[READY][GF: Phase 1 Proposal] Velodrome Finance

[alexcutlerdoteth]

@OPUser

As a user if I need to buy project native token to be part of OP incentive, then I am not in favor of it. We discussed this in depth on two prior proposal. here and here.

Curve’s proposal requires the buying and locking of veCRV on mainnet to directly access the the $OP bribes they are requesting as incentives. The pools that get those incentives are also 100% controlled by the votes of veCRV stakers on mainnet, requiring staked veCRV to access. Likewise to earn the fees the boosted liquidity offers, you must again stake veCRV on mainnet. In other words, projects and individuals need to buy and lock veCRV to access their proposed incentives as well.

I have not seen you raise a similar objection in their case. Is there a reason for this?

In contrast every .20c in lock incentives spent earns the ecosystem $1 in TVL locked in Optimism for 4 years (a 5x return). As far as I know, it is the only program in existence that requires projects to lock investment into the ecosystem to access $OP rewards. You yourself have mentioned worrying about capital moving off of the network when incentives tapper, this solves for that at a 5x multiple.

Do you have a suggestion for better a strategy? Or an explanation why you’d call this out as a deal breaker for us, but not Curve which actually requires capital flight from Optimism?

I would also direct you back to @TokenBrice’s eloquent explanation on the impact these incentives on projects like his. It’d be good to understand how think the removal of them would impact the strategy they are currently employing to grow their presence on Optimism.

[OPUser]

@alexcutlerdoteth

Do you have a suggestion for better a strategy? Or an explanation why you’d call this out as a deal breaker for us, but not Curve which actually requires capital flight from Optimism?

Thank you for this and I glad we got to clarify this earlier.

Curve:- rewards goes towards new or existing veCRV users.
Velo:- Same as above, existing and new users will be rewarded. + if you buy and lock new token then we give back some of your principle amount in form of $OP reward. The $OP reward of-course vary from epoch to epoch like mentioned above in comments.

This is where these two proposal are different.

[jackanorak]

Jumping in here quickly to say that alex’s post shouldn’t be taken as a direct knock on curve’s proposal, which i think (and i know he thinks) has been admirably shaped through a lot of cooperation and effort. I do think, though, it’s important to have consistency in your standards and reasoning – that’s the only way you get the outcomes you want.

[GuyWithKeyboard]

Just a quick note here, I haven’t the time right now to write my full thoughts for you guys but just want to note that you certainly do not have to buy the VELO token to lock and get OP rewards. You can simply farm the VELO we distribute through LP incentives, we distribute around ~12m VELO (~$350k) a week right now so plenty to go around, and take your VELO to lock it for veVELO. No purchase necessary.

[dohpe]

first time poster, just want to say that Velodrome have been incredibly active and I have been following them since their initial airdrop, I was sceptic at first and had my issues early with a miscommunication however they have been very active and have been very hard at work at building and growing the network and fixing bugs and adding features to the website, they are way more active on the Optimism network than any other protocol I have seen so far and I think they are worthy of this grant.

[alexcutlerdoteth]

@OPUser

Curve:- rewards goes towards new or existing veCRV users.
Velo:- Same as above, existing and new users will be rewarded. + if you buy and lock new token then we give back some of your principle amount in form of $OP reward. The $OP reward of-course vary from epoch to epoch like mentioned above in comments.

This is tough for me to wrap my head around.

I think you are trying to create a distinction where there really isn’t one.

Your objection was:

@OPUser

As a user if I need to buy project native token to be part of OP incentive, then I am not in favor of it.

Curve: You must acquire (or have acquired) and lock veCRV on Ethereum mainnet to access incentives designed to facilitate growth on Optimism.

Velodrome: You must acquire and lock veVELO on Optimism to access the incentives designed to facilitate growth on Optimism.

In both cases, you need to acquire “the project native token to be part of OP incentive”, though as @GuyWithKeyboard just noted this is not limited to “buying” as you suggest.

If I am understanding your attempt at a distinction, for Curve you are saying you see no issue with requiring the acquisition of veCRV to access OP rewards, despite the fact that it leaks value and activity from Optimism to mainnet. But in the case of Velodrome, you don’t think it is appropriate because it requires the acquisition of new tokens?

So there is something intrinsically better about requiring the acquisition of a project native token when you you include both existing AND new veCRV lockers on mainnet rather than focusing the incentive just on new veVELO lockers on Optimism? Even when considering in our case the result is millions in new capital locked in the ecosystem, versus value leakage?

This seems really hard to square fren, especially given when you’ve supported other proposals that likewise “require the acquisition of project native tokens” to access the incentives such as Balancer and Beethoven.

And to be clear here, I think the Curve proposal is a perfectly acceptable given the technical limitations that exist at the moment to them supporting a fully native solution. It may be worth it to the ecosystem even if the incentive isn’t quite as efficient. But, I’m just struggling to find coherency in your suggestion that it’s okay in the case of a solution that is objectively less optimal for Optimism and not okay in the case of an example that has demonstrated itself to be a ecosystem growth multiplier.

[katie]

@OPUser

Yes, you can. We are in delegate feedback week, so making changes are totally fine depending on feedback. Only problem would be if you made a major change to which either committee is not comfortable or delegate initially approved your proposal revoke their approval.

Jumping in here to say I don’t agree with this. As one of the 2 delegates that gave their approval, I personally do not like to see edits made after approval has been given. In previous cycles where changes were made after delegate approval, the proposals were withdrawn and resubmitted. If the velodrome team is comfortable with their proposal in the current state, then I would not suggest any changes be made at this time.

[Jadmat.Eth-DefiLatam]

@alexcutlerdoteth

¿Está preguntando cómo sabemos cuánto en co-incentivos es probable que Curve iguale para los grupos incentivados?

no, @tao in his last post shows 2 charts reporting weekly uniswap and curve incentives for particular pools; how can you find out the weekly Curve $OP rewards that will go to each Pool???

@alexcutlerdoteth

Para poner esto en perspectiva, son $90,000 en co-incentivos de Curve durante un período en el que Velodrome distribuyó $2,900,000. Eso significa que estamos bombeando 32 veces el estímulo en la economía optimista que Curve está pidiendo una subvención de solo 8 veces el tamaño de la suya.

That’s right, and that pumping was absorbed by the skaters, each one chooses how to mistreat their tokenomica

@alexcutlerdoteth

Si desea disputar algún argumento en particular, cítelos y proporcione datos o evidencia para respaldar su afirmación.

There is only data on how incentives and subsidies bring tvl; there is no data of a working product without this
I have read the complete thread, you can look for the statements that without subsidy there seems to be no traction

@alexcutlerdoteth

Para ser claros, Uniswap recibió su subvención antes que nosotros. Creo que el ritmo al que se han movido para ponerlo en uso deja en claro cuán prioritario es el optimismo actualmente para ellos.

100% agree with this

@alexcutlerdoteth

Lo único que le dará un enfoque de “esperar y ver” es una desaceleración del crecimiento en detrimento del ecosistema y un conjunto de datos comparativos desordenados sobre los incentivos DEX.

your conclusion is that if Optimims doesn’t inject 4M of $OP now ngmi? or is Velodrome who ngmi?

[states_of_nature1651]

I have been hesitant to post because I didn’t want to be cliche and be another new-ish account posting on the Veldodrome thread. But here we go.

It seems like the main source of the criticisms is that the benefit for Optimism looks like this:

Optimism should be looking to cultivate the presence of legacy mainnet protocols rather than supporting OP native upstarts with flashy marketing and distortive incentives. Supporting deep liquidity on known legacy protocols will be better for OP in the long run. Putting our thumb on the scale for Velodrome will prevent this needed development.

I think this is a flawed argument based on the data provided and I don’t see how any other current ecosystem player will step in to fill the niche Velodrome is filling in the near term.
This isn’t a knock on the legacy protocols. Onboarding a bunch of new protocols to Optimism makes no sense for them as a growth strategy. This shows up If you look at their grant proposals. They are looking to extend their current competitive advantage on mainnet to Optimism - not get into the business Velodrome is in.

If Velodrome was proposing using the OP grant to spend a ton of money bribing a 3-pool, tricrypto or funding the development of v3 pools then sure… they are trying to box out the competition. However, they aren’t trying to use the grant for this. They are asking to continue the incentives that have been filling a needed niche for OP’s future growth. Protocols that have come here are backing up that these incentives, including the lock bonus, were the easiest way for them to come to Optimism.

The mindset that we stop incentives and let Velodrome succeed or fail because we have so many well known protocols around to pick up the slack seems super short sighted. How will waiting to see what happens with the Uni/Curve incentive programs onboard 20 protocols to Optimism? Their incentive programs aren’t even designed to do this.

I’m sure there will be competition between the different DEX/AMMs, but this grant doesn’t seem to be playing a role in that. There are still a ton of needs to fill where legacy protocols have an obvious competitive advantage they will be able to exploit with some focused development.

Velodrome making good use of incentives also goes both ways. Optimism governance benefits from having a DEX that they have significant influence (and voting power) over that can adapt on the fly to ecosystem needs. The Velodrome team is willing to take on a ton of due diligence responsibilities to get the grant and they have basically created their own accountability metrics they will be measured by. Seems like an obvious win.

[Jadmat.Eth-DefiLatam]

For a protocol that seeks to boost its incentives, it is not comparable to do it with $velo or with $crv, the metrics here show a much greater loss of capital for $velo stakers.

@alexcutlerdoteth

¿Incluso cuando consideramos en nuestro caso que el resultado son millones en capital nuevo encerrado en el ecosistema, en lugar de una fuga de valor?

Curve’s proposal encourages the diversion of $crv rewards TOWARDS OPTIMISM, it is exactly the opposite of what you indicate, under your analogy it would be an “importing value from the main network”

[tao]

Seems like item “5) Velodrome should prove itself without incentives” is the main theme of comments challenging the proposal.

Our stance is simple: given than Optimism has chosen to run a continuous program to incentivize growth and activity in the ecosystem – and created this Governance Fund specifically for it – , then Velodrome is an obvious protocol to continue incentivizing. We’ve shared plenty of data for why this is the case.

We also welcome continuous incentives for other protocols demonstrating success in growing the ecosystem.

[fierydev]

At this point, VELO and OP have pretty much become synonymous!

VELO is basically in investment in the OP ecosystem, but amplified!

It is the place where every OP protocol wants to host liquidity!

VEO wars has been a success, as a participant, I fully support this proposal!

*VELO has also helped onboard RevenantLabs! The DAO has made a 100k$ VELO buy to get them started!

[OPUser]

@alexcutlerdoteth

I think you are trying to create a distinction where there really isn’t one.

Example:-

I have 100K in $USD some veCRV and veVelo.

Case 1 : Existing veToken holder

• Curve - As a existing holder of veCRV, I will get reward depending on the amount I hold and how I vote.
• Velo - same as above

Case 2 : New user

• Curve - I can use 100K $USD to acquire more CRV, lock it to get more veCRV. My voting power increase resulting in more reward and my principle amount is locked in form new veCRV.
  Velo - Same as above, + I will get some % of my principle money back in form of $OP as mentioned in the proposal for buying and locking $VELO. We have seen that lock bonus vary but could possibly reach up to $1.3 in $OP for $1 in depending on amount locked in that specific epoch but even If I take an average of 80% 30% return then at the end of epoch I will back $80K back 30K in form of $OP airdropped as a reward.

So basically, we are paying users to buy protocol native token which is not the case with Curve. Hope this example provide more context from my side.

@tao

40K OP incentives per week over 6 months, distributed to veVELO lockers proportionally to new veVELO balance per week

I am not trying to create a distinction, its clearly mentioned in the proposal.

@katie

do not like to see edits made after approval has been given

Thank you for this, Katie. I would like us to continue this conversation during coming Reflection period.

[alexcutlerdoteth]

Yes, I’m understanding you correctly.

You are arguing that governance should have no problem with an incentive that requires acquisition "the project native token to be part of OP incentive” as long as previous holders were eligible too. So you’d rather Optimism’s incentivizes go to previous holders of veCRV on mainnet (who have no vested interest in Optimism), than reward veVELO holders who are locking millions in new investments in Optimism. I still struggle to understand how think this is a defensible position.

@OPUser

So basically, we are paying users to buy protocol native token

No, we are not. We pointed this out here, here, and here. The token can bought or farmed from the ~12m VELO (~$350k) we distribute weekly. I’m not sure why you continue to say this when it is not true, but I’d appreciate it if you corrected your statement publicly so there is no confusion.

@OPUser

We have seen that lock bonus vary but could possibly reach up to $1.3 in $OP for $1 in $VELO but even If I take an average of 80% return then at the end of epoch I will back $80K back in form of $OP airdropped as a reward.

You are again saying something that is not true here. @tao pointed you to the dashboard with the chart you see below on two occasions. The lock bonus has never exceeded a 37% airdrop for new veVELO lockers. Again I would ask that you correct your statement so there is no confusion.

I think what you are advocating for here is objectively a bad deal for growing Optimism. You could have an incentive that lowers the costs for new protocols onboarding the ecosystem (locking $1 in capital for every 20c in incentives), but it seems that you think that ensuring that existing lockers are included is more important, even if that means rewarding $veCRV voters with no vested interest or investment in the ecosystem over actual Optimism users. I think we’ll have to agree to disagree.

Do any other delegates have a POV here?

[OPUser]

@alexcutlerdoteth

You are arguing that governance should have no problem with an incentive that requires acquisition "the project native token to be part of OP incentive” as long as previous holders were eligible too. So you’d rather Optimism’s incentivizes go to previous holders of veCRV on mainnet (who have no vested interest in Optimism), than reward veVELO holders who are locking millions in new investments in Optimism. I still struggle to understand how think this is a defensible position.

This is absolutely not what I am suggesting. Its a free market and a user/protocol can do what ever they want with their fund. But I am not supporting subsiding buying and locking protocol native token with gov fund.

@alexcutlerdoteth

Again I would ask that you correct your statement so there is no confusion. And even I

I was referring to this data(Edit 1:- this was initial twit, actual distribution was different, more info in comments below) . Gonna keep both for readers to make an informed decision.

Velodrome (🚴,🚴)

again, I am glad we had this conversation at early stage. But I see we are repeating the same statement again and again, this concern was raised in this thread couple of time, you were kind to enough to provide your side but I dont see any progress on this topic.

So, happy Sunday and good luck with voting.

Edit2 : Supported Balancer & BeethovenX proposal then why not this ? Their proposal is not airdropping OP directly to users wallet for locking BAL or Beets

edit 3- dont want to spam the thread so will edit this comment as needed. I understand that, as a user I dont necessarily need to buy the token, acquiring via farming could be another way to get the token. But my concern remain same, we are subsidizing native project token lock by help of gov fund. I would rather like to see them being used as a part of integration grant.

[alexcutlerdoteth]

@Jadmat.Eth-DefiLatam

no, @tao in his last post shows 2 charts reporting weekly uniswap and curve incentives for particular pools; how can you find out the weekly Curve $OP rewards that will go to each Pool???

Oh, my apologies. You are talking about these chart.

These have nothing to do with the grant proposals. This is just an analysis of the relative effectiveness of when protocols incentivize liquidity on Curve or Uniswap with direct incentives versus when they incentivize on Velodrome with bribes. As you can see they get somewhere between 1.3x - 3.3x the ROI on Velodrome.

This is because bribes for emissions models have been proven to be more capital efficient that direct liquidity incentives and Velodrome is the only platform with native bribing on Optimism.

@Jadmat.Eth-DefiLatam

That’s right, and that pumping was absorbed by the skaters, each one chooses how to mistreat their tokenomica

I don’t think this statement translated well. Could you try to restate it?

@Jadmat.Eth-DefiLatam

your conclusion is that if Optimims doesn’t inject 4M of $OP now ngmi? or is Velodrome who ngmi?

Velodrome would be fine. It is the rate of ecosystem growth that would suffer. The cost of liquidity incentives would increase, putting strain on ecosystem treasuries. Projects would need to increase the rate at which they are spending their granted OP to close the gap, depleting governance funds faster and increasing OP sell pressure. And it’d make it harder for new projects to bootstrap and onboard, slowing the growth in economic activity and losing builders to other networks. The opposite of what governance is supposed to be doing.

I think it is probably worth reemphasizing that we’ve onboarded over 32 net new protocols and projects to the ecosystem at a pace of about 5 per-month.

Those projects are bringing new users, capital, and activity to the network. We believe we need to continue to onboard new protocols at this pace and have proven methods for doing it. As @states_of_nature1651 so nicely put it (great post, ser), no legacy AMM is even suggesting that they’re interested in taking that work on.

But really, you don’t need to trust us on this, just listen to the builders.

@Jadmat.Eth-DefiLatam

For a protocol that seeks to boost its incentives, it is not comparable to do it with $velo or with $crv, the metrics here show a much greater loss of capital for $velo stakers.

Can you clarify this and provide some supporting data? Voters on Velodrome have earned more than voters on Curve for our entire existence.

@Jadmat.Eth-DefiLatam

Curve’s proposal encourages the diversion of $crv rewards TOWARDS OPTIMISM, it is exactly the opposite of what you indicate, under your analogy it would be an “importing value from the main network”

Yes, this is correct. Assuming Curve’s proposal passes, governance will literally bribing main-net veCRV stakers to vote to direct CRV emissions to the Optimism network. It is yet to be seen what the ROI of this strategy will be.

Velodrome on the other hand is offering $6.5M in emissions for incentivized pools, 1.6x the total value of the grant we are requesting and over half of all $OP incentives projected to be distributed via governance over the same period. Think about this, for a 4M OP grant we’re basically going to give a 50% match on ALL the stimulus offered by Optimism Governance at large.

We are committed keeping these emissions on Optimism in the context of this grant because we’re ecosystem maxis who believe that it has a tremendous opportunity for growth. That does not mean that they must continue to go exclusively go to Optimism in the absence of such an agreement.

There is just no way to cut the data to suggest that Optimism is getting anything other than an incredible ROI from granting Velodrome.

[jackanorak]

Okay I see what you’re getting at. Nah you should take that down bc you misunderstood the tweet and probably the bonus mechanism. DMs open if you want a rundown.

I want you to look at two things: the date of the tweet (July 17) and the deadline for locking (July 28)

The point was at that moment (July 17) there had been little enough locked in the campaign that the next $1 VELO locked would have returned $1.3 of OP. That is, there was more OP earmarked for distribution relative to locked VELO to date.

But as more VELO is locked over the next 11 days, that same OP gets spread out over more locked VELO so the final distribution per VELO would be much, much less. The tweet was just indicating that that hadn’t really happened yet.

In the end, enough had been locked that the bonus per $OP locked was a fraction of what you’ve posted.

So again, prob best to take it down - easy thing to misunderstand.

[alexcutlerdoteth]

I think you may have also doubled down on the “buying and locking” claim.

@OPUser

I am not supporting subsiding buying and locking protocol native token with gov fund.

Would you be willing to confirm that you understand that you do not need to buy VELO to access the lock bonus?

[alexcutlerdoteth]

By the way, there is another great way to think about the lock bonus. It may be one of the best ways to distribute Optimism Governance power to protocols and users who are most ecosystem aligned.

There have been plenty of conversations about the best ways to ensure that protocols are able to gain a voice in governance. This may be one of the best ones as it essentially represents an exchange: you lock $1 in Optimism for four years, you get 20c worth of voting power in Optimism governance.

This makes a ton of sense because projects and individuals locking for four years is demonstrating a long term commitment to ecosystem. They are now invested in both Velodrome and Optimism’s success. They are exactly the kind of people who we want to have a say in governance.

This seems far more likely to benefit the right kind of users that OP incentives that flow to fickle liquidity providers or mainnet stakers. There is also nothing in the language of this proposal that would prevent us from entering into a social contract with protocols who are earning these rewards to encourage them to hold and/or delegate the tokens they are earning.

Would that help alleviate some concerns?

[bebis]

There’s a lot of technical analysis going on here which I think distracts a bit from the value being added by the Velodrome team.

1. They’re on-boarding a ton of people the hard way - with actual customer/client services.

2. They’re getting teams and users invested long-term in the ecosystem’s success.

3. They’re the main Optimism point of contact if you’re a builder/developer.

4. Their bribing system makes operations much lighter for small teams and startups.

They’re doing the hard, high-effort stuff that most aren’t willing to. I’d consider any proposal they put forth extremely seriously.