How should Algorand's boost rewards for targeted DeFi rewards be distributed?

General Discussion
21

I like the way you see things in the long term, and I believe it too that real use cases will lead the way to a thriving ecosystem.

this can be a nice use case but is still laborious and it to has proceeded with the right steps. In any case, we cannot use these funds because they are to be invested in the short term as per rule.

"Rewards under this program will be distributed to projects at the beginning of each governance period and the project(s) must distribute the totality of the amount received as incentives to their users, with at least 95% of rewards initially distributed by the end of the period and the remainder distributed in the following period. " Governance-period-6-Measure-2

However, it could be a starting point for a future discussion.

2 Likes
22

Thanks everyone for the valuable comments. The team has drafted a distribution design summarized in this comment, but please feel free to share suggestions and feedback for improvement if any.

Folks Finance is eligible to receive 1.25 million ALGOs from the Algorand DeFi boost.

Folks Finance proposes to utilize the funds for incentivizing Liquidity Pools paired with gALGO as an asset on DEXs and lending pools through fStaking, a feature which was already in place in Version 1 of the protocol.

The rewards will be distributed between the two macro categories (gALGO/liquid governance and Lending) proportionally to their respective contribution in the total TVL.

The proposed breakdown of rewards within these two macro categories is as follows:

Section TVL Share
Lending 68,605,269.24 28%
Liquid Governance (gALGO) 177,270,384 72%

Lending Protocol: 28%

Allocation percentage is equal to the share of the TVL (expressed in ALGO) of the Lending section of Folks Finance as of round 27658600 (Wed, 15 Mar 2023 09:17:20 GMT). Below are the TVLs of the various pools:

The share of the lending section in regards to the total is as follows:

68,605,269 / 245,875,654 ≅ 28%

Within this category, the strategic intention is to specifically incentivize the USDC and USDt pools.

In addition, in order to incentivize the bootstrapping of new asset pools (e.g. wBNB), a portion of these are allocated to speed up the early adoption of new assets by incentivizing their deposits.

Asset Share
USDC 16.80%
USDt 7.20%
New Assets bootstrap 4.00%

Liquidity Pools: 72%

The share of rewards dedicated to the incentive of liquidity pools in DEXs is calculated in proportion to the TVL contributed by the Liquid Governance and gALGO asset in the ecosystem. This is equal to 72%.

The proposal is to use a portion of this rewards quota to remunerate the most-used pools and incentivize the pairing of gALGO with new assets for the purpose of increasing the amount of assets and TVL of Algorand ecosystem.

The rest of the rewards, is budgeted for DEXs’ pools combined with Folks Finance Lending (see explanation below) that DEX protocols will implement in the nearest future. In the case of not having the implementation ready for this quarter, an alternative distribution design would be proposed and then used for the spared rewards.

Asset Share
gALGO Pool + New Assets pairing 34.44%
Lending Pools 65.56%

The rationale behind the allocation is the following:

  • incentivize users to mint gALGO by increasing its utility
  • reduce slippage when swapping with gALGO
  • incentivize bridging of new assets into the ecosystem by pairing it with gALGO on DEXs, which could potentially lead to a new listing in Folks Lending Markets
  • incentivize strategic lending pools to boost efficiency for both DEXs and Folks Lending, as it would increase capital efficiency and reduce the effects of impermanent loss.

Rewards Allocation

Rewards are intended to be allocated according to the following proposed distribution:

Proposed Allocation
USDC fStaking 16.80%
USDt fStaking 7.20%
New Assets fStaking 4.00%
gALGO/ALGO Liquidity pools 10.00%
New gALGO pairing partnerships 12.00%
Lending Pools 50.00%

Lending Pools

The traditional AMM pool involves pooling two assets, allowing users to trade one or the other, paying a fee to liquidity providers. Although liquidity is always available, this system has the disadvantage of leaving assets unused for long periods of time. For this reason, Folks Finance aims to make this “dormant” liquidity more efficient by making it available to be borrowed. The Liquidity Providers will be able to earn both swapping fees from DEX side and lending interest from Folks Finance as their assets are utilized in both the lending and AMM protocols. This is possible by creating pools of fTokens (read more about them here) instead of the normal assets ordinarily used in Liquidity Pools. This results in an APR for the liquidity provider which is composed of both deposit interest on the lending portion and swap fees on the dex portion.

10 Likes
23

This looks excellent! Thank you Folks Team for putting a varied and impactful plan together for these funds!!

24

Hello everyone,

We have an update on how we would like to boost the lending rewards (those which make up 28% of the total).

Folks Finance wants to commit these funds (350,000 ALGO) through governance and distribute the rewards in gALGO. We believe this will further encourage the adoption of gALGO.

Also the governance rewards earned from this commitment will be distributed in the next quarter providing further incentives for the community.

Please provide your thoughts and opinions on this proposal so we can decide on whether to proceed as outlined above.

5 Likes
25

Who would control the votes for committing the ALGO into gALGO, or would Folks abstain from voting with these funds?

26

Please confirm my understanding:

  1. 350K gALGO will be distributed to folks that participate in Folks Finance Algo Liquid Governance.
  2. Governance rewards earned from the 350K ALGO commitment will be distributed as incentives in G8

Questions:

  1. When will the 350K gALGO rewards be distributed? I expect they will be distributed when G7 period concludes, but will they be distributed during the gALGO redemption window or after? If they are distributed during the redemption window, then most folks would simply redeem them for ALGO.
  2. How will they be distributed? Will there be a claim button for gALGO rewards in addition to ALGO rewards?
1 Like
27

I wouldn’t turn down free, no one would, but I don’t feel that is going to help gALGO that much. It needs to have some utility behind it, like being tied to buying an NFT with it and when holding the NFT(s) or gALGO, you get a discount on loans or swaps.

2 Likes
28

I understood that this incentive was meant to boost Defi, liquidity and TVL, like AF says; “This measure proposes that the extra 5MM Algo (“Boost”) from Measure 1 be given to DeFi protocols that fit the criteria below, to be used in targeted activities to attract new DeFi users from within and outside the ecosystem.”
And not allowed to boost governance even further, so I don’t know if this is allowed. Maybe you should check that with AF, but as I understood this is not how this should be used, so not happy with this…

1 Like
29

From my understanding the initial 350k gALGO (after GP7 Commit) would be dispersed through Lending/Deposit market users in the form of gALGO. The rewards on the gALGO Commit in GP7 would then also be dispersed in GP8.

3 Likes
30

That makes sense now. The 28% was referring to the above rewards.

Distributing the ALGO rewards as gALGO on Folks Finance showcases the power of Liquid ALGO Governance. In addition to further promoting gALGO adoption, it also enables the protocol to earn extra rewards to distribute as incentives to the community in the next period.

3 Likes
31

Aa… ok. I have misunderstood what they meant. That makes sense :+1:

2 Likes
32

Yes, Folks will abstain from voting with these funds

1 Like
33

Correct, this is what we meant :+1:
Edit: Since the AF DeFi Boost was sent by AF after the end of the commitment period, the rewards will be in ALGO

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