rewards are more fairly distributed.
Initially I think it will start with the assets that need the most liquidity. So probably starting with Algo - USCD and USDt. In the end, gALGO will not be incentivised because it cannot be borrowed so the problem does not arise.
Ok, I understand your point. It might be an good idea to focus on those couple core assets, but if I can ask you to consider incentivizing also other assets, even with very small %, that might have rather big psychological impact and it will not take away much from those core assets. If you try this method, not much to lose if impact is low, but might be rather meaningful upside. So maybe worth to try?
Also I think, Folks Finance has to make very very clear that these rewards are only for those who are only staking/depositing without loan involved. This might be confusing part.
To be honest i don’t know if it is worth trying.
Can you better explain the big psychological impacts if Folks Finance incentivized even by a very small percent the deposit of other assets?
I miss understanding this part.
I don’t know how familiar you are with consumer behavior model (if right term in English). But basic idea is that even little things matter. Case LIDL and their pudding discount. They decreased their pudding price from 0.99€ to 0.98€ and put sign “Sale”. Sales volume increased close to 20%. or case grocery store’s bonus points. People will actually spend a lot more money into items they do not really need when they get some points even if benefit is only cosmetic. So even very small incentives can cause quite significant change in people behavior. People are not rational creatures at all. When they see that they can get even small reward they are usually willing to take it. So my logic was that if they are wondering should they deposit their, let’s say goBTC tokens into Folks Finance when APY is 0% (like it is now) or not should they keep it in their wallet, they probably won’t lend it, more likely to keep it in their wallet because what is the point if there is no reward? Now if there is some additional reward they are more willing to take it. or if we look at OPUL, deposit APY 0,13%. so not to attractive, but if you also get additional benefit, let’s say +0,25% ALGO reward. they are more willing to seize that opportunity.
So that is the idea I was after. It is not bulletproof because, like I said, people are not rational creatures at all, but these kind of small things can have quite a large impact compared to actual underlying incentive.
I am not mad or angry in anyway even if this might sound like it, but feels like these allocations are already decided. If I understood right, you have decided that “deposit staking” only (might actually be good idea though ), and lending/borrowing excluded. Also feels like you have already decided to support only these three major coins/tokens.
So out of curiosity, I really want to know, what are the areas where you need community input? Can you offer guidelines, like “We have decided to support only staking deposits and these major tokens, we are willing to listen your opinions regarding distribution between these three”. or are all possibilities open to discussion in reality?
Of course I might be wrong and I got wrong vibe. Sorry if so.
Anyway, what ever you decide, I hope this incentive program will increase Folks Finance’s TVL You have done amazing job
It depends on what you define as new users. I’m assuming you mean users who currently don’t use the Algorand blockchain or use it on a limited basis.
If it’s the former, then you have to incentivize a token or tokens from another chain high enough to beat the market average so they want to deposit on FF and then possibly provide the ability to use the house token (gAlgo) for use in paired pools, if they commit to a lockup period or some other criteria.
If its the later, then incentivizing deposit staking on one or more popular tokens at a very appealing rate should be sufficient.
You are right to say, more or less, that some decisions have been made because you already know the most effective strategies to allocate these funds but it doesn’t mean that you are not open to new ideas that may come from the forum and can be implemented within the ecosystem. Maybe someone comes in with a new idea (for example, yours to also incentivize other assets to a lesser extent) and it is discussed as it should be.
Subsequently I also opened the discussion to see if beyond the 3 ideas proposed by Folks Finance there are also new good ideas for allocation of these funds.
Picking up the discussion it might be interesting to see how users might react to even the slightest change in APR on a token. The only thing I am in doubt is that in your example we are talking about consumers who have to buy a product, instead in this case we are talking about investors and I think the cognitive choices that are made are not exactly the same.
In any case I thank you immensely for your contribution and hope to have more in the future.
this will be my last post in this thread because my intention is not to hijack this completely
" instead in this case we are talking about investors and I think the cognitive choices that are made are not exactly the same" , you might be completely right and I can’t argue against and also that is not my intention. Unfortunately we do not have data how well this actually works or if it works at all. But maybe thing to consider in next governance period if we have same kind of reward program. My main worry if focusing only for ALGO, USDC and USDT is that incentivizing ALGO will somewhat overlap with Governance program. And what comes to USD Stablecoins, many outside of US are not so willing to invest in those. Or maybe it’s just me these are reasons why this might not be optimal solution if you want to maximize TVL. Again I might be wrong about this, but I just try to contribute different views so you can look at this from different perspectives.
I want to ask, is your intention especially grow those couple core assets? If that is you intention, then I think you are doing right thing by focusing no those couple core assets
Sorry for hijacking this thread, next time I try to make one comprehensive answer/proposal rather that a lot of small posts.
I hope we will get more people in here to share their thoughts
With Gov rewards being reduced every quarter it seems, and the introduction of Leveraged commit driving Borrow APR higher than we are used to seeing for prolonged periods, I am very much in favor of adding additional incentives to Deposits to stabilize markets.
I also do like DEX incentives for gALGO as well.
Perhaps one thing that might be explored would be donating part of these rewards to a community-led relief pool for Folks and/or all Algorand victims of the MyAlgo hack? Just a thought.
Another good option might be to incentivize a spread of Deposit assets (rather than just Algo deposits), to further attract TVL as others have mentioned. (goBTC, xUSD, goETH, USDC, etc)
With the upcoming participation node support, Folks could also win big points by incentivizing node runners that used Folks for consensus. (Verifying good behavior and uptime of course).
I actually think it is very healthy for Folks to offer alternatives to Governance commits for users. Being solely tied to Governance is a weakness in strategy. Just my .001 A though, and I am far from the expert on these things.
Sounds good to me but I think Algo should not be included in the deposit incentives. Cheap Algo hurts the ecosystem and encourages max leverage in governance. Max leverage is a good way to earn more on Algo but encourages locking up of all liquidity for 3 months at a time. It also enables user to earn free Algo with very low risk. Free Algo reduces the value of all Algo
It would be nice but I see it as hard in many ways.
For example by emphasizing only one of these the fact that the funds that could be distributed would be minimal compared to the Algo stolen. I have done some research it would be, at least, between 10 and 20 million Algo’s if I am not mistaken.
the discussion is still open and is being discussed, calculations should be done to figure out how mathematically speaking, optimally distribute the incentives within the assets.
I also find the idea of incentivizing consensus nodes great, actually Folks Finance could be the first to create an ad hoc program within the protocol.
It would be nice but I see it as hard in many ways.
For example by emphasizing only one of these the fact that the funds that could be distributed would be minimal compared to the Algo stolen. I have done some research it would be, at least, between 10 and 20 million Algo’s if I am not mistaken.
Fair enough points, I would add though that GovernorHat and myself engaged in a Twitter thread recently where we tagged a slew of community leaders for such relief initiative. If combined forces then the amount could be spread out to more affect. This is probably too early at any rate.
the discussion is still open and is being discussed, calculations should be done to figure out how mathematically speaking, optimally distribute the incentives within the assets.
I also find the idea of incentivizing consensus nodes great, actually Folks Finance could be the first to create an ad hoc program within the protocol.
very challenging.
As to incentivized nodes, I think it would be amazing if Folks led the way on this initiative and would answer a call many have put forth for decentralization efforts. I understand would be difficult to calculate, perhaps John Woods or other members of the community might be consulted for best practices for something like this.
Here are my thoughts on how the 1.25M should be deployed to boost DeFi.
The core strategy should be focused on growing liquidity in assets that have the greatest market breadth and depth, i.e., stablecoins, BTC, and ETH. Of course, gALGO must be added to that list because it has proven to be instrumental in growing the entire Algorand DeFi ecosystem and the Governance program. xGov requires ALGO to be committed for 1 year to collect rewards. Folks Finance liquid governance solution through gALGO offers a compelling product for xGOV participants.
The assets to incentives should be shortlisted to offer attractive incentives. I propose the following: gALGO, USDC, WTBC, WETH.
gALGO adoption depends on deep gALGO/ALGO liquidity. The only gALGO pool that should be incentivized is the gALGO/ALGO stable pool on Pact. No other gALGO pools should be incentivized.
Deep stablecoin liquidity is fundamental for lending protocols and the entire DeFi ecosystem. I would solely focus on growing USDC deposits through deposit staking.
BTC and ETH are currently the top 2 crypto markets. All Algorand DeFi protocols should be working together on growing BTC and ETH capital inflows into Algorand DeFi. It’s a shame that Algomint hasn’t delivered on integrating BTC and ETH bridges into their goBTC and goETH products. Their centralized custodial bridge creates too much of a barrier for folks to bridge over their BTC and ETH. Thus, I would pivot away from Algomint products and focus on Wormhole assets by incentivizing WETH and WBTC deposit staking.
That changes things. In that case, I would shift toward incentivizing bridging through MessinaOne.
This is outside the scope of this discussion … A partnership between Folks Finance and MessinaOne would make sense. Make it easy for users to bridge over and deposit USDC, BTC, ETH directly into Folks Finance.
I think personally the long term future of Algorand rests on generating real world economic activity.
Like ok say you incentivise deposits on the system, you disburse the rewards … then what? Does that have any impact in 6 months or a year?
Personally I think it would be good to incentivise real activity. Like Lofty, for instance, they actually take money from outside the ecosystem (rents) and pay them out to holders in the ecosystem, that’s real.
So yeah I’d suggest a program where you find an offline bank and use Folks to facilitate loans to them in exchange for interest. Then users can get real interest payments. You could then use these funds to boost the yields to encourage use.
It’s like Zopa was a service in the UK that took money and lent it out in small loans, that sort of thing.
In general just swapping one token for another means nothing, and everyone sitting around each quarter and taking governance off the foundation means nothing.
We need real world economic activity or we’re done.
), and lending/borrowing excluded. Also feels like you have already decided to support only these three major coins/tokens.
You have done amazing job 
