Retroactive Backer Distribution - Formal proposal with data backing

Authors : velvetdoctor, Freedom15

Summary : Goldfinch should allocate a separate retroactive reward % for Early Backer community similar to LPs retroactive distribution. Also, increase the retroactive reward % allocation.

Motivation : Currently there is no clarity on how much % of tokens will be retroactively allocated for Early backer community. 2% has been allocated for Backer Pool Liquidity Mining and it includes retroactive rewards. But there is no clarity what % of that 2% will be allocated to Early Backers.

Specification & Requirements :

Key Requirements

  1. Backer liquidity mining rewards will be separated from retroactive rewards

  2. Retroactive rewards will be distributed to Backer community based on number of pools they contributed to and the amount they contributed.

Specification
Currently 2% has been allocated for Backer Pool Liquidity Mining and it includes retroactive rewards to early backers. But there is no clarity what % of that 2% will be allocated to Early Backers. Assuming even 50% of it is for Early Backers (which is 1%), we still think that is UNFAIR because of the following reasons:
Data behind the proposal:
Total contributions made in the senior pool (including all borrower pools): $38,885,966
Contributions made by Early Liquidity Providers (Up to Almavest Basket 2, most probably these are VCs, Goldfinch team members and their friends): $16,580,000 = 42.6% of overall contributions
Contributions made by Non-US liquidity providers (starting from Almavest Basket 3): $16,729,474 = 43% of overall contributions
Contributions made by Early Backers (starting from Almavest Basket 3): $5,576,491 = 14.3% of overall contributions.

So if early liquidity providers who have contributed 42.6% of total contributions got 4.2% reward allocation under “Early Liquidity Provider Program”,
Non-us liquidity providers who have contributed 43% of total contributions got 4% reward allocation under “Retroactive Liquidity Provider distribution”,
Then, how much should Early backers who have contributed 14.3% of total contributions should get? Even if we assume all of this capital has similar risk profiles, Early backers should have been allocated at least (14.3*4/43) = 1.33%.
Note: Please understand that this 1.33% is assuming backer capital has same risk profile as Senior LPs (which is not).
But what happened?

  1. There is no separate mention of retroactive allocation for backers at all! Total negligence of backer community and their contributions!
  2. This retroactive allocation has been clubbed with Backer Pool Liquidity Mining with 2% allocation. So not sure whether the team wanted to give 50% of that 2% or 25% of that 2%? No clarity at all. They just left it saying community to decide. Backers are still not sure, why community has to decide for backer allocation while all the other participants (team, investors, auditors, early contribution LPs, Non-US LPs, treasury, warber labs, borrowers… and the list goes on) got their allocations without any discussions with community or voting??
  3. Even when the issue is luckily raised in Discord by a few of us, we were told we are getting more when we look at it from dollar terms. And that because there are only 500 backers, even 1% in tokens is significant!! We have no idea why they want to look at the number of people and not at the risk profile of that group!
  4. We think the number of people line of thinking by Goldfinch team is totally flawed. Because if we apply that line of thinking, then the following questions come up:
    While Early backers (about 500 of them) get a mere 1% token allocation,
    Why would Goldfinch team (consisting of only 20 odd people) get 32.8% token allocation (Early and Future team + Warbler labs)
    Why would Early Liquidity providers (we don’t even know how many of these, most probably less than 50 including all VCs, Goldfinch friends and family members etc.) get 4.2% token allocation
    Why would Early supporters (again we don’t know how many of them here, may be 10-15 VCs) get 21.6% token allocation?

We hope you could see how ridiculous that line of thinking is! Total nonsense! Because, Goldfinch team and early supporters took the maximum risk, spent maximum time and put maximum effort, it is totally warranted they get way higher allocations than other groups. No doubt about it! Whether the team and early supporters consist of 1 person or 100 persons, it shouldn’t matter. We care about their risk profile and not the number of people right? We, as backers think the same. Whether the backers are 5, 500 or 5000 it shouldn’t matter. All it matters is what is their risk profile and whether you are compensating them accordingly!

We also would like to highlight the risk profile of Backers to that of the LPs before putting forward our proposal:

Backers LPs
Capital provided by Backers is locked for 3 years No locking. They can take their capital out anytime as long as liquidity is available.
First risk capital - Backers will lose all their money first if a borrower defaults LP capital is super secure and it is the last to be lost
Backers do all the due diligence of borrowers No due diligence. Just provide the capital and relax
Backers decide the quality of borrower community Goldfinch would be made of Doesn’t matter to LPs
Backers hold borrowers accountable Doesn’t matter to LPs
Backers couldn’t take the advantage of TGE and token listing LPs along with all other participants such as Flight academy participants could take advantage of it
Backers had to put up this proposal and go through ardous voting mechanism just to get their fair share of token allocation LPs and no other participant in Goldfinch community had to do this
![image 690x224](upload://oW71qotkQixMPEg8E8qGxUDFvjb.png)

Taking in to consideration all the above risks and unfair treatment received by backers, we would like to propose the following options:

Option 1: Backers receive 3.99% of tokens (considering the risk profile of backers, the amount of hard work they put in, and the unfair treatment they got is worth at least 3x that of LPs, 31.33% of their share of tokens - please refer to “Data behind the proposal” section) as retroactive token allocation for all backers till December 31st 2021. With 0-12 months vesting based on the amount they contributed to the pool.
For example: If a backer contributed $10,000 (including Almavest Basket 5), then he would receive (10,000/5,576,491)
(0.0399*114,285,714) = 8208 tokens OR 684 tokens per month vested across 12 months.
And keep the 2% backer liquidity mining and 3% backer staking as it is currently. That 2% liquidity mining would provide incentive for future backers to contribute to the pools and 3% backer staking would incentivize backers to hold their GFI token for long term.

Option 2: Backers receive 2.66% of tokens (considering the risk profile of backers, the amount of hard work they put in, and the unfair treatment they got is worth at least 2x that of LPs, 21.33% of their share of tokens - please refer to “Data behind the proposal” section) as retroactive token allocation for all backers till December 31st 2021. With 0-6 months vesting based on the amount they contributed to the pool.
For example: If a backer contributed $10,000 (including Almavest Basket 5), then he would receive (10,000/5,576,491)
(0.0266*114,285,714) = 5471 tokens OR 911 tokens per month vested across 6 months.
And keep the 2% backer liquidity mining and 3% backer staking as it is currently. That 2% liquidity mining would provide incentive for future backers to contribute to the pools and 3% backer staking would incentivize backers to hold their GFI token for long term.

Benefits:

  1. By separating out retroactive backer rewards and backer liquidity mining, it would be clear to all backers how many tokens they could expect to receive in the coming months.
  2. By separating and increasing the retroactive backer rewards you are compensating backers in the rightful manner for the risk they are taking and the unfair treatment they got till now.
  3. This also sends a signal to the current and future backers that Goldfinch really values backer community and they really believe that backer community is the backbone of Goldfinch protocol.
  4. By keeping 2% backer mining, it provides an incentive to all future backers to contribute to the pools thereby increasing demand for participation and ability to fund larger and larger borrower pools in the future.
  5. By keeping 3% backer staking, it provides an incentive to all backers to hold their GFI token for long term

Downside:

  1. Goldfinch has to reduce 2.66% to 3.99% of token allocation for treasury and reallocate it to backer community.
  2. Goldfinch technical team has to make changes in their code to reflect the new token allocation numbers.

Voting:

YES vote to option 1: Backers receive 3.99% of tokens as retroactive token allocation for all backers till December 31st 2021. With 0-12 months vesting based on the amount they contributed to all the pools. Here we keep 2% backer liquidity mining and 3% backer staking as it is currently.

YES vote to option 2: Backers receive 2.66% of tokens as retroactive token allocation for all backers till December 31st 2021. With 0-6 months vesting based on the amount they contributed to all the pools.
Here we keep 2% backer liquidity mining and 3% backer staking as it is currently.

NO vote: Backers receive 1.33% of tokens as retroactive token allocation. This means Backer capital is treated as having same risk profile as LPs. With 0-6 months vesting based on the amount they contributed to all the pools. Here backer liquidity mining will be reduced to 0.67% which could seriously impact incentive for future backers. Backer staking will stay at 3%.

Resources:
Attached images describing funds allocated to various pools by Early LPs, Non-US LPs and Backers and comparison of capital allocation %s of LPs and Backers


URL: Discussion of various backer community members in Goldfinch governance forum

URL: Discord community member discussions regarding this issue

10 Likes

Thank you for the amazing work summerizing all our thought behind the current situation. I strongly support your proposal

4 Likes

Please there should be a cap at 1000$

3 Likes

Hi. Thanks for writing up this proposal.

I do support the notion of reallocating some of the treasury to Backer rewards. However, I do not agree with the proposed distribution.

  • This proposal favors large Backers.
  • A small backer who contributed $1000 to a Borrower Pool, would get less GFI than if they had contributed the same amount to the senior LP.

Smaller Backers had to put in just as much time doing their due diligence as larger backers. They also had to pay the same gas fees.

I feel strongly that a large portion of these rewards should be calculated with a “capped” contribution amount.

  • This would encourage smaller Backer to continue their mission-critical activities of finding and assessing great borrowers, setting high quality norms and to hold borrowers accountable.
  • This will also set a precedent that Goldfinch Protocol is not just rewarding participants for their up-front capital. Rather, it rewards those who supports and grows the protocol, that believe in the protocol - that it will change the world for the better, and that provide capital despite high risks and high gas costs that they may never make back.
4 Likes

Great work and thought out proposal really taking into consideration all figures. Investors in Almavest basket 5 also appreciate you including us as we are all under the same risk and lock up.

Every one of us early backer made and locked up our investment in support of Goldfinch for the LONG term and it would be great to see the dao and team prove and show how much early backers are appreciated as well as show clearly how future backers will be rewarded. We would be happy to invest again if so making the protocol stronger.

This is what a DAO is all about and it is great to see community members who really understand what they have invested in and what we deserve. It will be great to see the Team, VCs and the community show your appreciation and value towards early backers with a retroactive reward as well as future backers with more than just empty promises. It is very clear to see backers have invested more funds, risk and now we are investing more time and effort with these proposals.

I agree with BOTH options (1 and 2) and am happy to go with the majority or the teams decision if all is taken into account. Whatever is thought to be the fairest and best for the protocol, borrowers, backers and the community.

Thankyou

2 Likes

Hello there

I also agree with a capped contribution amount which can vary in percentage past an agreed figure.

But larger sums, pools vested in, time vested in should be rewarded more. It must be decided fairly.

I look forward to a response from the team on how we will be moving forward and to see what kind of value backers are shown (big, small, longer or shorter vested)

Thankyou

2 Likes

Hi!

  • I absolutely think larger sums should be rewarded as well. Which is why I agree that some of the rewards should remain “uncapped”

  • I am a bit torn on whether the amount of pools should be included. On one hand, contributing to multiple pools means you have done your due diligence on multiple Borrowers. On the other hand - investing a smaller amount in multiple pools was not feasible for smaller investors. Someone with $2,000 in total capital would spend half that in gas cost if they were to diversify across 3-4 borrower pools.

  • Since capital provided to the Borrower pools is locked for 3 years, I do not think it makes sense to look at the initial date you provided capital (Assuming this is what you meant with “time vested”?)

    • Say I invested in Sep 2021, and you invested in Dec 2021. Our capital would be locked until Sep 2024 and Dec 2024 respectively. In other words - my capital would unlock in 32 months, while yours would unlock in 35 months. In this example, I do not think either of us deserve higher rewards.

    • Many Backers were unable to contribute during the early pools. Either due to technical difficulties, exorbitant gascost, or simply not being able to get the transaction through before the pool was filled.

    • I do not think we should penalize those who were unable to commit during the early pools. After all, what is 2-3 months when all Backers have committed their capital for 3 years. (Senior pool LP is different, as they have the option to withdraw their liquidity at any time)

2 Likes

It was a shock for me to learn that the borrowed pool did not receive any rewards. why who risks the most didn’t get something initially? funds have been blocked for 3 years. the risk of losing everything without a refund. 0 rewards, why? I think it is unfair if the borrowed pool remains without rewards, it will kill the protocol, do not forget that it is necessary to stimulate future sponsors

2 Likes

Hey

I agree here. What figure do you believe rewards should be capped to before lowering the percentage of rewards? and how much would the rewards be lowered after the cap?

I personally only was able to Back almavest pool 5 due to the problems you just went through. It was either my NFT, Gas, congestion etc that would get in the way and they filled so fast so i was over the moon to get into basket 5!

But i do acknowledge for other backers that managed to supply greater funds and several pools they should also be compensated accordingly in a fair way.

I agree with the fact of whichever pool entered makes sense that there shouldnt be a difference like the senior LP because our funds are all locked for 3 years regardless.

Thankyou for taking all into consideration.

Just know I am very happy with all the proposals between yourself and Velvetdoctor as long as all backer pools are included and it is a fair calculation for the community and backers.

Thankyou so much for your time and efforts.

Hopefully we will all be happy and proud to be a part of Goldfinch after this is all sorted.

3 Likes

Hi.
Thanks for asking. To clarify what I meant by “capped” vs “uncapped” reward pools, I created an excel sheet. Hope you and others will find it useful. See Retroactive Backer Distribution w/Numbers - #7 by CognitiveLiberty

2 Likes

Hey there

Thankyou for the excel sheet. much easier to understand.

I think that is fair, but happy to put through a vote on what everyone thinks a fair cap is?

Anywhere from $1000 - $3000 perhaps? if it doesn’t impact the smaller holders too much?

Maybe if we go with the LP Senior pool capped sum? if its $1000 or more.

2 Likes

I did both backers and lp pool and backers should get at least 5x gfi for their risk, this is not even a question. Thanks for the amazing work OP

1 Like

Agreed with this line of thought.

2 Likes

I totally agree with the proposal. I would vote for option 1.

1 Like

Backers who take risks and contribute to the growth of the product should be rewarded accordingly. I don’t understand why people who are risk-free and only liquidity receive governance tokens

1 Like

Interesting proposal, and I fully agree with that baker should be rewarded higher/at least same per dollar amount of GFI tokens at dollar deposited basis with LP, but particially your prposal doesn’t make sense so much for me because the reason of the cap saying the time of due dilligence is same among all participants regardless amount deposited. Honestly, I’m not sure it’s right or not, but DD time could be varied among participants regardless the amount deposited. E.g. If assuming a whale putting 10k dollar, supposedly he didn’t have much DD befoere depositing.

So what I propose is we just should keep the same level of reward proportion curve among participants with the LP, and reward per amount deposited should be higher for backer accounting for the higher risk.