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

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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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