This Proposal is a continuation of the gas refund proposal (@Lup) (the “GRP”), the delegation proposal (@masstinsan) and details the renting rights idea I suggested on January 7th.
Overview
The Proposal aims at providing the opportunity to Traders to benefit from the GRP without qualifying as Stakers, while deriving their transacted activity into commissions for the Stakers. It is both designed to maximize the long-term commitment of Stakers – while allowing cross pool staking arbitrages – and to drive trading volume on the Protocol from all parties (Traders and Stakers).
By introducing a “Renting Rights” market, the Proposal is engineered to maximize the PSP budget utilization rate of the GRP and establishes an incentivization framework that can be capitalized on for future applications.
The Proposal is to create a separate market of “Renting Rights” which value and volume directly derive from the amount of PSP staked in the ParaSwapPools and the Safety Module (the « Pools »). Each Staker is to be attributed rrPSP at the end of each epoch that would be pooled in the “Renting Pool”. The attribution rate can be set higher for Safety Module stakers to incentivize protection of the Protocol.
The Renting Pool would function as follows:
- The Trader would flash-borrow rrPSP from the “Renting Pool” to benefit from the GRP;
- The gas rebate rate (“GRR”) attributable to the Trader would be a function of her/his “Trading History” (see relevant section) based on volume and number of trades, and a “Commission” would be paid to the Stakers in form of PSP;
- The amount of rrPSP borrowed would be calculated as: (GasSpentInEth*GRR)/PSPpriceInEth;
- A Commission of [30%] would be paid in PSP to the Stakers at the end of the epoch;
- The equivalent amount of total gas refund (incl. Commission) in rrPSP would be burnt after utilization.
Trading History
A contemplated way to materialize the Trading History bonus for Traders is to translate their address track record (volume transacted on Paraswap) into claimable NFT levels that correspond to the GRP thresholds suggested by @Lup. This would help to make the value proposition more intelligible to all parties.
For instance:
- NFT Level 1= 25% gas refund (gross of Commission) //[10] transactions on Paraswap from date [tbd]
- NFT Level 2= 50% //[50] transactions
- NFT Level 2= 75% //[100] transactions
- NFT Level 4= 100%//[250] transactions
In order to maximize value for Stakers and enable rapid volume expansion, NFTs can be minted for ETH – in addition to being dependent on volume as suggested – by Traders to access immediate rebate levels. Proceeds will be automatically used to market buy PSP and distributed to the Renting Pool. Price in ETH shall be determined optimally:
- Too low: being a Trader can become more efficient than being a Staker;
- Too high: only bought by highly active Traders who can break-even.
Based on preliminary calculations, Level 1 to Level 4 NFT can be priced at [0.15] ETH, [0.3] ETH, [0.6] ETH and [1] ETH respectively.
Such NFTs should probably be non-transferable to avoid rebate limit abuse (inter-wallet transfers). Once the gas limit reached, the NFT can reopen rebate rights at the end of the applicable period or serve as rights for other applications on the Protocol.
Optimal Gas Rebate Rate (“OGRR”)
Stakers who are active Traders – or acquire a NFT – can benefit from higher GRR than their eligible rate (i.e. a Staker eligible to Level 2 GRR based on her/his PSP staked can claim/mint a Level 4 NFT to benefit from higher rebate).
The OGRR shall be calculated at follows: (MaxGRR-ActualGRR) * (1-Commission) + ActualGRR
As such, the Stakers would pay a Commission to the Renting Pool on the differential GRR. This mechanism enables double incentivization for Stakers (i.e. staking + trading volume) while limiting deterrent arbitrage decisions.
Renting Pool / rrPSP
- Renting Pool size / rrPSP attribution
For the sake of simplicity, I assumed that the utilization rate of the GRP by the Stakers would be 50% of the 30M PSP budget (3k PSP for 4-6k unique addresses), given the GRR applicable to the average number of PSP staked (18k). As such, [15M] PSP can be attributed to the Renting Pool in form of rrPSP that, after being borrowed, will be claimable at [70%] by the Trader and [30%] by the Stakers. As a result, [5M] PSP could be claimable by the Stakers in addition to the NFT mint proceeds.
Based on this calculation, and considering that the GRP is a yearly program, we can contemplate a 600K rrPSP attribution to Stakers at the end of each epoch.
At this stage rrPSP tokens would be unclaimable by the Stakers as they are a representation of the maximum amount of PSP that could eventually be claimed (max [70%] of attributed rrPSP of 100% utilized).
It would probably be relevant to adjust the attributable budget at the end of each epoch based on the actual utilization rate of the GRP.
- rrPSP Burn
Renting rights would be burnt after utilization, including the equivalent amount of rrPSP paid in Commission to the Stakers. As such, the attributable amount of rrPSP to each Staker is dynamic.
Happy to hear your thoughts 