[DRAFT] [GF: META] Proposal to reserve a share of GF distribution for liquidity backstopping and stronger governance

The Commons: shoring up OP’s liquidity, governance, and funding capacity

Hi, I’m Jack from Velodrome, a leading Optimism dex that recently received a 3mm OP grant from OP Labs, a close collaborator in the build of our protocol. We’ve mostly been heads down building and showing up in partner discords, and we’re looking forward to participating more in OP governance. Consider this our first effort in earnest to engage, following some observations we’ve made.

OP grants to date are meeting some common needs…

Congratulations to protocol teams who have successfully received grants from the Optimism Collective. As part of Velodrome’s research on how best to apply, we read and catalogued every governance proposal to see which approaches seemed reasonable and what the community had to say about each. A few key themes jumped out:

  • Through Phase 0 and round 1 of Phase 1, a total of ~40.3mm OP approved for distribution
  • Of this, 40.0mm OP — ~99% of the total — earmarked for payment (to be likely sold)
  • The only OP designated for some use is for protocol-owned liquidity

We observed successful grants primarily seeking, loosely speaking, three forms of aid: liquidity (35%), user acquisition (28%), and ecosystem engagement (21%). All of these (necessary and valuable!) forms of help essentially amount to a guarantee of a protocol paying someone OP, which would then in all likelihood be sold for ETH or some stablecoin.

…and are a lot for OP to digest

Across the three largest dexes featuring LP, there are roughly 10mm OP in liquidity pools. If we assume the ~40mm distributed OP to be sold evenly over the next six months, we’re looking at 6.7mm OP sell pressure – two thirds of all the OP in liquidity pools – every month.

Simply offering OP to be market dumped for these purposes in this way is an attempt to outrun the token’s degradation, hoping that eventually enough economic value will be generated by the community before the glamour surrounding the OP token’s potential fades to oblivion.

People have hypothesized that it could come from blockspace demand. It could be MEV, transaction ordering, or even community-level partnerships. But there is currently limited tangible value accruing to the Collective, and as far as we can tell there haven’t been significant moves on this issue – and the need to address it is likely imminent.

So we’re offering a broader proposal, one we believe could make a huge difference for the ecosystem. It would help the OP token meet its intended purpose — sustainably fund public goods that may otherwise go unsupported — while lending a crucial layer of relevance to the Optimism Collective as a governing community.

We call it The Commons.

The Commons: securing public infrastructure

OP does in fact have a valuable function in permissionless settings: you can pair it with other tokens on AMMs and use it as a central liquidity node, the same way WETH works on Mainnet or, say, OSMO on Osmosis. This has the effect of providing liquidity to less central tokens, all while increasing the base token’s price stability.

So rather than simply doling out OP to protocols, under this plan Optimism’s governance would reserve some portion of tokens currently earmarked for distribution each round to be used for liquidity pairing. To gain liquidity for their native or utility tokens, applicant protocols would now offer the Optimism Collective some of these tokens for pairing.

As an example, we’ll look backward at the roughly 15mm OP being distributed to help with some form of liquidity. Let’s say OP had instead set aside 10mm of that OP for pairing with native tokens. Roughly speaking, the following would occur:

  • 25% of all previously distributed tokens would instead be earmarked for pairing
  • Selling pressure is reduced by nearly 25%, or 1.7mm OP per month, to 5mm OP per month
  • Adding 10mm of OP into liquidity would double the amount of OP currently in LPs to 20mm OP in LPs.
  • So we’ll have gone from dumping 67% of aggregate OP in LPs to 25% every month.

In addition, assuming a 35% benchmark APR we at Velo are using, the current $10mm (assuming OP at 50c) gained from liquidity provision would return roughly $1.75mm over 6 months, not including compounding [note: may vary substantially due to the many potential ways of deploying LP across different platforms].

Good for protocols

The selling point for protocols is simply this: they’re already asking for more liquidity from Optimism than what’s provided by this example and, even outside of OP grants, are incentivizing protocols such as Curve (and, yes, Velodrome). This is all to say that there clearly exists demand for this sort of liquidity backstop. This proposal would provide them this exact service while also giving them a responsible steward of their tokens. And, because this action lends some material value to the Collective, our hope is that it kickstarts similar initiatives accruing additional value and signals to the broader market that there is a nascent economic engine beneath us.

Becoming the Collective

By obtaining a wide range of ecosystem governance tokens, the Optimism community will gain broader governance power, creating a new layer of metagovernance available to Collective members to help shape the ecosystem for public benefit. The Collective’s status as stakeholder of participating protocols would then be formalized and made actionable. Delegates can now vote not just on Optimism-specific proposals but also on individual protocols’ proposals. Collective members now have a direct channel to partner with Optimism protocols, and some could even act as specialized representatives on behalf of Optimism. There is a lot of design space here.

This exact scenario has already played out for Velodrome. Some of you might know that when we first designed our token distribution, Velodrome took the initiative to grant Optimism 5% of our initial token share. This has proven to be one of our best decisions yet; Optimism has already gotten back its initial $150,000 grant to us in token value alone, and in the meantime it has collected substantial fees and compounded its power to incentivize liquidity in ways that have been beneficial for the ecosystem. And most importantly, that ownership has facilitated a close partnership between us and OP Labs; we actively work with them to help them use our protocol to best serve their interests.

Community member dcao has illustrated this mode of value creation through recomposition succinctly:

This is unironically true.

The Bet

The Working Constitution calls for the Optimism Collective to “undertake a series of governance experiments” to, among other things, “sustainably fund those public goods that improve upon the well-being of the Collective and beyond” and “minimize the discrepancy between collective impact and individual profit.”

We’re asking the Collective to take the experimental bet that acquiring a stake in partner protocols in exchange for crucial, clearly desired support does indeed serve this vision—that properly seating the Optimism Collective’s capacity in the combined value of participants’ efforts and successes will lead to new directions in shared responsibility and prosperity.

And we’re asking protocols on Optimism to do more than express support for the public good as a concept and take another bet, that they will in fact be better off by formalizing a commitment to the public good and inviting the greater Optimism community to the table. It wouldn’t be for nothing — they would gain a responsible holder of their tokens, in addition to all of the other benefits they stand to gain from partnering more closely with the Optimism Collective.

We’re Optimistic

There’s a reason why, when we were invited by Optimism to migrate from the Fantom ecosystem and build a liquidity hub, we shifted our entire trajectory as veDAO toward this new space. We saw in Optimism a unique ecosystem where it seemed that people were putting money where their mouth was when it came to experimentation in governance modes.

And now that we’re here, we want to help Optimism take real steps in proving that its philosophy of mobilizing new governance structures to build and maintain public goods can and does work.

One step in this direction, we think, is the communal ownership of liquidity, which we believe can be a public good. It helps that owning liquidity also happens to be a value-accretive activity, which in turn will help us fund more public goods in a sustainable way.

This, of course, all comes back to the question of why we have OP the token in the first place. Its sole purpose ought to be to fund public goods for the betterment of the community—so let’s make sure that this token can continue to do so by supporting its value through meaningful economic action.

Open questions

We invite discussion on this issue, as there are some details and specific cases we have a view on but could use more perspectives. For instance:

  • How would this be incentivized or required? Would there be some ‘bonus’ OP pool set aside?
  • How much OP currently requested for liquidity as a proportion of the total OP distributed should be targeted?
  • How do we factor protocols’ market cap (or having any token on OP) into these considerations?
  • Would OP compound LP positions or accrue vote power (in the case of, e.g., positions on Velodrome and Curve)?
  • Can we call this layer-owned liquidity (LOL)?
  • What would be the actual mechanics of managing the LPs? Who administers them?

Proposed timeline

We suggest that new grants be frozen until we consider this proposal. It is critically important that the Collective appreciate the likely inability of the current liquidity infrastructure to handle projected sell pressure.

We look forward to hearing thoughts on this.

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What a great proposal jack! I (a new user with 0 posts) completely support this. Perhaps the OP foundation could use this new dex I found called “velodrome” to create the LPs proposed by this proposal. Jack, have you heard about this dex before? With the simple passage of this proposal we could drive hundreds of millions of dollars to velodrome TVL. Maybe I should buy some VELO token.

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Defi value creation:

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Couple of points:

  1. 36M that was distributed in Phase 0 was for liquidity and user on-boarding so I dont see a problem if those token are sold out or dumped. That was their sole purpose, on board liquidity according to their proposal

Yes, this assumption is wrong.

If we assume the ~40mm distributed OP to be sold evenly over the next six months, we’re looking at 6.7mm OP sell pressure – two thirds of all the OP in liquidity pools – every month.

Not all of the token will be sold, token distribution plan from their proposal is from 6-24 months and few of them are not using their token as an LP reward, so token distribution will be gradual.

This is nice idea but will not work

Delegates can now vote not just on Optimism-specific proposals but also on individual protocols’ proposals

It will cause bias, if I have a say in project X and they submit a proposal here on GF fund, only option for me to abstain from discussion.
This will work out just fine on organizational and/or project level, just as you mentioned below

Velodrome took the initiative to grant Optimism 5% of our initial token share. This has proven to be one of our best decisions yet

And going back to last point, I dont expect anyone from OP foundation to comment on your proposal because I will see bias.

We are mixing two things here, price of OP and Public Good.

why we have OP the token in the first place

For public good we have dedicated 20% fund and its distribution is based on different logic which I am really excited about.

We suggest that new grants be frozen until we consider this proposal

Again, in my opinion, this we should not do. Pausing will only hurt our progress we have made so far.

Few point because this proposal is mixing couple of things.

  1. In Phase 1, we are not just focusing on LP, we are also looking into user on boarding via different approach, application migration and integration, marketing and even development support if idea is unique. Now we are asking projects to submit KPI based proposal if its based on LP incentives and we are working on making sure that its sustainable, long term. Again, opinion varies according to delegate but from what I see, we are looking beyond just LP.

  2. This seems to be focused on price of token with a mask of public good. We should keep them separate.

  3. Personally, I dont see a proposal if token are being dumped as long the reason is justified in their proposal. Again, depends on proposal. At the end of day, 1 OP will always has 1 voting power as it should be, after all its a Gov token.

  4. If you feel project proposal need improvement, join us and help us improve it.

  5. Pausing will not help but asking question and providing feedback to project proposal will.

  6. I see, you have marked it as Ready, unfortunately, I am not in favor of this proposal.


I want to mention few things. We have an excellent gov model(token house and citizen house) which motivated me to join this gov and I think, it need feedback and suggestion.

We are in dire need of community engagement, if i look at the stats on this forum, user involvement are going down each passing day. What can we do for that ?Last voting cycle, we had 17M vote count on proposal.
I think liquidity will see some boost once fraud proof and bedrock is implemented, current market sentiment is also having some impact on that.

Again, I might be in minority here, liquidity is not “critical” problem here but lack on user involvement is.

Resolving bias is another concern but that need a separate thread.

We have few thoughts and thread going on to improve overall gov process. Please join us there.

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Wanted to make a comment not about the discussion here, but about your manner of discussion.

I’ve noted in several posts that you are quite dismissive of ideas you do not personally agree with, without providing clear rational or full engagement with contrary arguments.

You are not worried about token price, and do not think token price is connected to governance activity. Does that make these opinions true?

Why is liquidity not a crucial problem? How are you defining liquidity?

Why will Delegates voting on individual protocol’s proposals cause bias? Why should you abstain from a governance discussion or vote when a protocol submits to OP if you also participated in a governance discussion or vote on that individual protocol? Being a delegate somewhere should not curtail ANYONE from participating in governance elsewhere. This is core to the entire ethos of decentralization and autonomy.

You claim that “this assumption is wrong” re: the distributed grant OP being sold evenly over the next six months. First of all, be acknowledge that this is a hypothetical, but offer no clear numbers on how many protocols are using OP as Lp rewards. What makes YOUR assumption that “token distribution will be gradual” accurate? Can you please provide evidence for this assumption?

This proposal emerged out of a comprehensive review of every single grant proposal submitted to OP, and was also discussed prior to publication with members of the OP team itself.

That is right, because they are mixed. Tokens have both economic value and governance value, and the very “public good funding” that the OP token is being used for DEPENDS on token value. No public good’s funding without the token having economic value.

This entire proposal is core to user onboarding. Maintaining economic value of $OP is fundamental to attracting new users to Optimism.

Can you explain why you believe this? and why you are not concerned that a massive distribution of the OP token will result in a token price that could certainly result in negative tailwinds for Public Goods funding, governance, user activity, and more?

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We were excited to hear OPUser’s thoughts due to their thoughtful feedback on our current draft proposal. We intend to clear up the entirety of their concerns voiced here, most of which we believe merely require some clarification.

36M that was distributed in Phase 0 was for liquidity and user on-boarding so I dont see a problem if those token are sold out or dumped. That was their sole purpose, on board liquidity according to their proposal
Yes, this assumption is wrong.

We made no value claims about where the tokens were going, just observing that for 99% of all tokens being distributed, the ultimate recipient is likely someone who is unmotivated to hold OP vs market selling it. Of course there’s nothing wrong with paying people to LP, use, or build on your product! Velodrome ourselves are using our grant for the same purposes – because these are things that protocols need. This is why we believe protocols have good reason to opt into our proposal, which addresses liquidity, by far the most requested need, and prolongs the efficacy of these programs.

That Governance is fine with using OP for these purposes doesn’t make it less unsustainable, which is our claim.

Not all of the token will be sold, token distribution plan from their proposal is from 6-24 months and few of them are not using their token as an LP reward, so token distribution will be gradual.

Going through the individual approved applications, we saw the distribution being heavily stacked toward the 6-12 month horizon. We certainly can provide supporting data if this is enough of a sticking point.

But even if tokens were distributed equally over 18 months (which is VERY generous); you’d still see unmitigated sell pressure of roughly a quarter of all LP’ed tokens each month. By the time the 6th month came around, the value of the grant would likely be a small fraction of what it would have been if spent at the start. Some GF proposals have already asked for an inflated amount of tokens, claiming they are anticipating this fact!

One thing we didn’t cover in our proposal would be that this observed sell pressure will heavily encourage front-loading of distributions by partner protocols, as they will stand to be better off using their tokens now and risk missing out on future grants than comply with expectations to get a second distribution worth a small fraction of the first.

It will cause bias, if I have a say in project X and they submit a proposal here on GF fund, only option for me to abstain from discussion.
This will work out just fine on organizational and/or project level, just as you mentioned below

If you believe that the Optimism Collective’s ownership of project governance tokens would bias your personal decisions, either you have graver concerns about the functionality of decentralized governance structures in general – or you (possibly correctly) believe that you, OPUser, individually have outsized influence on the collective, such that you can sway things for your personal benefit, which would naturally be problematic from a decentralization standpoint.

Separately, how would this structure be more problematic than an individual personally owning a large stake in project X and thus being conflicted — which of course is almost certainly the case for many delegates and perhaps something unavoidable?

To be honest, we believe this feature is the most exciting thing for committed delegates, as it reflects in our view a compelling experimentation around decentralized governance (and capitalism) – a collective stake in participating organizations.

This is nice idea but will not work

This opinion, on the other hand, in response to our data- and experience-driven proposal, has no support. Why not share your bias against this? Pretty sure we can address any material concerns you may have.

And going back to last point, I dont expect anyone from OP foundation to comment on your proposal because I will see bias.

Why would this be the case? Spell out exactly how they’d be biased. Is it because you think this benefits Velodrome? Note that nowhere do we mention Velodrome as a place to LP tokens; that is up to the OP Collective. If this is why you are concerned, do you believe that their small stake in Velodrome is enough to materially sway their interests?

There are many fantastic places to LP tokens, each with its benefits. Uni naturally has unique strengths, Beethoven’s well known for its farming abilities, etc.

And consider the opposite: it is entirely possible that they influenced us to make this proposal for the good of Optimism because, as tokenholders, they have a say in what sorts of communications we put out. And that would be a good thing. [To be clear, though, this proposal was entirely conceived by the Velodrome team.]

If someone from the Foundation were to comment on this, we would expect participants here to see them as people who put the Collective first. We’re genuinely confused at how you could expect otherwise.

We are mixing two things here, price of OP and Public Good.

Of course we are. We recognize the need to paint a veneer of propriety such that we don’t have random tokenholders screeching “but token price”, but until the OP Collective can figure out a way to accrue a material treasury, the token is how we have the ability to fund public goods. What we’re doing is offering a mechanical and governance-driven means of ensuring that this method is sustainable.

Seeing the token go to zero critically hamstrings the Collective’s capability to fund public goods or RFPG, which limits protocols’ capacity to facilitate user/liquidity/protocol onboarding, which lowers the stakes for governance participation, which leads to a death spiral.

We are laying out our concerns with the weight of experience of having seen this play out in several contexts – and, we believe, our expertise, having professionally consulted for protocols (e.g., Redacted) and layers (e.g., Boba) on this very subject, to say nothing of our deep history in complex tokenomics. We are sounding the warning here because not attending to this is a grave mistake. Let’s drop the pearls, people.

Again, in my opinion, this we should not do. Pausing will only hurt our progress we have made so far.

Pausing would prevent OP from multiplying the sell pressure overnight. Can you explain what sort of progress would be stalled in support of this? Why would delaying, say, two weeks have a material impact?

In Phase 1, we are not just focusing on LP, we are also looking into user on boarding via different approach, application migration and integration, marketing and even development support if idea is unique. Now we are asking projects to submit KPI based proposal if its based on LP incentives and we are working on making sure that its sustainable, long term. Again, opinion varies according to delegate but from what I see, we are looking beyond just LP.

As far as we can tell, none of these entails doing anything other than paying somebody OP so they can sell for stables. Would love to see an alternative — so much so that we’ve suggested one!

This seems to be focused on price of token with a mask of public good. We should keep them separate.

Already addressed above, but we’ll emphasize: this is an aesthetic objection to a material concern. The token price is not its own end; it is the sum total of Optimism’s operational capacity.

Moreover, this a rank misreading of our proposal, which is in fact not focused primarily on the token price.

  • The broader objectives you yourself have raised include participation in governance. Our proposal increases the stakes for governance.
  • The Constitution calls for experimentation in modes of governance; we’ve outlined in detail a way to dramatically expand the scope of governance.
  • You provide links to discussions on how to accrue value to governance; we’re not sure what else you can call our proposal.

Personally, I dont see a proposal if token are being dumped as long the reason is justified in their proposal. Again, depends on proposal. At the end of day, 1 OP will always has 1 voting power as it should be, after all its a Gov token.

Again, we’re not making value claims about the intended purpose of these tokens. We’re devising a win-win-win way to sustain these intended uses of the tokens.

For public good we have dedicated 20% fund and its distribution is based on different logic which I am really excited about.

Sure, but again we’re commenting specifically on the current program’s sustainability, on which we’re not picking up any material pushback.

We are in dire need of community engagement, if i look at the stats on this forum, user involvement are going down each passing day. What can we do for that ?Last voting cycle, we had 17M vote count on proposal.
I think liquidity will see some boost once fraud proof and bedrock is implemented, current market sentiment is also having some impact on that.

You can’t get around the fact that governance participation will pick up when there are higher stakes and modalities to it. Merely accepting the status quo of meting out rapidly depreciating tokens to a few dozen protocols is simply not enough to bring in outside participation, and tech updates will of course do precious little to affect that. But because we have a vested interest in making sure Optimism thrives, we will certainly do our part.

We have few thoughts and thread going on to improve overall gov process. Please join us there.

Sure, we’re happy to explain how this proposal would address all of these concerns. We’d actually considered doing this already. We’ll consider this your active encouragement to do so.

I see, you have marked it as Ready, unfortunately, I am not in favor of this proposal.

You might be, but we hope others reading can critically evaluate this on its merits. It would indeed be a concerning thing for governance if participation is so low that OPUser’s opposition is enough to stall what we believe is the first immediately actionable way to address an imminent threat to Governance’s power to satisfy one of its core mandates.

Nonetheless, this is the only change you’ve convinced us to make in our proposal, if only because we want to encourage more discussion (and clear up some particulars) before finalizing, and marking it as READY may have discouraged that.

We are encouraging readers and delegates to think bigger; we want Optimism to grow up and meet its potential, and to do so we must be receptive to experimentation, especially when there is a sound thesis and solid support behind it.

For any token incentive program, the most important measure is Emissions over Revenue. Projects almost always overpay for growth at the beginning ($1 of Emissions leads to less than $1 of fees), with the goal of flipping that ratio in the future. It’s worth noting that in Optimism’s case, the stated goal for OP incentives is that they not only lead to more transactions (revenue) but also more liquidity and users.

Importantly, none of the Phase 0 programs have started distributing OP, so we cannot really measure this Emissions/Revenue ratio for Optimism.

This also means your OP sell pressure numbers are hypothetical and probably overstated. You assume every single OP token will be sold on the market which is misleading, I think it’s fair to assume at least some amount will be held or staked in liquidity pools.

Backing this claim up with data from another network’s liquidity mining campaign (ex. Polygon or Avalanche) would be helpful. I know that in both cases, native token incentives for dapps led to growth in all of the key areas: transactions, liquidity, and users. And they did this without having the native token collapse from sell pressure.

My biggest problem with the proposal is that it would see the Optimism Treasury take on significant impermanent loss risk. Token pairs with high divergence are more likely to suffer from impermanent loss, and it’s fair to assume OP will continue to be more volatile than say, ETH. Arbitrageurs will rejoice if OP is naively overallocated into constant product AMMs.

While having the Optimism Collective act as meta-governance in the ecosystem might accrue some value to the OP token, I think it would challenge the network’s claim of being credibly neutral. Optimism functions as an extension of Ethereum, and maintaining credible neutrality is a must. Optimism was already accused of showing certain apps favoritism, and this proposal could make things much worse.

Unironically, impermanent loss invalidates the meme. By pairing OP with long tail tokens on AMMs, the Collective would lose value on many of their positions.

This is a ridiculous suggestion. The Collective should continue giving grants to projects they believe can convert incentives into more Optimism transactions, liquidity, and users.

Overall, this proposal uses a lot of hyperbole and does not establish itself as clearly better than the OP incentives that dozens of projects are about to kick off, many of which will enhance the OP token’s on-chain liquidity. Pairing OP with new projects’ tokens on AMMs is not “funding public goods”, I hope other readers and delegates see this clearly.

I believe the OP token’s utility will reach maturity only once sequencing/block production is decentralized. This is where it will derive most of its value, and trying to append weird and somewhat risky utility onto it now is a bit short-sighted.

I am not in favor of this proposal and would vote against it.

Disclosure: I am on the Rubicon team. Regardless of how it would impact our protocol, I simply think this is not a wise move for the Collective.

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The simple fact that OP would have these coins in the first place vs outright distributing them and thus having nothing invalidates the majority of your objection to the point where we have to wonder whether we expressed our plan clearly enough.

Consider:
Status quo, Optimism distributes 100 OP.
Our proposal, Optimism distributes 75 OP , reserves 25 OP and solicits 25 OP equivalent from partner protocols.

Setting aside the likely farming benefits to offset IL (after all, that is the compensation!), think there’s basic math you’re not seeing here.

Not really sure why you claim hyperbole in the proposal. We’re not saying that the grant program be stopped indefinitely - we consider it a means of prolonging its efficacy.

The fact of your calling it ‘weird’ I think gives your game away. You seek a distant, engineering-led, speculative approach to accrue value when we’re offering something concrete and data-driven that can be done now to meet an imminent need. The fact of expanding and iterating on modes of governance is not ‘weird’ – it’s literally baked into the Working Constitution.

Really unsure how else to respond here other than to reemphasize, this is not a wholesale stand-in for grants; it’s not necessary to use a program such as Avalanche as a counterfactual. We’re talking about changing how protocols get the thing they’re asking for – dex-based liquidity – in a positive-sum way. Even if we suppose that some marginal incentivized liquidity provider would miss out at the start, there remain the same outside incentives (and the same liquidity) to encourage plenty of new users, capital, and development – and, again, with our plan you could be comfortable in the likelihood of being able to prolong existing liquidity mining programs (and start new ones), along with all the others, to continue to bring in this activity.

But even if tokens were distributed equally over 18 months (which is VERY generous);

You are right here and I am also looking at how it will turn out, you also know, those funds are already distributed and there no point discussing about it now. All we can do is wait, see and learn from it.

Some GF proposals have already asked for an inflated amount of tokens, claiming they are anticipating this fact!

Again, I agree with you and like I mentioned earlier, best place to point this out is on project proposal so that they can work on it. I have seen, many projects are quite responsive to feedback and willing to amend their proposal.

If you believe that the

It not about me or you, I am talking in general. We had seen this in past voting cycle as well, If an entity has stake in a project, they choose to abstain from their proposal.

Spell out exactly the source of their bias

No, its not about your project or anyone in particular, apologies if my words were not formed properly you get a felling that I am referring to your project. If I have stake in Project X, I would choose to abstain from their proposal in GF round and would expect others too do so if they also have stake in them.

If someone from the Foundation were to comment on this, we would expect participants here to see them as people who put the Collective first.

I see here we have different opinion, from what I understood, GF funds are for token house and users holding token have say in this. Of course, at initial stage OP Foundation can decide to approve or reject it but only when a proposal is approved by token house.

Why would delaying, say, two weeks have a material impact?

2 Weeks would not be a problem, I was thinking a pause for months. Reason being, if we pause for months, there will be many proposal at once which would be hard to judge and manage.

OPUser, individually have outsized influence on the collective

Its quite opposite, I am no one, my knowledge is limited and I still learning about different tools and technology and trying to find my niche. There are few delegate here, far more knowledgeable than me and I look up to them.

I have chosen not to share my view on any comment related to token price.

If I am missing anything here, let me know and i would try to explain it it detail.

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I’ve noted in several posts that you are quite dismissive of ideas you do not personally agree with, without providing clear rational or full engagement with contrary arguments.

Thank you for the feedback and I would love to extend my thoughts, could you please share the link.

Why will Delegates voting on individual protocol’s proposals cause bias?

If I have stake in Project X, I would choose to abstain from their proposal in GF round. This is how in general voting works, its nothing new.

Can you please provide evidence for this assumption?

Its not assumption, I am simply quoting what mentioned in project proposal.

Again, choose not to comment on anything price related.

Jack here. Many thanks for the considerate reply. Will respond per item.

You are right here and I am also looking at how it will turn out, you also know, those funds are already distributed and there no point discussing about it now. All we can do is wait, see and learn from it.

Yes, absolutely. The last batch was intended as a demonstration to provide a sense of scale. Of relevance is the next batch (and so on), which is why we were asking to hold off on this series of grants, just for a week or two, to consider this proposal.

We’ve submitted this proposal as a team, but I would volunteer to dedicate myself solely to this project to make sure we could get to consensus quickly enough to continue rewards.

Again, I agree with you and like I mentioned earlier, best place to point this out is on project proposal so that they can work on it. I have seen, many projects are quite responsive to feedback and willing to amend their proposal.

We can def do more of this – but it’s addressing the symptom and not the cause. Our proposal intends to remove that kind of guesswork altogether.

It not about me or you, I am talking in general. We had seen this in past voting cycle as well, If an entity has stake in a project, they choose to abstain from their proposal.

If I’m understanding you correctly, you’re saying that delegates with personal stakes in protocols currently abstain from votes where there might be conflicts of interest. I think that’s fine – if fragile – as a means of preventing capture (as we’ve seen in politics).

In any case, what we’re proposing is a step away from these types of conflicts, as the only shift is the addition of governance to firms’ capital bases, not individuals. To say that personal conflicts would enter into it in a more significant way than in the status quo would be to say that governance itself is captured by individuals, which is an entirely different matter (one, incidentally, this proposal is also attempting to address).

I see here we have different opinion, from what I understood, GF funds are for token house and users holding token have say in this. Of course, at initial stage OP Foundation can decide to approve or reject it but only when a proposal is approved by token house.

I think we have the same understanding here. We were just saying that the OP Foundation should have by this point more than demonstrated their commitment to and interest in Optimism’s success as a primary matter.

2 Weeks would not be a problem, I was thinking a pause for months. Reason being, if we pause for months, there will be many proposal at once which would be hard to judge and manage.

Absolutely. In fact I’d be all in favor of proposing a cap on any sort of pause to keep distribution flowing.

I have chosen not to share my view on any comment related to token price.

I don’t want to overstep my bounds here with you, especially because I sympathize with this sentiment (and strictly adhere to it when it comes to Velodrome), but unfortunately in the case of funding public goods, the price is of relevance in that it dictates OP’s ability to do so.

I think we ought to be able to refer to its instrumentality to this end while avoiding the ugly speculative discussion that comes from hyperfocus on it. That is, of course, unless there is some sort of legal/regulatory reason to avoid any sort of mention.

Again, their stated goal here is more transactions, users, and liquidity, which I think the current program is on track to accomplish. Optimism does get something out of these incentives. I am arguing that 25% more incentives to fuel growth in those three metrics is more valuable than incentives for long-tail token liquidity against OP on AMMs that account for less than 30% of Optimism DEX volumes.

So a network’s token accruing value from block production is “speculative” but pairing the token with long tail assets in constant product AMMs is “concrete” and “data-driven”. Gotcha. Could not disagree more. There is way more value for OP in block production than there is in “partnerships”.

Why not? Those incentive programs grew their respective network in all of Optimism’s target metrics. They are great comparables and I am not sure why you want to dismiss them.

I guess I do not feel the urgency you do or see this “imminent” need for utility. Incentives are about to kick off on almost all Optimism apps and Bedrock will be online later this year. I don’t buy the theory of the coming OP liquidity crisis, and as I mentioned, you did use unrealistic estimates.

Also, I want to see the Optimism Collective do governance experiments, I just think this is a bad one! And I see hyperbole throughout the proposal, not just the suggestion that grants should stop.

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Could you please help me with this example:
reserves 25 OP : who will get this and what would be its purpose, same question for 25 equivalent from partner

Just realized that we missed this question on an important topic - apologies.

Would hope you’d expand on this thought, as we’ve struggled to find any direct line between our proposal and any sort of loss of credible neutrality. Governance is either neutral or not; what it has governance over ought not to affect neutrality.

If your belief is that simply expanding the purview of governance leads to a loss of neutrality [don’t want to misrepresent tho], that implies the desire for highly limited governance, a view I’d really like to hear explained in light of what’s been posted on the forum to date.

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Instead of giving away 100 tokens, Optimism gives away 75 tokens and keeps 25 tokens for itself.

In return for other grants, some partner protocols may choose to offer some of their own tokens to Optimism, which then pools the 25 OP against protocols’ granted tokens in LPs throughout Optimism.

So now instead of having 0 tokens, Optimism now has custody of 25 OP tokens as well as equivalent value of other protocols’ tokens. So in addition to keeping some of its own tokens under the discretion of governance (possibly to be distributed later!), it also has tokens of OP-domiciled protocols. All of these tokens are used to increase liquidity throughout the ecosystem, and Optimism may choose to exercise governance rights through these partner protocols’ tokens.

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But why do this? Optimism already has 5.4% Partner Fund and 8.8% Unallocated. If the core team wanted to do this, they can using those funds and such proposal could fall under a classic POL strategy or maybe someone creates a specific/innovative way of applying it.

This also means your OP sell pressure numbers are hypothetical and probably overstated. You assume every single OP token will be sold on the market which is misleading, I think it’s fair to assume at least some amount will be held or staked in liquidity pools.

I’m not so sure, considering the moral panic you seem to exhibit at the thought of impermanent loss. Feel free to back your assertion with some data on how much farmers LPing tokens A + B getting paid in token C choose to farm token C. Any seasoned farmer can tell you it would not be much. Or feel free to consider how much long-term holding or LPing you get from users getting incremental tokens for use rewards, or devs getting paid in OP.

And in any case, there would have to be substantial retention of tokens for there not to be a material impact. A 50% haircut in our estimates is still demonstrably intolerable if what we’re trying to swing as OP is sustained funding of public goods.

For any token incentive program, the most important measure is Emissions over Revenue . Projects almost always overpay for growth at the beginning ($1 of Emissions leads to less than $1 of fees), with the goal of flipping that ratio in the future. It’s worth noting that in Optimism’s case, the stated goal for OP incentives is that they not only lead to more transactions (revenue) but also more liquidity and users.

Why not? Those incentive programs grew their respective network in all of Optimism’s target metrics. They are great comparables and I am not sure why you want to dismiss them.

Again, there’s nothing in our proposal that impedes the growth of any of these things. It provides if anything more stable liquidity, thus facilitating more trades, investment, etc., better rates due to greater activity on lending and trading protocols, etc. We’re not saying the net effect ought to be any different from Avalanche Rush or any other programs –– the concrete benefit to these protocols and their users doesn’t change one iota. So yes, they’re good models for OP globally. No, they’re not a counterfactual here.

I guess I do not feel the urgency you do or see this “imminent” need for utility. Incentives are about to kick off on almost all Optimism apps and Bedrock will be online later this year. I don’t buy the theory of the coming OP liquidity crisis, and as I mentioned, you did use unrealistic estimates.

Even if you were to discount our estimates of sell pressure by 50% we’re talking about massive, sustained sell pressure by any reasonable measure. Saying you don’t “feel the urgency” without any evidence or modeling does not help anyone here make sound decisions.

And I see hyperbole throughout the proposal, not just the suggestion that grants should stop.

Would love to see specific examples of how we’ve strayed from data or reason. To answer the question of “what else is hyperbolic” by saying “well, it’s everywhere” isn’t productive.

So a network’s token accruing value from block production is “speculative” but pairing the token with long tail assets in constant product AMMs is “concrete” and “data-driven”. Gotcha. Could not disagree more. There is way more value for OP in block production than there is in “partnerships”.

Whether OP collectively resolves 1. what it’d look like, 2. whether it would outweigh potential risks, 3. ultimately whether to go with it, among other issues is, yes, a matter of speculation. Certainly it could accrue material value, and I’m not saying it’s the wrong path! I’ve had these conversations myself, and there’s much to be gained. But something like this being implemented is months and months away, and the sell pressure we’ve described is occurring as we speak with little other than market markers to mitigate it.

And in that time, the weeks and weeks of incentives being voted on by OP will depreciate, and so on. And, yes, what we’re describing is a mechanical buffer against this sell pressure that also happens to carry many side benefits. It’s a positive-sum construction.

Gotcha. Could not disagree more. There is way more value for OP in block production than there is in “partnerships”.

Not really sure where this adversarial tone is coming from. It’s not an either-or; it’s a matter of meeting needs as they come. Any sort of opinion you may have over what’s good or bad is more helpful when it’s backed by evidence or modeling.

We do this because it’s a positive-sum means of offering to grantees a service they’re already asking for while generating more meaning for governance and cohesion between OP governance and constituent protocols.

Same service, more bang for everyone’s buck. Save the unallocated for non-redundant initiatives once we figure out what to do with it.

Who is asking for this?
First time this was raised was this thread.

But this is not redundant, this is a change, I would say a constituent change.
The other issue I am not understand is who is going to own the created LP, since Optimism provides OP, the dex provides their token? So in the case of Velodrone, it would be VELO. But then you need to create the LP for it, and that LP will have only one owner.

If your proposal tries to tackle price, too early to tell and like others have said, many assumptions on your initial post, some of which I don’t agree.
If your proposal tries to tackle governance participation, the issue is very different and this proposal does nothing.

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