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).
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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.
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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.
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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.
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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.
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I have to agree with @polynya, none of the clarifications change the fact that this is directly incentivizing the staking of DHT with an OP grant. It doesn’t matter what the legacy staking method is. It doesn’t even matter what the TVL is.
I won’t support a proposal that creates a massive subsidized incentive for users to buy a specific token unless there is solid reasoning as to why this can’t be done another way.
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Agreed, there are many tangential issues I raised above, but this is the crux of it, indeed.
Even if it’s demonstrated that staking is 100% required, it needs to be appropriate given the market size of the token being staked.
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This proposal could remove the governance DHT piece, but that would be a step backwards imo.
What we would like to see dHEDGE do with OP incentives is create a sticky ecosystem that avoids mercenary/opportunistic capital.
If we only incentivise liquidity, it’s fine, but only halfway there. We’ve seen on Alt L1s how quickly capital leaves when new opportunities arise/or when incentives dry up. It’s the main reason we’ve looked to overhaul our staking mechanism.
So how do we boost loyalty?
One way is by incentivising both productive usage + governance (skin in the game) on Optimism.
This combo is the closest user alignment with a protocol.
If we aim to make Optimism the homebase for protocols, this becomes a competitive advantage over other chains / rollups.
On the point of DHT token price pressure - there’s currently 8m of staked DHT on mainnet that this proposal aims to migrate to Optimism. If even half of this DHT bridges across, this would max out* staking rewards without any further DHT required to be purchased.
*the new staking mechanism has an optimal ratio of vDHT:DHPT. Holding excess vDHT without an equivalent increase in dollar value of DHPT does not increase accrued rewards. This is specifically designed to incentivise pool token ownership and protocol engagement, which will increase overall TVL and usage on Optimism.
Read more: DFP-33: New DHT Staking Model 2.0 - dHEDGE Feature Proposals (DFPs) - dHEDGE DAO
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disagreed completly. it seems a bad idea to distrbute tokens like that.
Sorry about that. I double checked with the team, the 1-3 year figure isn’t right, and 6 months does seem to be the upper limit.
Emissions are dynamic, based on the performance of TVL If all staked pool tokens have 0% or less performance from when the pool tokens are staked, then there are 0 emissions, both for DHT and OP, as they are matched.
If all staked pool tokens have a pool performance of 50% or more, it appears the max emissions rate is reached over 6 months. The 500k OP tokens are distributed to investors on the platform, and more DHT is distributed than OP in dollar terms, assuming the current price of DHT and OP.
How the model works, less emissions are done if manager performance is poor (more likely during a bear market), and more emissions are done if manager performance is high, up to a cap (more likely during a bull market).
So the range the tokens would be distributed would range from 6 months at earliest if manager performance is high, to an unknown max in year terms if manager performance is low.
Thank you for sharing this proposal. I agree with @polynya and @Michael that I don’t like it seems to end up incentivizing users to purchase the DHT token as it is required to be paired with the pool tokens in order to receive OP rewards. I’m especially wary of this situation given the amount requested is fairly sizable.
I know you mentioned that if half of the staked DHT on mainnet gets migrated, then staking rewards will get maxed out but I’m not necessarily confident with this assumption and that at least some subset of new users wouldn’t buy the token for getting rewards. I understand the goal of wanting users to have more governance skin in the game but I don’t think that the Optimism governance fund should be the one incentivizing this vs dHedge.
I’m going to vote no on this specific proposal but I’m happy to review a new version if submitted later.
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Vote: No
We echo similar sentiments shared by delegates above, especially that users have to purchase the DHT token.
I’ve been motivated by the feedback through this forum & Discord and if this proposal doesn’t pass, happy to incorporate ideas into a revised proposal next cycle. dHEDGE is proudly building on Optimism and supports efficient allocation of OP and DHT resources.
The idea to align our OP grant proposal with the new dHEDGE staking mechanism was due to clear synergies with what we think is one of the better ways to truly align productive protocol usage + governance.
Our incentives model combines both a governance token and a TVL deposit to increase the stickiness of TVL brought by incentives, and ensure governance voters have used the platform.
Aligning external incentives with protocol staking rewards enables the creation of longer term engagement through i) rewarding actions that benefit the protocol and ii) increasing governance engagement.
Our proposal includes both of these features.
What we’re trying to avoid is situations like the below example where a significant amount of L2 rewards were allocated to LPs in a specific protocol. This program quickly attracted TVL, which also quickly left when rewards dried up in late June.
More on the staking Proposal: DFP-33: New DHT Staking Model 2.0 - dHEDGE Feature Proposals (DFPs) - dHEDGE DAO
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I will have to vote No to this proposal for the same reasons as the other delegates.
I don’t believe it’s proper to accept a proposal that ends up incentivizing purchasing and staking DHT tokens.
But I would like to thank you for your engagement @cyrus and actively encourage you guys to reapply but considering the feedback we are giving you and have a new proposal without the staking component.
I understand and appreciate the sentiment but this also incentivizes people to lock in(via staking) and grow your protocol which is not something I think an optimism grant should be used for.
I have to agree that @polynya raises a pretty strong point here, I was actually pretty set on voting for before I looked into the details, and so I’d absolutely recommend reapplying for a lower amount and with some adjustments to the staking component.
Please do ping me + others who have shared objections here when the new proposal is live!
FWIW, I don’t think encouraging capital to lock into your protocol is out of scope at this stage of distribution. Encouraging the uptake of a native token ultimately isn’t too different from asking for liquidity mining on your token, which, I’ll remind people, is the single largest ask being granted through voting round 2 (need to update still…).
And what I think would make this a compelling case over and above these liquidity mining asks would be to demonstrate how locking translates to more economic activity occurring systemwide.
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Voting Yes as the proposal is well-aligned with Optimism & we like the thought put into sticky incentives.
Value-add: Okay
Amount: High
Op distribution: Okay-Good
Co-incentives: Good
We have to echo that the amount requested is rather high and the incentivization of DHT purchases is not our preferred choice. However, we reluctantly voted Yes on basic liquidity mining proposals from other projects that can potentially move over first users and liquidity to Optimism and we believe your incentive design can indeed be more sticky, integral and advantageous to the broader ecosystem.
We’ve been early users on dHedge and basically been waiting for your Optimism deployment after the crippling effects of Eth gas costs on your adoption (Adjusting positions was impossible due to expensive SNX contracts). If this proposal doesn’t pass in its current shape, we look forward to a slightly adjusted proposal. With your current product & the growth plans in your early-days, we are confident that many incentive designs can help dHedge and Optimism accrue sticky liquidity and onboard users; a.o.t
- specific pool incentives
- liquidity with main trading tokens (e.g. incl. ETH or OP) + arbitrage opps
- (reactivation of) trading competitions & top investors
- builder incentives (e.g. integrate certain pools in new projects or meta investment apps)
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With a view to incorporating your feedback if our current proposal doesn’t pass, can you please elaborate on this?
Why would Optimism not mutually benefit from dHEDGE growing our protocol on Optimism? We’re requesting a grant to help migrate our existing governance to Optimism. Users who’ve been active on mainnet for up to 2 years.
To me this seems absolutely what an optimism grant should be used for?
Sharing the same sentiment as other delegates, we voted no on this proposal because we don’t believe the DHT staking structure and incentives are properly aligned with the growth of Optimism.