DISTRIBUTION
On distribution I think we should consider who earned the airdrop and if there had been any promises made. It also seems there are two parts to the airdrop, a large amount that is available now (earned by current holders), and in addition to that there will be future weekly rewards (distributed over 12 months).
The amount already available to claim has been earned by Yearn’s current veCRV and current yveCRV holders (current = at time of airdrop), and future EPS airdrops will be earned by Yearn’s veCRV and future yveCRV holders.
For example, 10 mins ago someone added $100k of liquidity to yveCRV-ETH, I don’t see why they should benefit disproportionally from an historic airdrop versus SLP holders at the time of the EPS airdrop. I therefore think a proportion of the airdrop should be given as a reward based on a snapshot of yveCRV and yveCRV-ETH holders at the time when the EPS airdrop was available.
I don’t see how yvYFI holders fit into this except indirectly via Yearn’s veCRV so Option C isn’t an option imo.
In terms of promises made, the backscratcher promises x% greater fees (currently 58%) than if you locked up CRV yourself. Although the promise is in terms of trading fees and not in terms of a surprise airdrop - the EPS airdrop now forms part of the APY - so we want to make sure people are better off from having deposited into Yearn’s CRV vault. This is more reason to reward current yveCRV (and SLP) holders based on a snapshot if possible (this could be with yveCRV so that the amount of CRV locked continues increasing).
Stakeholder
Did they earn any?
Yearn’s veCRV
Yes!
yveCRV holders
Provided CRV. They were promised to earn a significant amount more than had they held veCRV.
yveCRV-ETH SLP holders
Same as yveCRV holders but took on additional IL risk to help turn yveCRV into a liquid asset.
Treasury (YFI holders)
Built the backscratcher
yvYFI holders
No
I would expect yveCRV-ETH SLPs to receive the most (per $ of investment) for the extra risk taken (this is what Yearn was trying to incentivize the most after all) followed by yveCRV holders/Yearn’s veCRV. Yearn’s share of veCRV should be treated the same as yveCRV holders.
What we decide with the future airdrops is less of an issue provided the rules are made clear at the start. As others have stated it makes sense to incentivize people to lock CRV or used to increase Yearn’s veCRV (or ideally both by taking the relative proportions – may need to consider being gas efficient, there’s currently 744 yveCRV holders).
I found this a bit confusing so I might have got something wrong here!
You’ve reframed my thoughts on the 10% - I agree with all of this.
From reading through everything so far, I’d suggest we need to mirror what StakeDAO is doing and pass the whole $EPS drop for the backscratcher vault on to yveCRV holders, proportionate to their yveCRV/LP position at each weekly snapshot date.
Currently, StakeDAO’s sdveCRV incentives are substantially higher than yveCRV’s due to their SDT token rewards. If yveCRV doesn’t atleast match the airdrop, then it’s simply non-competitive, and also will disincentivize future CRV lockup in the vault, to the detriment of all Yearn users.
The LP’s should definitely receive a proportionate drop, based on their share of yveCRV in the LP at each snapshot date - but I don’t think they should receive any extra ‘risk premium’ as they are already being compensated for this by the pool APY, currently ~100%. (Disclosure: I am currently one of those in the LP).
If we set a solid precedent here by fully compensating yveCRV holders/LP’s, then the backscratcher vault only becomes more attractive and will encourage future lockup. It also allows yveCRV to remain competitive with sdveCRV.
I would expect yveCRV-ETH SLPs to receive the most (per $ of investment)
I would strongly disagree. All yveCRV holders should benefit in proportion to yvecrv, regardless of whether they are LPs or not. this is an airdrop to veCRV holder and all yveCRV holders locked the same CRV with Yearn and should get EPS in proportion (or benefit from EPS in proportion).
One thing I would suggest is that the veCRV contributed by yearn should be able to be used by yearn and not distributed as a windfall to yvecrv holders. Formula for snapshot should be:
(an individual’s yvecrv / total yvecrv) * (total yvecrv / total vercrv in backscratcher vault). That second term equates to about 80% right now. Basically the 20% of the vecrv that yearn contributed to the vault should not flow to yvecrv holders. Yearn should be able to do what is wants, and would strongly recommend doing something that makes the vault more attractive going forward like adding vecrv.
I’m very impressed by the quality of the discussion here
I’d be very interested in a yveEPS vault - structured similarly to yveCRV, claimable by yveCRV holders.
That ensures that:
We’re not seen as parasitic (we can’t possible sell the airdrop)
Then we’d be positioned to build out vaults for EPS on BSC as well, using the same backscratcher mechanism. Now, how does that benefit the greater community? Well, it expands our presence on the BSC, and increases TVL. I imagine this may be a bit more work for the devs, one question is how to adequately compensate them for the additional work.
One thing I would like to add is that this sets / maintains precedent. Just like how others are using what StakeDAO is doing as precedent, we should use this opportunity to think about how we manage all unexpected airdrops going forward - not just this one.
I’m not sure the framing of “contributed by yearn” is the correct way to think about it. I’ve been working on a longer note about yvecrv, but have not had time to finish it.
In short I think the yvecrv holders are being under compensated for the value they provide. Locking with yvecrv (vs vecrv) means you never get your crv back. So the value of a yvecrv needs to be equal to a vecrv today (decaying over 4 years) + a crv in 4 years.
The 10% rev share that comes back from the other crv pools is not “Yearn” money it is money earned by the yvecrv holders. Unless yvecrv is kept closer in value to crv, nobody should ever lock with yvecrv. Distributing the 25% “yearn” or “extra” EPS available in yearn to yvecrv holders would go a long way to boost the value of yvecrv, if it’s value can be brought above crv, then people will enthusiastically lock more crv at no additional cost to yearn.
Regardless of how I framed it, all I am talking about is what subset of yvecrv holders get the benefits. My suggestion gives a pro-rata share of the EPS to current yvecrv holders (the 80% - ie: what they would have gotten had they just staked on curve independently) and the incremental amount (the 20%) goes to buying vecrv which benefits future yvecrv holders but not necesarily current holders.
In your opinion, what subset of yvecrv holders should earn what portion of the benefits of the EPS airdrop? @Jonathan
EPS airdrops should be made directly to yvecrv holders and LP holders (ideally directly by ellipsis as they do with vecrv and not to yearn for those ~80% of vecrv) and let individual holders claim it and do what they like.
The remaining 20% the “yearn” 20% should be immediately claimed with penalty.
Of this half should then be relocked for 90 days to earn the unlock yield, the other half should be sold (This represents ~10% of all the vecrv in yearn currently). The proceeds should be used to buy back and burn yvecrv if the price of yvecrv is less than the price of crv. This results in more vecrv becoming “Yearn” vecrv. If the price of yvecrv is greater than crv, then the proceeds should be used to buy and lock crv, again creating more “Yearn” vecrv. The yield from the locked EPS should be treated the same way, re-locking half and selling half.
This has multiple huge long term benefits for yvecrv and for yearn:
The buying and burning of yvecrv helps keep the price of yvecrv at or above crv.
The buying and burning of yvecrv increases the fraction of vecrv that are “yearn’s”
If the price of yvecrv is close to the price of crv, getting new people to lock new crv in to yvercv (where they get EPS airdrop without needing to lock for 4 years) is a no brainer.
As the “yearn” % of vecrv increases there is constantly more money to support yvecrv price by buying and burning or to buy new crv to lock.
After modeling this a bit more, here’s a few more questions/ideas regarding the distribution:
Time-weighted snapshot
Should we take historical yveCRV balances into account?
t_0→t_n - time-weighted snapshot since yvecrv creation
t_{n-1}→t_n - time-weighted one-week fixed time snapshot between snapshots
t_n - simple snapshot matching the time of the airdrop
Distribution schedule to maximize farming
I see two potential farming models with the second one being 2.25x more efficient in terms of active farming weeks.
After paying the initial 50% penalty and staking EPS, the principal can be unlocked on a rolling 3 month basis. EPS is delivered to holders with a 3 months lag. This way we always farm with 3mo worth of the airdrop, which translates to an average of 9.75 weeks of EPS airdrop in farming.
Increase the farming amount till the end of airdrop in 12 months, then airdrop a big chunk (9mo worth) and distribute the remaining portion as it unlocks over the remaining 3mo. This way we farm with 21.9375 weeks of airdrop on average.
@bateg
Are you modeling EPS staked returns as constant?
The bulk of the return comes from early unlock penalty, I haven’t thought about it enough to be confident about how it will change, but I suspect there will not be a uniform distribution of unlock penalty (even assuming constant EPS price, which seems unlikely to me.)
What is the goal? I think the goal should always to act in the best interest of token holders. This removes 1 as an option (for me) as it rewards those that are no longer token holders at the expense of current token holders.
Both 2 and 3 are reasonable but I think 3 is a better understood financial model. I think of airdrops like dividends and the airdrop date is the ex div date. If you own a stock on the date of the dividend, you get it, regardless of duration of hold. In this farming model you have proposed the dividends are earned on weekly model but only payed out annually.
I guess all of these questions come down to what the goals are. Asuuming the goals are to:
Treat all yToken holders fairly based on the risk their investment carries and their ancillary benefits it provides to the yearn eco system (and if that is not the goal, please let me know how you see it).
I am advocating for maximizing yvecrv price. Since you can never withdraw from the crv from the vault, the only incentive investment in yvecrv carries is price appreciation. I think this is in the best interest of both yvecrv holders, but also the entire yearn eco system, to maximize yvecrv price as it incentivizes new crv locking…
But you may have different goals or a legitimate quibble with my analysis.
Thanks to everyone for the thoughtful conversation.
I think 2 or 3. As with veCRV, only current yveCRV holders should benefit from the airdrop and ongoing benefits.
3 may be the simplest to implement, and I don’t see much of a downside - especially considering it matches the underlying approach $EPS is taking.
There’s probably a 3rd option here, and that’s just to take the penalty and distribute directly to yveCRV holders/LP’s each week shortly after.
In option 1 - the 50% penalty to immediately claim is already being taken, which means the tokens are now transferrable. Rather than locking them all up then, we could instead airdrop directly to yveCRV holders and allow them to determine what they’d prefer to do individually (stake + lock, hold, sell).
So, suggesting option 3 for Distribution Schedule:
3. After paying the initial 50% penalty, EPS is delivered to holders within a few days of each airdrop.
I’d probably vote for this 3rd option first, followed by option 1. It will also reduce any added complexity around ongoing claiming + re-staking of rewards to maximize returns.
I understand the first few airdrops will likely be locked up (first already is), while we settle on how to handle future drops - so any previously locked drops could just be handled with Option 1 until we agree on an approach.
I think selling the airdrop for YFI and then locking it in the DEV fund is the best way to do this.
Also incentivized more vampire attack structures to suck out the Liquidity of these non-censical yield farms.
Time-weighted snapshot option 1. Distribution schedule option 2 seems to provide a good balance of powering up Yearn and rewarding those who contributed to yveCRV.
I bought into the vision and integrity of curve, choosing to lock my tokens for 4 years. Elipsis is attempting to reward those who back curve. It’s the simplest solution but the only correct one - yearn should be act as a permeable membrane. Distribute EPS as if you don’t exist. Much like an LLC, be a pass through entity. Get out the way.
Option 3 sounds simplest, and seems how EPS is doing their airdrop anyways… but I think some people might jump in and out of the pool before snapshots, which doesn’t really sounds fair I guess? But going with the ‘dividend stock’ comparison, what prevents people from buying dividend stocks before their payout date and selling right after? Is it only market forces? If something else, do those same pressures apply here?
What would be the logic in doing snapshot 1 instead of either 2 or 3? Ideally you’d use this opportunity to strengthen yearn’s CRV moat by increasing it’s de facto yield, instead of diverting rewards to people who have locked crv and have potentially sold already.
