Attracting LP liquidity to tiny pairings has proved to be a large hill to climb for the community. Regardless of incentives offered LP’s that would benefit Tiny the most are often ignored. To compound this a large share of governance actively ignores their duties in voting for farming reward distribution.
I propose some small tweaks to our current structure to fix this:
Step One:
Tinyman should implement a slashing mechanism for those that fail to vote in farming LPs. It’s a simple idea: If you fail to vote in farming rewards, your monthly governance rewards for the next cycle are forfeit – either by burning, or adding them into the claimed rewards for active govs the next month. These are not insignificant amounts either. At minimum as much as 5-10% of governance rewards go to accounts that do not vote for LPs to distribute rewards.
Directing rewards is the primary duty of Govs, and a stunning amount simply ignore this part of the platform. That has to change – we need active govs, not passive ones.
Taking a cue from Stango on our discord, we should gate rewards claiming behind voting in the months farming rewards cycle. No vote cast means your share of the rewards are allocated to those that do. (This can be done gradually: Say every month those that don’t vote lose 20% of their rewards for the next month, adding another 20% every month to give people some leeway into the adjustment.).
Step Two:
LP’s should be able to lock tiny-paired tokens into governance to count for voting power. Specifically they should be able to lock tokens that are of outsized benefit to Tinyman, with the value of tiny at time of lock added onto their tinypower. One variation or another of this has come up from time to time but failed to receive traction. It’s time to change that, but it’s going to take a concentrated effort to whip the votes.
I propose two to start:
- talgo/tiny (as opposed to algo/tiny)
- usdc/tiny
Why talgo/tiny:
More liquidity in talgo/tiny means more share of staking rewards going to the platform.
Despite some significant advantages to talgo/tiny over algo/tiny there is a large discrepancy in the LP pairings. Encouraging migration to the staking-paired LP will increase Tinyman’s importance in securing the Algorand network, as well as offer more algo rewards – something that will be of major importance once the subsidized-staking rewards end – assuming nothing replaces it.
We already have a foothold for talgo and tiny use in Folks Finance and we can encourage the use of both by adding the ability to lock the paired LP for governance voting power.
Why usdc/tiny:
USDC/Tiny is an often overlooked pairing, despite decent farming rewards and a stablecoin it sits at a paltry 13.5k TVL and rarely moves much. More importantly the LP helps absorbs selling pressure from those that have tiny unlocked in batches to dump on us – even once VC unlocks are over the first round of Governance unlocks start for those that originally locked Tiny at the start of our governance model and never extended the lock duration.
Locking these tokens ensures long-term liquidity in these pools regardless of how farming votes go, as well as helping provide a floor for tiny price action and providing another option of tiny utility.
Both of these methods should come with an ability to auto-farm voted farms for their pools – providing both another incentive to lock the LP (not having to remember to recommit to every farming cycle each month and risk losing out on rewards if they forget).
I have a few other ideas that would build upon this one should we be able to get community support behind it.
So what do you like about this proposal? I get enough feedback and support I’ll open up a vote in Governance Proposals and start the off-chain vote.
Edited to Add:
I am a staunch advocate of tiny-paired LPs for tinypower rather than a free-for-all for LPs. We want to drive and enhance use of tiny after all, not any and all tokens in the gov platform – and the last thing we need is any less motivation for govs to buy tiny.
There are other tokens of course in the ecosystem that may be of value to add to our governance LP lists over time. tiny/folks, tiny/goBTC, tiny/IGA, tiny/alpha to name a few projects off the top of my head. However given market conditions I do think this should be a tiered roll out, with focus on tiny/talgo and tiny/usdc first, with more votes to add on LPs as we go after monitoring how much of an LP is locked into governance to see how users react to the idea as well as to avoid any unexpected side-effects.