[READY] [GF: Phase 1 Proposal] dHEDGE

Thank you @leifu - we’re in agreement and will incorporate this into the [ready] proposal

Dhedge is a great product and it’s good to see incentives will be matched 1/1. I support this proposal.

3 Likes

I support this. Will be voting for.

1 Like

Thanks for the proposal!
I have been using dHedge for a while. it’s a great product. Can you articulate the following:
“users will be required to pair their staked DHT with staked dHEDGE Pool Tokens to receive incentives.” - what does this mean? what pairs are eligible? can you gives an example?

3 Likes

Thanks @Ruby - based on your feedback will add the below to the Proposal:

"The proposed new staking mechanism requires users to stake $DHT paired with an allocation of specific dHEDGE Pool tokens (DHPT). This is designed to ensure staking rewards are going to users who are involved in the value creation on the protocol, versus solely locking protocol token liquidity. Not all dHEDGE pools will be able to be staked initially, dHEDGE will operate a whitelisting process to ensure the stakeable pools are of sufficient performance and TVL.

dHEDGE has yet to confirm which DHT:DHPT pairs will be stakeable, but will include the Toros automated strategies e.g. Stablecoin Yield, and a new market neutral strategy launching the week of 25th July.

As an example, a user could stake 200 DHT with $1000 of the Stablecoin YIeld pool. As the time staked increases, combined with performance increases in Stablecoin Yield, the users potential staking rewards will increase. Variables influencing the total rewards eligible include i) time staked, ii) performance of staked pool token, and iii) the dollar ratio of staked $DHT to $DHPT. Please see the attached Proposal (above) for more detailed information.

Rewards are paid out at the time of unstaking, which is where dHEDGE intends to allocate an equivalent amount of OP to the $DHT being emitted."

1 Like

Voted: Yes

Reason:-

  1. Project has good overall TVL on other chain, with this incentives they might be able to motives users to move their asset to OP chain.
  2. Co-incentives are matched 1:1 in $ value
  3. Distribution plan is good.

Cons:-
500K in 6 months seems like they might burn the incentives too fast.

1 Like

thank you so much for the detail!
this looks great!
I voted yes for dHedge, LFG!

good analysis
agreed

Voted yes - I like the 1:1 matching and overall Optimism alignment. Thank you for a well thought out proposal!

1 Like

I have a number of concerns with this proposal.

1.) The # of tokens requested for the TVL/Usage seems huge, why not use request a smaller amount to start? For context, that’s almost $1,000 per unique address that has interacted on optimism. Protocols of a similar size have been requesting in the 100k-250k OP token rage, which I think is more appropriate.

*** the biggest concern ***
2.) In order to be eligible for token distribution, users are required to buy the dHEDGE token. While working on a new staking system might be something that makes sense internally, this feels a lot like have optimism subsidize the price of the token. I don’t see how helping dHEDGE “create closer alignment between protocol revenue and staking rewards” is helping drive usage or liquidity to optimism.

3.) There is an undefined whitelist for the pools where these token distributions will go. What’s stopping dHEDGE from allocating all of the tokens to their own pools?

To me this proposal doesn’t seem to have aligned incentives with OP at all, and I will be voting no.

I recommend others do this same and I’m happy to clarify my logic on why this seems like a direct subsidy of the dHEDGE token price.

While I appreciate dHedge’s contributions to Optimism, this proposal is more designed to incentivize passive (correction: not passive, but staking nevertheless) staking of DHT tokens rather than active usage on Optimism, that too for a very substantial amount that’s >12% of DHT’s market cap. I’ll be voting Against, but I hope to see a future proposal which incentivizes managers and investors instead.

2 Likes

@polynya While I appreciate dHedge’s contributions to Optimism, this proposal is more designed to incentivize passive staking of DHT tokens rather than active usage on Optimism

This statement is actually untrue, as staking isn’t passive. New staking is directly tied to using the dHEDGE protocol. To participate in staking, you must have added to TVL in proportion to what you are staking. The extent to what you receive in rewards is determined by the performance of the TVL you added. You can read more about the model here: DFP-33: New DHT Staking Model 2.0 - dHEDGE Feature Proposals (DFPs) - dHEDGE DAO.

This proposal directly contributes to growing TVL and user-base on Optimism.

I hope to see a future proposal which incentivizes managers and investors instead.

TLDR; to stake you are now required to be an investor and stake a proportional amount of investment in a managed pool, more investments from investors benefit managers.

2 Likes

Looking to address a couple of misinterpretations of our proposal. Points addressed in order below from @Michael’s post

Grant request

The amount of OP requested is based on our current staking and DHT performance mining emissions rate.

dHEDGE currently distributes 35,000 DHT per week in staking rewards, and 25,000 DHT per week in performance mining (a reward for being invested in well performing pools).

At current prices this equates to around $250,000 over six months. During the analysis and drafting of our proposal, $OP was around $0.50 and we sized the OP request accordingly.

The total ask is also conservative based on the rate of granted OP per Optimism TVL from other similar passed proposal requests:

Screen Shot 2022-07-24 at 3.07.13 pm

New Staking Mechanism

The new staking mechanism is fundamentally designed to increase protocol utilisation and engagement as well as support governance of the protocol. Staking rewards are not set-and-forget: they are only redeemable on unstaking which requires an investor to monitor pool performance to assess an optimal time to claim rewards. (Once claimed, an investor then needs to restake with reset staking reward parameters and the process restarts).

dHEDGE is about to drive a migration of staked liquidity onto L2. Fundamental to the new staking mechanism is sunsetting staking on mainnet and enabling staking on L2 for the first time. Given dHEDGE is on Optimism and Polygon, current DHT stakers have a choice on which L2 to continue staking on.

There’s currently $1m DHT staked on mainnet, and migrating dHEDGE governance to Optimism is part of the motivation for this grant application.

Pool Whitelisting

The requirement for a pool to be whitelisted for staking rewards is to ensure rewards can’t be gamed through subversive pool management. The whitelist of pools is to offer quality investment vehicles that maximise a stakers opportunity to receive rewards.

The composition of the initial whitelist will be decided by governance vote.

Whitelisting requirements may include: minimum TVL, minimum manager ownership %, minimum Sortino ratio, and/ or minimum recent performance.

2 Likes

Thanks for the clarification. If the protocol allows investors to use it without being required to stake your token, and for OP to be distributed for said activity, I’d be happy to support it. However, I’m not going to vote for a proposal where >12% of the market cap is distributed in $OP for staking said tokens.

3 Likes

You have to understand these are very volatile markets, and request a reasonable amount accordingly. Currently, 500,000 OP is worth $475,000. Given DHT’s market cap, no more than 50,000 OP is acceptable IMO (given the requirement for staking DHT).

1 Like

To further clarify on this point:

Staking rewards (including OP rewards) would only be paid out to stakers who have paired a positively performing pool token. The staking mechanism does not incentivise the act of staking DHT alone. If a staker pairs DHT with a pool that performs negatively, no staking rewards are earned.

The new mechanism is aimed at incentivising active liquidity.

An alternative would be incentivizing pools without staking, like liquidity incentive programs for AMMs. However, I believe this kind of incentives program would be bad for the OP token, and bad for dHEDGE, giving out rewards on a flat predictable rate. Tokens received in this way tend to be dumped as soon as the investors receive them.This method is more like “getting something for nothing” which I’m not sure is conductive for growth on Optimism or dHEDGE.

With the new staking mechanism on dHEDGE, only managed pools that perform positively, their invested stakers receive any reward with incentives. In addition, investors don’t receive rewards continuously, but only when they close their staked position. And they receive reward relative to their performance, maxing out after a certain performance threshold. For a protocol like dHEDGE, the protocol doesn’t earn fees unless the manager perform positively. This system emphasizes investors to choose the best managers, and managers to perform well and consistently to attract investors.

As for the OP received, it should be put in context of the TVL dHEDGE has on Optimism. dHEDGE Optimism TVL has been growing consistently. I see Cyrus posted a quote of 2.5M earlier today. Currently it’s at 2.77M. Compared to other protocols who’s OP grant was approved, we have a much lower OP distribution request per Optimism TVL.

In the broader context, this proposal is stating an equivalent amount of DHT will be matched on dollar terms. If we were to remove this staking component, that would no longer be the case, as DHT is only given out based on the new staking mechanism. A follow up proposal where OP tokens where given out to users without an onchain mechanism incentivizing positive behavior for both DHT and the Optimism network, dHEDGE would have to give out free DHT using a system the protocol has already found doesn’t work too well.

I understand the concern about it being staking, however, it would be most valid if DHT wasn’t being given out on at least an equivalent rate. As the Optimism grant is flat, best case scenario, more DHT is given out than OP due to performant managers. The base scenario, an equivalent portion of DHT and OP are distributed, though OP only for a limited time, per the size of the grant.

1 Like

You have not addressed the chief concern in the comment you’re replying to - requesting >12% of your current market cap in OP tokens to give out to your stakers is unreasonable. Not to mention, this is a very volatile market, and with $OP outperforming recently it’s not impossible in the future you will not be able to meet your “equivalent amount of DHT on dollar terms” obligation. As I’ve mentioned above, in your model where staking DHT is required to earn OP and DHT incentives, the OP incentives must be commensurate with DHT’s market value - IMO anything above 50,000 OP is reckless.

2 Likes

his is a very volatile market, and with $OP outperforming recently it’s not impossible in the future you will not be able to meet your “equivalent amount of DHT on dollar terms” obligation.

Distribution of OP tokens is based on DHT distribution. It’s not DHT trying to match OP, it’s OP matching DHT, as stated in the spec of the staking model. “Will not be able to meet your “equivalent amount of DHT on dollar terms” obligation” doesn’t understand how the mechanism works. If OP’s price outperforms in the way you state, less OP is distributed. Again, I recommend you read how the mechanism works: DFP-33: New DHT Staking Model 2.0 - dHEDGE Feature Proposals (DFPs) - dHEDGE DAO.

I do hope OP outperforms, and continues outperforming, as the OP token is already planned to be added, and managers may choose to invest pool assets into OP tokens. Likewise, investors can choose to invest in pools with OP token as a position.

You have not addressed the chief concern in the comment you’re replying to - requesting >12% of your current market cap in OP tokens

I stated already, looking at market cap terms isn’t the right way to view this, as it should be TVL. This proposal isn’t a token swap, and no where is it stated that the intention is to increase DHT price.The main purpose is to incentivize TVL through incentivizing managers outperforming the market, and investors investing in those managers. dHEDGE has pivoted away from doing flat rate inflationary rewards to achieve this, as previous incentive models, as the one you seem to imply to prefer, wasn’t triggering the desired effect.

I actually don’t expect 12% of DHT supply to be distributed in 6 months. Looking through the history of this post, it was requested to reduce the stated time to 6 months down from 1 year. But to me, looking at the model, and OP requested, given that OP will only be used for incentives as per the proposals, and OP distribution to users is being matched to DHT price, I expect OP to be distributed to dHEDGE users in this way for 1-3 years, just from this allocation alone.

3 Likes

Thanks for the clarifications. However, what you’re saying here diverges from the proposal, which specifically targets 6 months. If you expect 3 years instead, for example, I’d recommend asking for 80,000 OP instead.

1 Like