PSP-EPΔ04: Soft Adjustment of Gas Refund
Gas Refund Program, PSP incentives, PSP-EP, Consortium
To adjust the current reward mechanisms and parameters of the Gas Refund Program to ensure its long-term sustainability, using data and context from the great analysis of PSP-EPΔ03: Adjustment of Gas Refund Values [GovCo Proposal]
The Gas Refund Program is an initiative spearheaded by the DAO to alleviate the cost of gas for stakers using ParaSwap. As these refunds are done in PSP, three main limits were set during the initial proposal and budget allocation, as well as the later adjustment and renewals in the PSP 2.0 proposal:
- A per-address limit of USD 2500 per epoch
- A per-address yearly maximum of USD 30k
- A global budget limit of 30M PSP
Until now, these limits have been enough to maintain the program sustainable. However, a new surge of activity driven by a small number of wallets shortly after PSP 2.0 has put pressure on the current budget in a way that threatens the exhaustion of the budget well before the end of the year.
While most of this volume comes from a healthy level of protocol growth (such as the doubling of eligible stakers that are part of the GRP), one worrying figure concerns the top eligible claimants of the GRP compared to previous epochs.
Less than 7% of all refunded wallets got 83% of the total PSP refunded, despite only generating 8.8% of the epoch’s volume.
Were this behaviour to continue during the second epoch, over 20% of the total global Gas Refund budget could be drained, with +80% of it going to these small number of wallets. In opposition, there is no more emission of PSP for PSP staking, so the overall amount of PSP dedicated to the gas refund program could be potentially increased. However the ratio of earned/spent needs improvement.
To ensure the sustainability of the Gas Refund Program, this proposal aims to amend the current limits to a new level while staying attractive. This will help keeping the budget sustainable while not affecting the vast majority of users. Additionally for those consuming the most of the refunds, it could drive behaviours that increase the ratio of earned/spent regarding the DAO balance sheet of the program.
Goals, Means, and Implementation
This proposal is another possible decision for the DAO regarding the exposed figures above, to make the gas refund more sustainable and fair.
On the opposite of PSP-EPΔ03: Adjustment of Gas Refund Values [GovCo Proposal] this proposal will start only for the epoch3 in order that no negative effects are happening retrospectively. However this should also be an express proposal because this needs to be voted before the start of the epoch3, and this could serve as a precedent regarding how and when we can have effect on the epoch’s gas refund.
By reducing the limit of maximum gas refund per wallet per network, the effect of this proposal would be to correct the ratio of 1/10 between the emitted value and the generated one for the DAO. Indeed gas prices are lower on other networks and the generated fees are proportionally more important. Moreover, this makes this decision less brutal for stakers and more comfortable at usage, because reaching $500 of gas refund on mainnet would have the effect of “deleting” all gas refunds on other networks. This will improve the ratio of earned/spent more than nerfing for all the networks (the ratio won’t move).
This more simple and soft proposal aims to reach consortium more surely, and to be applicable on epoch3 because of this anterior notice of change in the DAO engagements:
- Reduce the maximum per-wallet limit to $500 per epoch per network
Explanations of this additional proposal
The discussion around this key aspect of the protocol should be continued, and installing a calm frame to that by letting everybody to agree on the rules of the next turn is important. While I do believe it is important to balance the emissions of PSP related to the gas refund program as I showed it previously in the DAO, notice must be made and balance must be found so we reach efficiently a good and better gas refund program
These proposal effects do not overlap with PSP-EPΔ03, so this proposal could be applied whatever is the voting outcome of PSP-EPΔ03.