Authors: Blake West and Mike Sall, co-founders Warbler Labs
Summary
This proposal is the same as Retroactive Backer Distribution Proposal #3, with the exception that it proposes to make the 2% of Backer Liquidity Mining be dispursed over the first $100M of interest payments, rather than the first $1B. This has the effect of increasing the total amount of the Backer airdrop to 1.66%. It also effectively increases the the on-going APY’s for Backers from liquidity mining, and ensuring their properly compensated over and above what LP’s get, who are taking substantially less risk.
Motivation
After calculating some numbers, we determined that the APY’s may not be enough to properly compensate Backers. At $1B of interest payments, there may be cases where Backers were actually making less in APY than LPs, which doesn’t make sense. This would address that, and still be enough to handle Backer incentives for a considerably length of time ($100M of interest payments)
Update - The airdrop spreadsheet has been updated to reflect the new $100M. It also now takes into account for estimated protocol growth. The net effect is increasing the total airdrop amount for Backers, as well as increasing the expected on-going APY’s for Backers from the liquidity mining.
So, if the numbers don’t change then how come you are claiming that the APYs will increase for backers? If the same tokens are distributed for the first 100Mn interest payments instead of the first 1Bn, why wouldn’t the numbers change? Could you please explain a bit more? I don’t understand the logic.
Instead of all these complex calculations, hasn’t it been easier if you guys just removed the caps and given the tokens to people based on whatever the capital they contributed? I know you didn’t want the whales to scoop up the whole thing but for that you can always keep cap on contributions right? That way, people would contribute more to get more tokens. Instead, you are privatizing risks and socializing rewards to please small investors. I don’t know if you realized it or not but backers who contributed more capital got 10 times lesser returns than backers who contributed less capital (200% vs 2000%)! Basically you are discouraging the big backers. I don’t know how that is good for the growth of the protocol. Anyway, I know nothing is going to change now, but just putting my 2 cents out there so that you give it a thought at least in the future. Thanks!
Hello guys! So regarding this amendment I vote YES.
Additionally I have a suggestion, could you please add bottoms "YES"and “NO”, it would definitely make the voting process easier cause for users it os not very convenient to write comments for each proposal and for you I suppose it is quite difficult to read all the comments and calculate scores manually.
I truly believe having an active community of hundreds of small to medium sized backers, rather than 3-5 whales, is much better for the health of the protocol.
Yes - those who contributed larger sums should be rewarded. Which is why I agree that some of the rewards should remain “uncapped” - as is the case with the current proposal.
However, If all rewards had been proportional to the amount contributed to the Backer pools, the two largest backers would receive 30% of all rewards. (They contributed $1,69M in total). This also means those two backers would hold a very large voting power in any future proposal.
We need to foster a large community of Backers. Finding and assessing great borrowers, setting high quality norms and holding borrowers accountable are all mission-critical activities that doesn’t need a large amount of capital. Small-medium sized 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.
ZERO Backers received a net APY of ~2000%
In the spreadsheet, only those who contributed <1000 USDC received a theoretical APY of >2000%, however:
Interacting with the protocol had very high gas costs. I took a look at an arbitrary wallet, and found that the net APY is much lower.
No backers received 200% apy either. The closest would be Backers that contributed >200,000 USDC. They received an APY of 202-206%. In other words, they got GFI tokens valued at over $400,000 for providing $200,000 in stablecoins. No matter how you look at this - it is an absolutely insane return.
I believe the proposal by Blake and Mike is a very fair approach.
The capped part will encourage smaller backers to contribute to the protocol with their time - finding and assessing Borrowers and holding them accountable. As well as participating in decentralised governance.
The uncapped part will encourage larger Backers such as yourself to do the same, but also to contribute sizeable first-loss capital to the Protocol.
The retroactive Backer airdrop is divided into 4 parts. The fourth part is the “Theoretical liquidity mining”. This part would award Backers with rewards for the pools they are participating in as if their pools successfully participated in Backer Liquidity mining.
This part would change with the amendment by Blake and Mike
Hmmm I agree that large backers shouldn’t hold most of the rewards, that’s why I am saying having a cap on the capital contribution for 4-5 days (say 10,000/20,000 max per person, which Goldfinch did implement for first two backer pools I guess) and then if the fund doesn’t get filled, then opening that cap would make sense so that everyone is given a fair chance to contribute whatever they can. If the fund gets filled, that would be FANTASTC! We get all the diversification we need. Otherwise, big investors can take up the slack and help fill the borrower pool so that the borrowers are happy and come again. In this case, you are giving everyone a chance and there is very less probability for big investors to scoop up the whole thing. I believe in giving EVERYONE a FAIR/EQUAL CHANCE but don’t believe in UNFAIR/UNEQUAL REWARDS (socializing profits) and giving special treatment to any one group of investors (irrespective of their capital contribution).
Anyway, if Goldfinch had told investors that rewards for large contributors will be capped and they will get 5-10x lesser rewards than smaller contributors, do you think any big investor would have contributed as much as they did? I doubt it. Capping rewards and rewarding some group of investors 200-300% and some other group 1900% (regardless of costs) doesn’t sound right to me. If it sounds right to you and the greater Goldfinch community, then I leave it here! I think, an efficient system should be about giving everyone EQUAL OPPORTUNITY/CHANCE and EQUAL REWARDS.
Hope you got my point. I am not against small investors OR supporting large investors. I am only against unequal rewards. Thanks!
You want everyone to be treated equally, but want larger Backers to be treated “more equal than others”
What I’m saying is - and I’m repeating myself at this point - Backers contributed in two ways.
They spent dozens of hours learning how to be Backers. Finding and assessing great borrowers, setting high quality norms and holding borrowers accountable are all mission-critical activities that doesn’t need a large amount of capital. They also poured many hours into assessing each individual Borrower pool.
The time it takes to learn being a great Backer is the same, no matter the size of your portfolio. Thus, some of the rewards are capped - to recognize the time each individual spent learning the ins- and outs of being a Backer. And the time spent assessing each individual pool.
The second way a Backer can contribute, is with capital.
Part of the Retroactive Backer Airdrop is directly propotional to the amount of USDC contributed to the Backer Pools.
Going forward, the Backer Liquidity Mining will be directly proportional to the amount of USDC you contribute to the Pools
Your proposal completely disregards the time and effort put into being a good Backer. You use the word “Equal”, yet you want the contributions (Time and effort) of smaller backers to be disregarded.
Also - your assumption regarding big investors is delusional at best. You are saying that investors wouldn’t contribute to the Borrower pools, knowing they would get “3x” on their provision? I would be more than happy to see my APY increase by a couple % - maybe go from 18.75% (default) to 22-23% (with GFI farming).
I like how we discuss these things and backers tokens get higher yet the price dumps every day so it would have been better to just distribute day one without more tokens. LPs won and backers totally lost
Hey all, we updated the spreadsheet to reflect the change in Backer Airdrop numbers. The total amount for the airdrop increases to 1.66%. Also, again the point of this amendment was to also recognize that the on-going liquidity mining was likely going to be too low APY’s for Backers, and so thought it would be better to increase those, especially at this early stage.
Hello. How does this proposal account for the return of capital to the Bakers? After all, some receive capital monthly, and someone will receive it in three years. It’s a different risk.
All Backer pools have monthly repayment schedules. There are varying term lengths (1-3 years), but all Backers have capital coming back monthly. Also those who were in longer pools have more of the “theoretical liquidity mining” so they are implicitly being rewarded a bit more.
Hey I want to respond to a few things here about large vs. small investors.
Large Backers are not being penalized - You said “basically you’re discouraging the big backers”, but I think this is a weird way to look at it. The “capped” portion of this is a one-time bonus for small backers to help build community. We aren’t penalizing large Backers in any way. If we didn’t do the capped portion, I don’t think the correct thing would be to keep the % of tokens the same, and give a whole bunch more to large Backers. The airdrop would just be fewer tokens!
2.This capped thing is just for the retroactive airdrop, and not ongoing liquidity mining - As mentioned before, we’re trying to build a community, so a one-time dispersal is useful. But the on-going liquidity mining is strictly driven by amount of capital. So when you say “give it a thought for the future”, we did, . The whole future is exactly that way, strictly by capital contribution.
Large Backers and LPs will always end up capturing the vast majority of actual token rewards anyway (even if the APY’s on this one-time airdrop are higher for smaller backers, the actual number of tokens is still much higher for large Backers).
But overall, I just want to say we’re all in this together. Large Backers are incredibly important, and small Backers will do great research work too. This airdrop in general is about bootstrapping an awesome community of both. WAGMI!
For example, in the Cauris pool, only interest is paid monthly, and the principal amount of the loan at the end of the term (in three years), but in other situations, the payment of the principal amount of the loan can be monthly or in year. I believe that this should be taken into account in propousal.
. The whole future is exactly that way, strictly by capital contribution.