Limit TINY Rewards Locking & Stop Reinvestment at 25% APR to Foster Ecosystem Liquidity

Proposal Discussion
1

As the Algorand network approaches maturity and mainstream adoption, transaction volume on Tinyman is poised to grow significantly. To ensure TINY plays an active role in this evolving ecosystem, this proposal suggests stopping the ability to reinvest governance rewards and limiting the rewards locking process when the Governance Reward APR falls to 25%.

Background

There is a renewed interest in the Algorand blockchain. The Algorand Foundation now has a clear path toward profitability and is aggressively pushing for the adoption of Algorand into mainstream projects around the world. My prediction is that Tinyman will directly benefit from this additional volume of transactions.

With this impending growth, the $TINY token needs to step up and play a larger, more active role in providing liquidity and utility across the Tinyman ecosystem, ensuring the protocol can continue to evolve alongside Algorand.

The Proposal

When the Governance APR falls to 25%, the protocol should enact the following changes:

  1. Limit the Rewards Locking Process: Restrict new rewards generated in the future from being locked back into governance.

Rationale & Benefits

By implementing this change, we create a “win-win” scenario for governance participants, ecosystem users, and the protocol itself:

  • Compensating Early Adopters: Early supporters who have locked their tokens and supported Tinyman through its early stages are appropriately compensated for their efforts before the APR dilutes too heavily.

  • Activating Idle Capital: Instead of having new rewards passively locked in governance, those newly generated TINY tokens will be forced out into the broader Tinyman ecosystem. Users will be encouraged to deploy these tokens into Liquidity Pools, find alternative earning mechanisms, and serve the ecosystem’s liquidity needs as a whole.

  • Long-term Value Appreciation: Once Algorand and Tinyman achieve their true potential volumes, this circulating, actively deployed liquidity will create a healthier DeFi environment. Ultimately, TINY holders will benefit from the organic increase in the value of TINY as an active asset rather than just a locked governance token.

Governance Poll

Do you support the proposal to stop reward reinvestment and limit the rewards locking process when the APR falls to 25%?

  • Yes - I agree, we should limit locking/reinvestment at 25% APR to push $TINY into the ecosystem.

  • No - I disagree, the current locking and reinvestment mechanisms should remain unchanged.

2

I vote yes, although I don’t see a vote button…

3

Hello! Welcome to the forums.

First I would avoid a vote button in the discussion thread. This is for feedback and refinement to ideas. A Governance Poll vote would be put in the Governance Proposals category should it move forwards, with a link to this discussion thread.

Governance Proposals - Tinyman Governance Forum

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On to the discussion part!

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A lack of use for tiny in circulation and being dumped instead has already caused significant loss of value for the token. I would note that limiting rewards from locking tokens – (the only long-term method we have to restrict Tiny supply other than our BBB program) does not exactly help the value or the scarcity of Tiny. That could just encourage others to stop locking Tiny all together or extending their lock duration.

Locking Tiny-paired LPs might be a more beneficial solution (with half the amount being added to a users tinypower at the time of lock). Encouraging both long-term tiny-paired LPs as well as increasing the amount of tiny that is locked for a long period of time to stabilize price action and deeper tiny-LP liquidity.

Even with an astounding 48.33% farm and a 5.74% pool the tiny/goBTC LP has only some $3,000 more locked in Cycle 21 (with 53 participants) than was locked in Cycle 20 (with 52 participants) when it featured a mere 20.18% farm. I myself make up over 8% of the pool and will withdraw it all for a gov lock should I reach around 50% of the LP, but I’d much prefer to build a substantial commitment in important Tiny paired LPs, like tiny/Algo, tiny/goBTC and tiny/USDC LPs and lock them into governance for additional tiny power equal to the Tiny share of the LP at time of lock.

That encourages long-term liquidity in important tiny pairings that can help offset sell pressure as well as help tiny price appreciation when BTC is on a bull run.

Example: I would personally like to build far deeper liquidity in the tiny/gobtc LPs but rewards themselves don’t really seem to draw much. My solution is to simply withdraw my position as tiny, locking it, then funneling rewards back to the LP and farming the tiny back into it. Rinse-repeat.

However I’d be equally willing to build a large Tiny/gobtc position (lets say I added 7 million tiny paired with goBTC), and as long as I can still farm it while it’s locked (maybe by auto-adding vaulted LP positions to applicable farms if they get the vote without having to recommit them to a new farm).

That would ensure larger liquidity in the tiny LP and ensure it stays in the LP for years. It would run the risk of votes not coming for future farming cycles, but that would imo only encourage more tiny locked to ensure a farm for the LP. It also adds yeild from the pool itself regardless of if and when farms are voted for the particular LP.

This subject has come up before: Allowing $TINY LP’s to be used within TM Governance

1 Like
5

Sorry but terrible idea. We need more Tinyman governors and liquidity providers, not less. If people can’t lock their TINY tokens into governance, they have less skin in the game and they are less committed to Tinyman, so they will probably move onto Pact and they will just swap TINY to POW or USDC etc. so TINY price will go down even harder and we have less users. protecting your own bag desperately is not good way to go.

I think goal should be completely opposite. Tinyman should encourage people to lock as much TINY into governance as possible. this means less TINY into circulation, meaning less sell pressure. higher market cap lures more eyes → more TVL.

Also good to keep in mind that current TINY gov rewards are just temporary way to distribute the tokens to Algofams and get new users. After gov rewards run out, most likely 50% of the burn budget will go into governor rewards which means that with the current trading volume, yield will be pretty low.

Summa summarun, we need more governors and locked TINY, not less.

Regards,
ROAM

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6

strong text
Nao concordo muito com a sua sugestĂŁo acho que devemos incentivar mais ao uso da rede e deixar a porcentagem

7

I really appreciate the depth of your analysis here, especially regarding the need to deepen TINY-paired LP liquidity (like $TINY/$goBTC and $TINY/$ALGO). You’ve touched on the exact ‘utility gap’ I’m aiming to bridge.

I actually agree with your core premise: TINY is most valuable when it’s working for the protocol. Where our ideas converge is the transition from passive scarcity to active utility.

Here is why my proposal complements your vision for TINY-paired LPs:

  • The Catalyst for Liquidity: The current 25% APR reinvestment loop creates a ‘gravity well’ that keeps TINY locked in governance. By stopping reinvestment at that threshold, we provide the necessary nudge for governors to move their rewards into the very LPs you mentioned.

  • From Scarcity to Productivity: While locking restricts supply, providing liquidity in a TINY/goBTC or TINY/ALGO pair achieves a similar effect on ‘sell pressure’ while simultaneously generating fees and deepening the ecosystem’s roots.

  • Synergy with LP Governance: I’m fully on board with your suggestion of allowing TINY-paired LPs to be used within TM Governance. In fact, my proposal to stop reward reinvestment serves as the perfect ‘Phase 1.’ It forces the question: ‘Where should these rewards go?’ The answer, as you’ve highlighted, is into high-value LPs that support the growth of the Algorand DeFi landscape.

By limiting the passive locking loop, we aren’t just ‘releasing’ TINY to be dumped; we are re-routing it to become the utilitarian engine of the platform. We move from a model of ‘lock and wait’ to ‘provide and earn,’ which ultimately builds a healthier, more liquid Tinyman for everyone.

8

ROAM, I completely agree that we need more ‘skin in the game.’ However, I believe we have different definitions of what that looks like as the protocol matures.

1. Passive vs. Active Commitment: Locking TINY in governance is a passive commitment. While it restricts supply, it doesn’t actually help a DEX perform its core function: trading. If $TINY is only valuable because it’s locked, we are building a ‘vault protocol,’ not a Decentralized Exchange. By limiting reinvestment at 25% APR, we encourage ‘active skin in the game’—moving rewards into Liquidity Pools where they actually facilitate trades, generate fees, and improve the platform’s health.

2. Addressing Sell Pressure: You mentioned that people might dump TINY for USDC or other tokens. If the only thing preventing a sell-off is a governance lock, then the token lacks organic demand. We shouldn’t fear circulation; we should give people a reason to use TINY. Deepening TINY-paired LPs (as discussed in other threads) creates a natural ‘buy-side’ demand that is much healthier for the price than artificial scarcity.

3. Luring More Eyes (TVL vs. Volume): Market cap is a ‘vanity metric’ if there is no volume to support it. A high market cap with thin liquidity leads to high slippage and a poor user experience. Pushing TINY into the ecosystem ensures that when those ‘new eyes’ look at Tinyman, they see a highly efficient, liquid machine, not just a high percentage of locked tokens.

4. The 25% ‘Sweet Spot’: To be clear, I’m not suggesting we kill rewards. 25% APR is still an incredibly competitive yield in any market. It simply acts as a ‘circuit breaker’ to prevent an infinite loop of reinvestment that concentrates supply in the hands of those who aren’t necessarily providing liquidity to the DEX.

My goal isn’t to protect my own bag—it’s to ensure that when the ‘burn budget’ eventually takes over, we have a platform with such high trading volume and deep liquidity that the 50% burn rewards are actually substantial and sustainable. Let’s make TINY the utility engine of Algorand, not just a locked asset.

1 Like
9

Sorry, but I can’t still share your views. People have talked a lot about Governance participation and I think only good solution is to give gov rewards to those who vote i.e. are active. So limiting users is still not good way to go, we should lure as many govs and rewards active ones. this way we lock as many TINY as possible while leaving free riders without rewards.
It is true that Gov is somewhat vault protocol type of thing, but it is what it is, because it benefits us all.

ROAM

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10

No.

It will only increase sell pressure. The rewards tokens will be sold and not reinvested elsewhere.

It will accomplish the exact opposite of what is intended.

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