8RC-3: Distribute MPH staking rewards in MPH

Proposals Request for comments
#1

Author: Zefram Lou (zefram@88mph.app)

Specification

Currently, all protocol income (interest fee + farmed tokens) are converted into DAI and distributed via the MPH staking pool.

We propose that a new staking pool should be deployed and migrated to, with the following updates:

  • The reward token becomes MPH rather than DAI
  • Staked MPH becomes a transferrable ERC-20 token (xMPH)
  • The distribution period becomes 14 days rather than the current 7 days

In addition, because the migration would require existing stakers to spend gas on exiting the existing pool and enter the new pool, 500 MPH should be allocated to the first distribution period to incentivize migration and compensate for the gas cost. These MPH tokens would come from the governance treasury.

Argument for

Creates MPH buy pressure

Using protocol income to purchase MPH allows 88mph to autonomously generate buy pressure for MPH. Price up good, price down bad🤷‍♂️

Native yield-bearing MPH

Distributing staking rewards in MPH allows us to create a yield-bearing MPH token that only depends on 88mph itself rather than third-party lending platforms.

Reduces gas cost

MPH stakers are likely to be long-term believers & investors of the 88mph protocol, meaning it’s likely that they would use the DAI rewards to buy more MPH anyways. Integrating MPH buying directly into the staking pool means that these purchases are grouped into a single transaction, which is a lot more gas efficient.

Changing the distribution period from 7 days to 14 days also decreases the frequency of exchanging the protocol income into the reward token, making it cheaper in the long run to distribute the rewards.

Argument against

Confusion for inflation

Many not-so-reputable projects often create farming pools for their token that simply uses inflation to give out rewards in the same token. Such farming pools dilute the token supply and usually cause the token price to drop.

While the MPH staking pool is nothing like those farming pools, the difference may not be obvious to the less technical users, and explanation of the differences is certainly needed. This may cause confusion.

Stakers who don’t migrate within 14 days won’t get gas compensation

Long-term believers of 88mph might have chosen to stake their MPH and forget about it, letting the MPH earn the DAI yield. Therefore, they may not be able to react to the launch of a new staking pool quickly enough to take advantage of the gas compensation.

Dilutes the staking pool

Currently, staked MPH is not an ERC-20 token and cannot be transferred between users, so if someone is an active trader or liquidity provider of MPH, it is in their best interest to not stake their MPH. This means only the long-term believers of 88mph, who do not expect to move their MPH around much, will stake their MPH. These stakers are rewarded for their long-term investment with a boosted APY, since fewer MPH tokens are earning yield.

If staked MPH became an ERC-20 token, holding or trading staked MPH is strictly better than holding raw MPH, so even the short-term speculators are incentivized to stake their MPH and trade the staked MPH. This will dilute the MPH staking pool, and decrease the staking APY for the long-term stakers.

Required actions

  • Develop and deploy the updated MPH staking pool contract.
  • Deploy a new Dumper contract that sells tokens into MPH instead of DAI.
  • Call FeeModel::setBeneficiary() with the new Dumper contract as the beneficiary, so that protocol income is sent to it.
  • Distribute 500 MPH in the first 14-day reward distribution period.
  • Notify existing stakers of this change.
6 Likes
#2

Good idea, I think you stated the pros and cons very well. I think the psychological aspects should also be considered, getting paid in dai makes it “feel” more real; like you are genuinely participating in the upside profits of the protocol. On balance, I think this is a slightly better value generator in the long term compared to the incremental buy pressure from this mechanism.

1 Like
#3

I understand the “feel” more like real. But I would love to earn more MPH rather than DAI. I don’t understand the last part about trading staked MPH, what it implies for me is that you create a liquidity token that you can trade. If so, is it necessary ? The ideal is earning MPH instead of DAI.

#4

I like the proposal! So long as we are not creating an inflationary measure.

1 Like
#5

Highly in favor of implementing this change. xMPH improves composability with the rest of the ecosystem, such as use as collateral on Aave, which is a huge benefit to the 88mph community. Look no further than xSushi for a case study, which seems to be positively received so far. While changing the reward token to MPH creates inherent buy pressure (a great side effect) I see its primary benefit as the auto-compounding of staking rewards. As of right now, gas prices effectives make it unprofitable for small stakers to compound on any reasonable timeframe, making the APY somewhat disingenuous.

So long as we’re market-buying MPH with protocol income vs inflation, the pros outweigh the cons.

Happy to contribute towards development of new Staking and Dumper contracts if needed.

5 Likes
#6

Oh yeah a new Staking contract would be necessary for sure. Right now we’re using a regular Synthetix-style staking contract, but if we want auto-compounding switching to a yearn vault like contract would be better. Shouldn’t be too much work.

#7

This would more than make up for the loss in buy pressure if the MPH payback amount is taken away for FR deposits. The revenue system reminds me of another popular project right now, Vesper Finance. Fees on their pools go directly to buying back VSP on UNI and is sent to VSP stakers.

As a MPH staker I would love for more exposure to MPH and especially autocompounding. I sometimes worry MPH might appreciate before I can get enough dai to make it worth the claim and swap.

I don’t think deflationary is the right term but it seems that rewarding stakers with MPH off the open market would reduce circulating supply. I’m not familiar with the trading of staking tokens (haven’t personally experienced that with vVSP and VSP), but the proposed features of the pool would definitely increase the amount of MPH staked. Some might call this dilution others might just say it’s increased adoption/usage of the native token.

1 Like
#8

The advantages to earning Dai are numerous for long term stakers, which would better allow MPH holders to weather a potential bear market. I need to think about this more, I see advantages in both right now. Auto-compounding like Yearn would help out the “little guy”, which I generally feel is the best long term path for respect, and eventual mass adoption.

#9

I think the proposal overall makes sense and would support the distribution in MPH.

I am not sure about the short-term speculator point in the ‘Dilutes the staking pool’ section though as the gas fees may well outweigh the benefits of accruing yield on their holdings. That being said, these people were unlikely to stake in the first place as the post acknowledges.

Are there any proposals/ discussions around a staking boost based on time staked? I think BadgerDAO had something like this and it would probably make staking stickier - just a thought.

1 Like
#10

Good proposal! As long as MPH consistently bought from market for whatever reason it’s good!
For other part, need to place NOT INFLATONARY TOKEN sign in bold red letters in the middle of main page so with time even not tech savy users will figure the difference between MPH and others:)

2 Likes
#11

Oh yes, having a time-based boosting is super cool! We can even make it work with xMPH, if someone wants to stake they only need to hold xMPH in their wallet, and they’ll gradually earn a boosted reward, while if they want to transfer the xMPH to someone else they would lose the boost. This can solve the staking pool dilution problem, since even if speculators stake they won’t get boosted rewards.

I will do more research into how this can be implemented and likely adjust the proposal.

2 Likes
#12

So looks like path to solve the TVL UP - token price UP puzzle lies in building progressive/boosting reward system and incentivized MPH holding. The more you stake the more APR(by getting extra MPH) it should be with penalty for early exit. The more days passed the more MPH tokes you get. And the more MPH you have in your acc initially the more APR you can get similar to centralized platforms lice Celsius or Nexo. Locked MPH token should do the good boost and if so it will be market bought especially by big stakers.

#13

This would be brilliant, and if there is anyway I can help then let me know.

One thought, and I don’t know if it’s possible, but using the below made-up parameters:

define amount each MPH staked would receive based on that week’s protocol earnings

0-1-month staked = 50% rewards
1-2-months staked = 75% rewards
2-3-months staked = 100% rewards

3 months staked = 100%+unallocated rewards for those that staked < 2 weeks.

What I was thinking is that in a transition it would be cool if a snapshot of existing stakers could be taken so that effectively their ‘staking boost reward clock’ would take account of their time staked… I don’t know if this would be possible though.

A final thought, IIRC BadgerDAO boost programme required only a number of weeks in order to earn the top level of boost. I think it’s good to set a longer duration because it aligns the interests of the MPH long-term holders with the long-term financial success of the protocol.

2 Likes
#14

This might be a silly question, but what guarantees that there will be enough MPH on the open market to buy so that stakers can be rewarded? Also I assume that the amount of MPH received will depend on the price of MPH at the time of purchase?

#15

There’s always the Uniswap & Sushiswap pool for liquidity. The amount of MPH does depend on the price at the time of purchase.

#16

Hmm, so I’ve done some research and it seems that having a time-boosted reward is hard to implement with auto-compounding and transferrability. I think for now we won’t implement a time-based boosting so that we can push this out more quickly, though if you (or anyone reading this) know how to implement this then we can definitely work it into the proposal.

#17

I think it will create good buying pressure if the inflation is under control, if it’s not it will be like BSC where even with buybacks and burns tokens dumped 80%.

I would like to see the option to compound my rewards without having to execute extra SC interactions. What would be even more amazing is a toggle where I can set to auto compound without having to any gas, it does not go to my rewards, but to my staked position.

#18

Oh yes, the new staking contract will have auto-compounding

2 Likes