PSP-IPΔ13: Gas refund for Stakers

Looking forward to it :fire:

3 Likes

Hey guys, these are fascinating discussions, and we’re happy to see Paraswap trailblazing again on gas dilemmas !

We couldn’t help but drop by when we saw the mention of flash-renting of “rrPSP” : if it is a path that the Paraswap community wants to explore, we suggest you have a look at the Paladin Protocol and consider using it as the lending infra for this idea.
This would seriously reduce developing cost and we’re totally open to tailor the solution to Paraswap as there is a huge use-case for sPSP stakers to also be able to rent their staking options to market makers and other actors of the DAO.

1 Like

Very interesting discussions. I’m learning all the days thanks to all of you

I had a thought, if we want to adopt the curve gauge mechanics couldn’t we instead have the weights of rewards given to PMM be decided dynamically or through a gauge vote the way CRV/CVX does? This would be interesting and as we open up more market makers we could see a bribe type mechanic develop.

1 Like
  1. I assume there would be no time limit on claiming refunds?
  2. Where should the claiming occur? Don’t see a point in forcing people to claim on L1, tbh.

This Proposal is a continuation of the gas refund proposal (@mouph) (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 @mouph. 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 :slight_smile:

15 Likes

First of all I wanted to thank you for your involvement in the paraswap community.

It’s great to see that by emulating each other we can come up with such an innovative proposal. The formulation is clear and precise.

I really like the idea of NFT to reach a GRP threshold. NFT which could then allow certain advantages according to the evolution of protocol.
The overall synergy of the proposal that always encourages either stake or bring volume (or both for the more reckless) is perfect for ParaSwap.

It seems really exciting and the fine-tuning of the parameters will be done as we go along !

3 Likes

Off the top of my head idea if we had to move towards that direction, the missed airdrop problem could be addressed by the distribution of rebate NFTs to eligible wallets.
This would help managing PSP emissions while incentivizing “disappointed” traders to return to Paraswap and bring volume.

7 Likes

Will all stakers be eligible for the refund?
Very interesting proposal…

3 Likes

Yes from 500 PSP staked if @mouph first threshold is applied

3 Likes

That’s great to have an active community here. Paraswap is moving forward and growing everyday.

9 Likes

Hi everyone! This is a quick message to give you a bit of an update on this proposal: it has generated a lot of interest and it will be brought to a vote! :innocent:

It’s going to take a little extra step before that. Several community members are preparing a global budget for ParaSwap for the year 2022. This is a very exciting long term work and gas refund will of course be considered in it.

Stay tuned! The governance forum will be getting very busy very soon! :v:

12 Likes

Hi all! Now that we are getting close to the vote on the 2022 DAO budget, it is time to discuss the next actionable steps towards the full launch of the gas refund proposal :fire:

We agreed with @Mouph that it was probably better to sequence the launch in 3 steps to take into account the dev and timing constraints. What we contemplate is the following:

  1. Launch of the Stakers gas refund :rocket:
    What: Initial proposal.
    Objective: Launch asap to drive volume, increase trading volume and demand for PSP.
    Dev requirements: limited.
    To do: Define the PSP thresholds.

  2. Release the rrPSP/NFT roadmap :artificial_satellite:
    What: Communicate on the precise NFT Level eligibility criteria for free mint (+rrPSP mechanism).
    Objectives: i/ Foster preemptive trading volume of non-stakers for NFT free mint. ii/ Make up for the participants who where not eligible to the initial PSP airdrop.
    Dev requirements: none.
    To do: i/ Define the eligibility criteria (volume, # trades, applicable period) ii) Price the NFT levels iii/ Draft the roadmap and communication strategy

  3. Launch of rrPSP/NFT :full_moon:
    What: Gas refund proposal.
    Objectives: i/ Maximize the outcome of the program though increased trading volume (by incl. non-stakers) and increased staking (better APY) ii/ New stream of revenue for the DAO (NFT sales in ETH).
    Dev requirements: smart contract / UI
    To do: i/ Dev ii/ NFT design.

I will suggest some thoughts on the PSP thresholds and NFT pricing later today.

Looking forward to reading your views and suggestions on the proposed roadmap!

10 Likes

I am a big fan of this proposal so I am happy to see that things are becoming more and more precise.

The idea to focus the communication of Paraswap on this is in my opinion very relevant when we see the fervor of the community when we approach this subject!

We learned from our “mistakes” regarding the communication on the previous airdrop so this time it will be a no-fault!

(The choice of emojis for each section is very good :wink: )

6 Likes

Such an exciting development, I’m super glad to see so many people working on making this happen from its concept stage to even budgeting! I’m completely in agreement with this roadmap, the NFT drop is also a great idea that won’t tank $PSP prices and will bring new volume.

Only thing I’d add is that I still insist we need a better refund ratio for non-ethereum sidechains, since the initial proposal aims to introduce this on all supported chains (see my previous thoughts on: Gas refund for Stakers - #13 by 0xYtocin ).

The presence of paraswap and $PSP in some sidechains like Fantom and MATIC gives us a very strong edge and community that competitors do not have right now. A hundred transactions in a network like MATIC would cost the same as refunding a single transaction in ETH, while still adding volume onto the network. However, I don’t see anyone from these chains committing eg 500 000 PSP to receive a few cents back in basically anywhere but ethereum.

I understand this will potentially add more development time, but I find the inclusion of sidechains to be crucial in this process, not only to appease people who mostly trade in specific sidechains, but also to make users excited to use Paraswap anywhere thanks to the versatility of its refunds :slight_smile:

4 Likes

I like the idea! This will clearly provide more value to the 25-50% refund ratios and redirect smaller volumes towards Paraswap. I was trying to figure out some ways to drag users from competing solutions and that would be very appealing with limited impact on the PSP budget.
I’m working on a threshold / NFT pricing proposal and I will definitely integrate it :fire:

3 Likes

Ok guys! Thanks for your amazing work. I think it’s time for the governance scribes to get to work! We will synthesize all these perspectives into one clear document. The idea is to remove all ambiguities and then move to a vote: we will deliver the text later today.

Stay tuned Swappers!

6 Likes

To follow up on this, I’d like to share with you some thoughts regarding the refund thresholds (Point 1. of my precedent post), the NFT pricing (Point 2.) and the eligibility criteria for NFT attribution (Point 2.).

I’ll start with my conclusion to illustrate the framework that I’ll set out:

[Chart 1]

Let’s start :fire:

A. Framework Overview

So remember there are 3 ways to access the GRP:

  1. Be a Staker (subject to minimum PSP staked).
  2. Buy a NFT of Level 1-4.
  3. Free mint a NFT of Level 1-4 based on Transaction History.

Each Participant has the possibility to upgrade his Level by making use of each of the 3. For instance, a “Level 1 Staker” can upgrade to Level 2 based on Transaction History or buy a Level 2 NFT.

Based on this, the problem that I tried to solve is the following:

Find Thresholds/Prices that maximize the Function(Trading volume, Staking volume, Revenue for the DAO)

There are several constraints to factor in:

  • Opportunity Cost/Arbitrage: Each participant has the opportunity to maximize his Level and can/will do so by comparing the cost/risk of each the 3 ways. Therefore the Thresholds and Prices are dependent on each other.
  • Capital at Risk: Staking PSP implies being exposed to price volatility. Therefore many Participants will contemplate the alternatives.
  • PSP/ETH volatility: Gas are ETH denominated, refund is in PSP. Therefore both the budget and the NFT prices are highly sensitive to the PSP/ETH price volatility.
  • Nature of Participants: Small retail, large traders, professional partners, etc with different objectives and ways to assess risk.
  • Competition: Other solution(s) offer gas refund. Therefore there must be competitive edges to redirect transaction volume to Paraswap.

B. Thresholds

OK so now let’s dig in the Theresholds suggestion :1234:

The proposed 1 to 4 levels: 5K, 20K, 100K, 500K (respectively) currently integrate 73% of the Stakers (2831 of the 3867 Stakers - See Chart 2). Note: The on-chain data doesn’t include the capitalized PSP so the ratio is higher than this.

[Chart 2]
image

The following chart provides you with a (logscale) view on the Stakers distribution per PSP held.

[Chart 3]

As you may have noticed, the Level 1-3 thresholds are significantly higher than the initial proposal. In addition to adverse PSP price movement (-50% since Jan.5), the rationale for this is the following:

  • Provide existing Stakers with the opportunity to upgrade for free based on their Transaction History if they have effectively used Paraswap over a defined period (method TBD). For those who have staked but used competing solutions to benefit from gas refund, there is an incentive to redirect flow to Paraswap.
  • Maximize the DAO revenue from opportunistic Traders who don’t want to commit to Paraswap but find a direct financial interest in buying an NFT, or from Stakers who don’t want to commit further (See C.).
  • Maximize the Trading Volume from Step 2 (my precedent post) from all the Participants who want to mint a Free NFT.
  • Maximize the Staking Volume per Staker to decrease the PSP velocity and long term commitment to the Protocol (unstaking implies loss of rights).

As suggested by @0xYtocin, I introduced superior gas refund (Column 4 of Chart 1) for non-Ethereum chains.

Furthermore, I have suggested a “Max PSP Refund” (Column 5 of Chart 1) set at 50% of PSP staking threshold (2x close competitor’s limit).

Finally, I believe that the gas rebate % should be harmonized between Stakers and Traders to avoid any confusion from Participants (my initial proposal suggested that Trader rebates where gross of rrPSP commission). The commission would be added on top of it.

C. NFT Pricing

Minting cost for non-Stakers

I have fixed the price of each Level X NFT at 30% of the Staking cost (Column 9 of Chart 1) to factor in a >70% perceived Capital at Risk (see A.). Provided the suggested Max PSP Refund level, this enables all Participants to make a max 9.3x return on the price of the NFT (Column 10 of Chart 1).

Minting cost for Stakers (See Column 11 of Chart 1)

Stakers who want to upgrade Level without additional staking should benefit from a discount on the minting cost. The most logical approach would be to fix the price at 30% of the PSP shortfall in ETH equivalent. E.g. If I have 15K PSP staked and need 5K PSP to qualify for Level 2, then my Level 2 minting price would be 0.09 ETH (1500 PSP at current price).

D. Transaction History

This is a sensitive topic on which Paraswap’s team has far better insight given their experience on the PSP airdrop. As discussed with @mouph, it will probably need to factor in once again volume, trades #, with a relevant applicable period.

E. Competitive advantage

I identified the following advantages for users:

  1. Opportunity to benefit from gas refund without putting capital at risk.
  2. 2x Gas refund limit.
  3. Superior gas refund on non-Ethereum chains.
  4. Ownership of a “nice” NFT with multiple future application possibilities.
  5. Additional Staking APY (rrPSP).

F. ETH/PSP volatility

I think we should address the PSP/ETH volatility issue (A.) by fixing a floor price that guarantees NFT buyers that they will receive at least X of ETH in gas refund. It would be determined based on PSP/ETH price at the NFT launch.

Congrats if you made it down here :rofl:

Looking forward to your feedbacks!

12 Likes

I’ve got nothing more to add myself, I think the proposal is already ambitious enough :clap: Maybe in the long-term we can integrate the safety module to give a halfway option between pure PSP staking and an ETH upgrade, but I feel that’s something we can add later, since the safety module itself might be revamped soon.

Congratulations to you Seb, as well as everyone who helped refine this proposal to this stage, this truly shows that we have an amazing DAO here!

4 Likes

Very nice work of vulgarisation. Even for neophytes like me, it allows to understand the different ways to benefit from the GRP and the advantages.
I look forward to seeing the different approaches implemented.

2 Likes