Summary: This GIP proposes reducing the percentage of protocol fees allocated to membership vaults from 50% to 10%.
Motivation: One of the key reasons to implement membership vaults (per GIP-13) was to incentivize TVL growth. Because TVL growth has stopped, we should reduce membership rewards in order to maximize USDC reserves available for building V3 (per GIPs 68/69/70/71/72).
Specification & Requirements: Reduce the percentage of protocol fees reallocated to membership vaults from 50% to 10% via snapshot and governance votes.
Benefits:
By mid 2025, the protocol has an extra ~240k USDC to support V3 efforts (calcs)
Because we are not setting member fee allocation to zero or some very low number, we are still achieving the other aims of GIP-13 i.e. we’ll be maintaining clear utility and value for GFI.
Downside: Reduces membership rewards for existing membership vault participants. Only ~88 people are still participating in the program, and 10% rewards is still significant.
Voting:
“Yes” - You agree to reducing member fee allocation from 50% to 10%.
“No” - You disagree and vote that the member fee allocation should remain at 50%.
I am not sure if this makes sense because currently this is the only utility of GFI that remains and if we remove this usage also then GFI purely becomes a governance token and no one will have any incentive to hold the token. Actually reward % reduction might make sense once V3 is implemented and TVL starts growing. Then we can slowly reduce this percentage so that people staking GFI continue doing it as the amount of USDC rewards they get will remain more or less equal as the TVL increases (even though % of rewards decrease).
Just my two cents.
I agree with the opinion of @velvetdoctor.
The lack of TVL growth does not mean that the percentage of protocol fees has no impact on TVL at all. It seems to me that the TVL value in this particular case is influenced by both macroeconomic factors and the situation on the crypto market, as well as Goldfinch’s relatively recent losses due to loan defaults. Goldfinch’s reputation and trust in the protocol still needs to be restored.
In my opinion, a significant reduction in the percentage of protocol fees could negatively affect the value of the GFI. The percentage should be reduced gradually: 50% → 45% → 40% → 35% → …, monitoring the impact of these changes.
I support this proposal. I don’t think membership has shown any strong correlation with GFI, and the usage has generally been declining. So i think it’s very likely that the reduction would have a strong effect, or that it’s currently creating much action. But as a hedge for just in case, this proposal only says to reduce it to 10%. I could be onboard though with a gradual reduction rather than all at once.
I also think that the extra money could be used in better ways. If it turns out there’s some big reaction, we can always increase it.
The reason I proposed this is to free up ~238k USDC that can be used towards building the next version of Goldfinch vs boosting rewards for membership participants. The 238k represents only about 6% of the current GFI value locked in membership.
I agree that by removing rewards, GFI becomes mostly a pure governance token, which is why I left 10%. We will need to revisit tokenomics and rewards structure for the next stage of the protocol and can adjust rewards accordingly then if needed.
Membership rewards currently don’t impact TVL. Reducing rewards could potentially lead to a one time offloading of GFI that are unstaked, but I think that’s a risk worth taking.
We should not do a gradual ramp down. The process for doing this is time intensive, and would leave us with significantly less funds to use in service of building V3. The ~238K is already a relatively small amount and I wouldn’t want to reduce this more.
Let’s put this to a vote and see what the community thinks!
This statement still seems to me logically unsound. It would be more correct to say that “keeping membership rewards at the same level does not lead to an increase in TVL.”
Yes, it is possible that reducing membership rewards to 10% will not lead to any negative consequences: it is possible that among the current members there are mainly only those who are more interested in developing the protocol than in receiving rewards.
$238k, as you correctly noted, is a relatively small amount. On the other hand, the psychological perception of the 50% → 10% transition seems very significant. This could reduce the attractiveness of GFI for current holders and lead, as you also rightly noted, to partial withdrawals. Although future members may not even know that such a transition ever took place
As a result, it is difficult for me to weigh all the pros and cons. You can add an intermediate rate to the proposal, for example, 30%. Those who have doubts can vote for this option.
