Retroactive Backer Distribution Proposal #3 (with data)

Authors: Blake West and Mike Sall, co-founders Warbler Labs

Summary

Building on the proposal by @velvetdoctor and @Freedom15, and using the “capped” concept in the proposal by @CognitiveLiberty (which is also how the LP airdrop worked), this proposal suggests that Goldfinch allocates a separate retroactive reward % to Backers, as well as implements on-going liquidity mining for Backers. See full data behind the proposed airdrop here.

More concretely, this proposal suggests two things for consideration by the community:

  1. 1.51% for the retroactive Backer airdrop to give them 2X APY’s of the LP airdrop . This is broken up into 4 “parts”. A “capped” reward, an “uncapped reward”, a “risk bonus”, and “theoretical liquidity mining” for the pools already contributed to, but which will not be able to participate in Backer Liquidity Mining once it is turned on. Each item is explained in detail below.
  2. Allocating 2% for Backer Liquidity mining, to be activated as soon as possible . This proposal also explains how Backer Liquidity Mining works, and suggests keeping the 2% allocation previously described.

Motivation

Early Backers should be compensated for the risk they took and work they did. And for future Backers, having liquidity mining will prove a great incentive to do further work.

Specification and Requirements

There are two parts to this proposal, the airdrop and Backer Liquidity Mining. Let’s start with the airdrop.

Airdrop

The airdrop is broken up into 4 parts.

  1. “Capped” grant - The first $750 of each Backer deposit will be rewarded with GFI at the $98M price of the seed round. This is identical to the LP airdrop, and also shows appreciation for smaller dollar Backers.
  2. “Uncapped” grant - Each dollar of Backer capital is also given 0.08740 GFI per dollar, with no cap. So $1000 means 87.4 GFI, $10k means 870.4, etc. This is the identical rate that the LP grant received for this portion as well. This part recognizes larger contributors for the risk they take.
  3. “Risk bonus” - This is a multiplier on the first two parts, and would be set at 100%, meaning that Backers get double the grant that LPs got, to reflect the increased risk they take and work that they do.
  4. “Theoretical liquidity mining” - Finally, each Backer also receives rewards for the pools they are participating in as if their pools successfully participated in Backer Liquidity mining. This is because even after activating Backer Liquidity Mining, legacy existing pools will not be able to participate. All future pools will though. So this airdrop optimistically assumes the existing pools will fully pay back, and thus will pay out all their rewards.

When you total this up, it comes out to 1.51% of the total supply. See the spreadsheet for full details.

Unlock schedule

Basically the same treatment as LPs

  • The capped grant (first $750, or first 875 GFI of rewards) unlocks immediately for everyone.
  • Beyond that, if you put in less than or equal to $20k in a pool, it all unlocks immediately.
  • If you put in more than $20k in a pool, then the entire amount above 875 GFI vests over 12 months.

Comparison with LPs

Looking at APY’s generated per dollar, the Backers will generally receive about 2X the APY’s of LPs . At roughly today’s prices (~$10), LP APY’s from the airdrop ranged from roughly from ~90%-1400%, depending on exact amounts supplied. In this proposal, Backers will receive about 200%-2500% APY’s . (See the referenced spreadsheet)

In the post by @velvetdoctor, their math says that 2X means 2.66%, but ours says 2X means 1.42%. Where is that difference coming from? It’s really coming from the capped grant. A lot of the total tokens for LPs were driven by the capped grants, which is largely driven by the number of people involved. There were over 5157 LPs, and we wanted each one to get something meaningful from the capped portion. Whereas there are only 420 Backer contributions. So doing that same meaningful capped amount simply takes fewer tokens. I suppose one could argue that this number of people is irrelevant, and only total tokens matter. But I disagree in this case, because we’re building a community, and it’s important to recognize smaller contributors. More broadly, I think APY is the more fair way to compare the airdrops, and when you look at that level, this proposal does in fact give Backers generally 2X the APY of LPs.

Regarding Liquidity

A key point that has been brought up regarding Backers is that they have to lock up their capital for 3 years. While this is practically true, it is not inherent to the protocol. Backers receive an NFT for their participation and we expect secondary markets could develop to enhance liquidity on these in the future. This could be a great use of community grants.

Summary of Airdrop proposal

This proposal shows strong recognition for the Early Backers with a healthy 2x risk bonus. It recognizes the work they do, their importance to the protocol, and recognizes both small and large Backers.

Backer Liquidity Mining

The second part of this proposal is Backer Liquidity Mining. At a high level, Backers should receive rewards as interest payments are made back to the protocol, because this most closely aligns all incentives.

Time based incentives don’t track well with the lumpy nature of when Borrowing takes place (ie. total borrowing could be flat for weeks and then double a week later). It makes more sense for the rewards to increase if borrowing activity (and hence repayments) are increasing, and to stay flat if that activity is staying flat. You could also imagine rewards happening per dollar contributed, but that doesn’t take into account risk or time. $10k in a pool that pays 1% is not the same benefit to the protocol as $10k in a pool that pays 15%. Lastly, the goal of the protocol isn’t just to lend money out, but to get repayments back in. So you should only hand out rewards to Backers who support good Borrowers that actually pay back, rather than Backers who support bad borrowers who only borrow the money but don’t pay back. So, waiting until interest payments come back is the key. It cleanly aligns so many incentives.

Specifics

  • 2% of the total GFI supply should be allocated for the first $1B of interest payments
  • Those rewards should be paid on an exponentially decelerating rate per dollar (ie. earlier interest payments are rewarded significantly higher than later interest payments).
  • No unlock schedule on rewards. As soon as an interest payment is made, more rewards are immediately claimable by Backers.

For the full rationale on why we think using interest payments is the best approach, and how the decelerating reward rate works, see this doc.

Benefits

All the same benefits as what is listed in velvetdoctor’s proposal. This proposal doesn’t touch or state anything about Backer staking. That component will require another proposal, and may end up having a greater or fewer allocation of tokens, depending on the exact design and state of the protocol at that time.

Downside

No real downsides except usage of the token, but if the proposal passes, then it is assumed the community believes this is a worthwhile use of the token.

Voting

“Yes” - Means allocate 1.51% of GFI to early Backers as a retroactive airdrop, and allocate 2% to Backer Liquidity Mining, as already designed and deployed.

“No” - Means do nothing.

Update 1/18/2022 - There was one Backer who was not included before. They have been added back in. We’re now confident all Backers have been included. This changes the total Backer distribution to 1.51%. The transaction representing their deposit is here. No one’s distribution amount has changed The formula is completely still the same. There’s just one additional deposit that is being tracked, and hence the total amount went up.

Also , @Igor has offered to do the engineering work to implement the airdrop for 550 GFI. He did basically the same work before when helping with the community Flight Academy NFT’s, so he’s a great candidate for this. So that will be added into the final amount, and sent to him upon completion.

25 Likes

Yes - I fully support this proposal.

Can you please confirm that liquidity provided to Almavest #5 will be included in Retroactive Backer Airdrop. @Freedom15 and many other 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.

3 Likes

YES - I am in full support of the proposal. Thankyou so much Blakewest. This will be an incredible investment for my baby boy.

I just want to confirm before i get too excited that this includes Almavest Basket 5?

Thankyou

2 Likes

Appreciate the mention. Thankyou so much for being so on point.

2 Likes

Yes it would include Almavest Basket #5. That pool is in the spreadsheet.

4 Likes

You have made our day. Thankyou so much. I will wait for the rest of the community to vote and hopefully all can go ahead.

2 Likes

@blakewest -
Thank you for putting together this proposal. This really shows how fast you guys act in acknowledging and putting a proposal forward to rectify it. Kudos to you and your team !

I like how it is broken down into 4 buckets for past backers and also allocating enough GFI% to future backers ! I like how you propose to reward future backers using repayments made. This is really key for the success of the protocol.

I’ve a generic question on secondary markets developing for backer NFT - do you see this being developed in-house by goldfinch team or anybody developing it using grants ?

In general I fully support and agree on this proposal ! I will vote ‘Yes’.

5 Likes

YES
The big players always get more! Right?
Is it possible to consider the proportion of airdrops in a comprehensive manner, such as compensation for users who were not able to participate in the early stage due to technical reasons?

1 Like

Thank you. Sorry, it is late at night my timezone, I didn’t see the spreadsheet when first reading through the proposal :sweat_smile: :pray:

1 Like

Goldfinch is a community owned protocol now, and the power of DeFi means interoperability. So I think secondary markets could be built by anyone, and grants would be a great way to encourage that.

3 Likes

“Yes” and LP consistent rules are great

1 Like

YES…and thanks for fast resolving…appreciate

1 Like

yes. Thank you for your work. Appreciate that

1 Like

Great offer, I vote for

1 Like

Definitely YES. Applause

1 Like

YES. Thank you for the quick proposal. Hopefully we can get the precious GFI very soon.

1 Like

thank u focus on this. so beneficial for us

1 Like

I just think the earlier backers that invested even before the flight accademy etc. should get higher rewards or at least some advantage than for example almavest pool 5 backers.

In my opinion, it also wasnt fair giving same allocation to people depositing to LP on 13th of december and to a person that had been providing liquidity since summer.

2 Likes

Definitely YES.

Dear Blake thank’s for your proposal it seems quiete fair solution for Early Backers!

velvetdoctor, Freedom15, CognitiveLiberty big shout out to you for bringing this issue so quickly

4 Likes

Apparently, all stakeholders of the protocol are equal. Definitely “Yes”.

2 Likes