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

The project that stands to benefit most from the proposal is the one drafting it. Just stating this for transparency.

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We’ve already stated that this absolutely doesn’t have to be on Velodrome, and liquidity is going to go onto our or other platforms one way or another through liq mining. So net benefit for us is actually marginal and possibly negative, as this is essentially free (i.e., not bribed or rented) liquidity for the protocols.

If your broadsides are the result of some fear of self-interest, you can come right out and say it. But it’s really not our intention here; this is a genuine attempt to bring real, actionable ideas to the Collective, one I’m confident is among the first raised here.

For transparency, of course.

Lets take a step back, when you say

some of their own tokens to Optimism

are you referring to OP foundation ? If yes, then my understanding was right and let me give you one example.

Your suggestion:
Total number of OP distribution 100, 75 to project, 25 to LP along with 25 other from project receiving the grant. Just for discussion, assume value of each token is $1.

once approved, OP foundation gave 100 Token and got $50 worth of LP, right ? Ignoring impermanent loss.

What about this, OP foundation give 50 to project(without asking anything in return from the project) and out of other 50, buys $25 worth of other project token and do the LP. Here also, foundation gave 100 and still has $50 worth of LP. Sounds weird right ?


You also mentioned that having other project token will give OP foundation right in the said project DAO, right ? First, that is a up to OP foundation if they want to take this responsibility and second, such foundation level change is out of our scope, that kind of change need approval from both house (token and citizen)

not to mention, we are asking project a co-incentive, most of them are matching the grant by $1:1

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

35% of all approved OP for distribution has been for the purpose of incentivizing liquidity on a dex. We’re offering an alternative means to achieve the thing protocols are directly calling for. That’s what I mean by redundancy.

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.

The owner of the LP would be the Optimism Collective. They would be LPing the tokens, they’d have governance rights over the consitituent tokens, and they would be earning fees and emissions on these tokens.

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.

Then feel free to substantively rebut our estimates or assumptions. So far nobody has.

If your proposal tries to tackle governance participation, the issue is very different and this proposal does nothing.

Again, please substantiate with a thesis. Ours is this: governance participation will increase when governance participation means more than who gets to distribute tokens. Having direct ability to help inform the direction of constituent protocols is a meaningful step forward for the Collective and is in our view among the most powerful possible draws to participation. I’ve read the forums and haven’t seen a compelling alternative raised so far. If there’s one you have in mind, please direct me.

not to mention, we are asking project a co-incentive, most of them are matching the grant by $1:1

This is a great point in support of our plan that we’d missed; protocols are already donating their tokens to get liquidity. This actually makes the full accounting of the plan much more feasible, as we can credibly say that these participating protocols are able and willing to offer their tokens for liquidity.

What about this, OP foundation give 50 to project(without asking anything in return from the project) and out of other 50, buys $25 worth of other project token and do the LP. Here also, foundation gave 100 and still has $50 worth of LP. Sounds weird right ?

Actually think this would be just fine! No problems at all with this; it’s a model we support.

But there’s an element of coordination to the proposal as we’ve laid out, especially in that it helps signal to protocols that they don’t need to bribe/incentivize as much for their liquidity.

You also mentioned that having other project token will give OP foundation right in the said project DAO, right ? First, that is a up to OP foundation if they want to take this responsibility and second, such foundation level change is out of our scope, that kind of change need approval from both house (token and citizen)

This is a helpful procedural point we’re certainly willing to get guidance on in trying to get this done. One way or another, a new proposal has to be made in the first place. We’re here making that proposal.

The owner of the LP would be the Optimism Collective. They would be LPing the tokens, they’d have governance rights over the constituent tokens, and they would be earning fees and emissions on these tokens.

If the Optimism Collective wants to create such endeavor, they would need to create such a proposal and go thru both houses.

Then feel free to substantively rebut our estimates or assumptions. So far nobody has.

Napkin math here. Of the 40M to be distributed over Phase0, around 18M have been done so far. Those protocols haven’t started with their incentives. The End.

On a side note: It’s clever to frame the discussion here for price since discord has a strict no price talk.

If your proposal tries to tackle governance participation, the issue is very different and this proposal does nothing.

There is a governance apathy because people being people (Solving voter apathy) , will only look at their own short term incentives. The second issue is the delegation/voting excludes all but OP sitting in a wallet. You can’t LP it and you can do anything remotely composable for it. If you want to create a meaningful or different product that will have an outstanding backlash from the community, create a wrapper for OP, make it composable for yield and/or money market, and used the underlying OP for delegation to yourself.

As a final note, this forum is very active on the topics that draw interest (not counting the users that create an account to make one comment at the behest of some protocol’s proposal). That your proposal has garnered 29 responses in less than 24hs, BUT all of them are rebutals, should tell you everything you need to know on why it’s incorrectly framed.

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okey, so let me summarize this.

Example I gave is absurd as we are creating liquidity by diluting our own token. I would like to see them being used and believe GF fund is doing the same, sure here also token will be diluted but there is fair chance that we will be able to fund and support a project proposal which will help in on-boarding new users, liquidity and innovation.

Also, I would like to point out and you might have read this too as you mentioned reading all the proposals, going forward most delegate, including me, are looking for more than just LP reward in a proposal.

We’re here making that proposal.

This is good move, having early discussion will help us all. But like I said, you need to wait until both house are live and I expect citizen house to be active in next few month(just my random guess).

That’s all I have to say as now, will be reading the thread and jump in if I needed.

If the Optimism Collective wants to create such endeavor, they would need to create such a proposal and go thru both houses.

Responded to OPUser with this, but sure. Whatever the process ultimately has to be, we can follow it to get the job done.

Napkin math here. Of the 40M to be distributed over Phase0, around 18M have been done so far. Those protocols haven’t started with their incentives. The End.

Not really sure the point you’re trying to make other than that the entirety of the sell pressure is ahead of us, though we’re certainly excited to see the uptick in activity!

On a side note: It’s clever to frame the discussion here for price since discord has a strict no price talk.

Not really sure how this is relevant; we never even considered going to Discord first, as this proposal sits outside the scope of any individual grant. The only reason we posted in this section vs others was that it pertained to the GF program as a whole and we didn’t want to be presumptuous in posting in a top-level forum.

There is a governance apathy because people being people)) , will only look at their own short term incentives. The second issue is the delegation/voting excludes all but OP sitting in a wallet. You can’t LP it and you can do anything remotely composable for it. If you want to create a meaningful or different product that will have an outstanding backlash from the community, create a wrapper for OP, make it composable for yield and/or money market, and used the underlying OP for delegation to yourself.

“People being people” is exactly why increasing the stakes ought to increase participation. We’re not at all at odds here. And I’d love to see wrappers enabling governance rights for tokens in these other forms; one of the consulting devs on the Velodrome project has been banging on that drum for years. In the meantime, why not focus on immediate possibilities that can get results and participation for this highly critical time?

As a final note, this forum is very active on the topics that draw interest (not counting the users that create an account to make one comment at the behest of some protocol’s proposal).

If you’re referring to dcao above, he is an independent (though friendly) trader who was trolling us in an attempt to undermine our proposal because he is publicly very short OP. His posts are very obviously ridiculing us. If you’re referring to some other protocols, ya there’s evidence of that.

That your proposal has garnered 29 responses in less than 24hs, BUT all of them are rebutals, should tell you everything you need to know on why it’s incorrectly framed.

The majority of these responses are three people separately going in a back and forth with me. I hope you don’t call that governance, consensus, or even signal. And OPUser (don’t want to speak for them), while pushing back, has suggested an openness and curiosity, which is what any person making a proposal would hope to see!

It is worth noting that this proposal would introduce a new type of risk onto the Optimism Treasury’s balance sheet. Not going to argue with you about impermanent loss, in this scenario it would, in some capacity, occur on some of the Collective’s liquidity positions.

Your “modeling” is the assumption that every OP token that goes to users in the next 6 months is going to be market sold on an Optimism DEX in the current state of unincentivized Optimism liquidity. I find this unrealistic and pointed to previous network incentive campaigns where enough growth and liquidity were generated to counteract the natural selling pressure that token incentives bring.

Velodrome self-interest is not my concern with this proposal, I think it would be a poor allocation of the Collective’s treasury.

This proposal tries to lock in 25% of OP token incentives for “pairing” on long-tail AMM pairs. If a protocol wants to do this with its own OP grant, great! But why standardize this? The top of funnel for OP incentives should remain open-ended.

Am I wrong? Given that liquidity mining on the dominant liquidity venue on the network, Uniswap V3, is not very approachable, Velodrome stands the most to benefit from this proposal. That’s all I said.

I will get back to you with my concerns on the metagovernance bit.

Example I gave is absurd as we are creating liquidity by diluting our own token. I would like to see them being used and believe GF fund is doing the same, sure here also token will be diluted but there is fair chance that we will be able to fund and support a project proposal which will help in on-boarding new users, liquidity and innovation.

It’s not absurd because 75 OP are being market sold one way or another and the other 25OP are being reserved. What makes it inefficient is the fuller accounting of what’s occurring in that the protocol is not getting the 25 extra OP of value in exchange for its token.

Also, I would like to point out and you might have read this too as you mentioned reading all the proposals, going forward most delegate, including me, are looking for more than just LP reward in a proposal.

It really can’t be lost that we are insisting on continuing grants as they are (for all their multifarious purposes), just with some portion of the 35%-ish of liquidity mining OP instead being used for this LP purpose.

This is good move, having early discussion will help us all. But like I said, you need to wait until both house are live and I expect citizen house to be active in next few month(just my random guess).

So any sort of meta-governance is off the table until this next piece comes online? In that case we insist on getting a definitive answer on this issue because we don’t see much reason to wait for another piece of the structure to come online unless there’s an obvious reason for it.

lol…sorry to push you there, like I said, I am still learning and sometime I needs more information to make a decision.

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So any sort of meta-governance is off the table until this next piece comes online? In that case we insist on getting a definitive answer on this issue because we don’t see much reason to wait for another piece of the structure to come online unless there’s an obvious reason for it.

The obvious reason is that The primary responsibility of the Citizens’ House will be funding those public goods which have the most positive impact on the Optimism and Ethereum ecosystems. as detailed here This Governance Will Self Destruct — The Optimism Collective

It is worth noting that this proposal would introduce a new type of risk onto the Optimism Treasury’s balance sheet. Not going to argue with you about impermanent loss, in this scenario it would, in some capacity, occur on some of the Collective’s liquidity positions.

Area Man unsure whether accepting free $100 a good idea:
“What if I lose $10?” he wonders

The risk is trivial when you’re comparing it against giving away the entire position. You can’t seriously be continuing on this point.

Your “modeling” is the assumption that every OP token that goes to users in the next 6 months is going to be market sold on an Optimism DEX in the current state of unincentivized Optimism liquidity. I find this unrealistic and pointed to previous network incentive campaigns where enough growth and liquidity were generated to counteract the natural selling pressure that token incentives bring.

It’s an illustrative model for which i’ve already noted there is a substantial buffer within which the sell effect continues to be intolerable. And who is going to incentivize the LPing of OP tokens? Haven’t seen any proposals detailing those specifically. Let’s say there’s 50% less selling on 50% more LP (HIGHLY generous): that would be 3.3mm sold on 15mm, still over 20% of all LPed tokens sold per month. Are you actually okay with this?

This proposal tries to lock in 25% of OP token incentives for “pairing” on long-tail AMM pairs. If a protocol wants to do this with its own OP grant, great! But why standardize this?

The 25% was a sample amount and subject to discussion, but standardization as an option (and potentially a requirement) is a good one because it makes clear and puts into action Optimism’s commitment to 1) supporting OP as an ongoing means of funding public goods, 2) supporting enduring liquidity and facilitation of market performance, and 3) expanding the scope and stakes of its governance.

The top of funnel for OP incentives should remain open-ended.

It still would be; again, this is ultimately about increasing and sustaining OP incentives for all kinds of initiatives.

Am I wrong? Given that liquidity mining on the dominant liquidity venue on the network, Uniswap V3, is not very approachable, Velodrome stands the most to benefit from this proposal. That’s all I said

You are, and it’s okay to be wrong, though I appreciate the implied compliment that we are a dominant player on Optimism.

Already explained why the marginal effect of this proposal passing (even if we were to get all of the liqudity) is insignificant and possibly a liability; if we are that dominant, all the liq mining rewards in the status quo are going to veVELO holders (i.e., not LPs) directly as revenue. If this proposal passes, we lose a big chunk of that.

But we’re still coming from behind. Synthetix, Perpetual, and Lyra, the largest players, continue to do most of their incentivization on Curve and v3. Beethoven and Zipswap are also certainly relevant as outlets.

Okay, now you’re grasping. If this were the final word, there would be no voting on any OP grants at all. Think we’ll have to do our own research.

No, it’s sincerely been a good exercise. Hope it’s been meaningful for you.

Unfortunately, yes. This demands constitutional change which need both house approval, as @Netrim has mentioned.

But I am not from OP team and if you feel its something urgent and time sensitive matter, please jump in our discord and check with them.


One thing i like about DAO is chautic co-ordination and just because we have different opinion does not mean either of us a wrong, it just that we see differently.
I would suggest you two thing, jump in to our discord(gov-temp-check channel) and seek feedback on this, that might help you move things faster and second would wait until you have some support here from other users and/or delegates.

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Sure thing. But the OP Team already viewed this proposal at several levels and deemed it appropriate for review under the current structure, so seems like an unnecessary step.

Still haven’t seen anything definitive indicating that what we’re proposing entails a constitutional disruption.

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