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
-
Backer liquidity mining rewards will be separated from retroactive rewards
-
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?
- There is no separate mention of retroactive allocation for backers at all! Total negligence of backer community and their contributions!
- 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??
- 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!
- 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 |
|  |
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:
- 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.
- 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.
- 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.
- 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.
- By keeping 3% backer staking, it provides an incentive to all backers to hold their GFI token for long term
Downside:
- Goldfinch has to reduce 2.66% to 3.99% of token allocation for treasury and reallocate it to backer community.
- 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