pDAO Liquidity Committee and Budget Proposal

Liquid Staking Experience
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Abstract

There is broad agreement on the need for liquidity incentives that @knoshua outlines in the Liquidity Incentives forum post. I would like to suggest an outline for an Incentives Committee based on the Lido DAO. I further propose that this committee be given access to the LM incentive size discussed in the rETH Liquidity Incentive thread on Discord. I will outline guiding principles, an accountability scheme, and some action items.

Motivation

The Rocket Pool protocol has had various phases of growth in its history. These phases have been characterized by an imbalance towards an abundance of Node Operators or an abundance of rETH demand. Finding a harmonious balance was the goal of the initial commission system, however, upon abandoning that the protocol lost its only variable way to influence rETH demand.

The protocol is billed as a Liquid Staking Solution and thus the protocol has an obligation to hold certain values. These principles will help build confidence that Rocket Pool aims to truly be liquid.

Guiding Principles

  1. The committee’s chief mission is to support low slippage exchange between ETH <> rETH on major platforms where this trading occurs.
  2. The committee will aim to minimize costs and prioritize long-term capital-efficient strategies to build liquidity.
  3. The committee will aim to expand access to rETH across major DeFi protocols to build a resilient price-feed oracle.
  4. The committee will aim to sustainably build rETH exchange volume.
  5. The committee will support the oDAO rETH:ETH ratio as the focal point in designing liquidity incentives except in such cases where the committee would be required to add incentives that would serve only to boost demand with marginal benefit from added liquidity.
  6. This committee will manage funds allocated to and/or rewarded to the pDAO for liquidity purposes in accordance with any conditions those funds were received upon and with the approval of the broader pDAO with equal accountability reporting.
  7. The committee will be sensitive to market actions and adjust emissions accordingly to reasonably maintain the aforementioned principles in adverse markets.
  8. The committee will respect the will of the broader DAO and respond to feedback from monthly reviews in earnest.

Governance

Initial whitelisted addresses will be approved through rough consensus from the core team and community. Thereafter, committee members will structure transactions and execute them from a multisig. All related addresses are to be included in the monthly report. New members are to be added over time to increase the security profile of distribution. A future debate may arise about compensation for these multisig signers for gas expenses.

Accountability

The committee will be tasked with electing a treasurer to handle communications and bookkeeping. Duties will include but not be limited to publishing a monthly report on locations, amount, justification, and efficacy of incentives for each platform distributed. This report will also request a tentative budget for the following month in $RPL to be allocated as they see fit within that budget and with community feedback taken into consideration during each reporting period.

A reporting period will be 3 days of community feedback followed by a vote only if feedback is contentious or changes outcomes.

Change Management

I propose an initial committee member review within the first 6 months pending proposal approval to discuss change management and/or areas for improvement. Prior to this review, existing members may vote to remove a member with a supermajority consensus. This period of time should also serve to establish a formal onboarding and offboarding procedure.

The treasurer should serve a variable term as set by the committee whilst respecting any wishes the broader pDAO may have.

Initial Budget

In order to facilitate broader discussions around tokenomics, I propose based on the pDAO Budget Definition thread and further discussion in the rETH Liquidity Incentives Discord thread the following budget:

Incentives (e.g., LP bonuses) - 50%
Grants and Bounties - 30%
Reserve Treasury - 20%

The major alteration from the original budget discussion is the removal of the Marketing allocation from the pDAO budget. This was suggested as the core team has recently hired a Marketing team member from their funds and the Bankless marketing blitz is likely sufficient coverage for the time being.

This amounts to 67.5k RPL, or 1,113.75 ETH at market prices, annually. For a theoretical run of approximately 1 month, this gives the committee ~93E or $154,000 USD to work with. In light of parallel discussions about tokenomics changes, this amount serves as a conservative starting point.

19 Likes
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I am very supportive of this committee and budget proposal, I believe Jasper should definitely be on the committee as well.

6 Likes
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I am very supportive of this. Having a liquidity committee will mean Rocket Pool is better positioned to manage liquidity needs for rETH in accordance with the guiding principles. Additionally, I agree with the proposed pDAO budget allocations - incentives for rETH are an important priority, and this is a good starting point that can be actioned soon.

I believe we should be aiming to push for some L1 rETH liquidity incentives in the near term (given that OP incentives on Optimism will soon be commencing), in order to preserve L1 liquidity required for upcoming L1 integrations.

7 Likes
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What is the timeline for this? Can we define a period for discussion and schedule a snapshot vote?

Would this propsal cover existing treasury and if so how do the outstanding bankless payments factor in?

3 Likes
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100% supportive of this and think this needs to get going ASAP - we need to start with what we can now. Also now that “Marketing” has been removed from the budget, I agree with the budget distribution.

I think there’s clear community support for liquidity incentives per Discord and the threads on the forum (though I would love for more to comment their opinions here as well). As such, this should go up as a Snapshot vote with or closely following the DP Limit vote. I think it would make sense to split the topic into two votes:

  • Budget approval
  • Liquidity committee directive and initial regulations

For the sake of specificity, I think a timeline as follows would be good:

  • 1 Week of Discussion and refinement (until 2022-08-12T00:00:00Z)
  • 1 Week of Open Snapshot vote for approval of the budget outline (starting from the 12th)

If anyone has any different ideas for a timeline, please share.

For initial member, perhaps the easiest solution would be starting from the existing multisig members for the OP incentives (Note, that this is just starting point and others can be nominated or current listed members can express disinterest in being included - I will update as I see comments either way):

If we go this route, ideally I think we should include them specifically in the Snapshot vote for the LC and provide three options:

  • Approve Liquidity Committee Directive and All Initial Members
  • Approve Liquidity Committee Directive but Do Not Approve Members
  • Disapprove of Proposal

The purpose being to allow the passage of the framework even if the community has reservations with some committee members.

However, the directive for Snapshot voting (RPIP-4) only proposes for two voting options so if we are to strictly follow that, we’d have to go with a blanket Approve/Disapprove (practically, I don’t think this will matter since I see it unlikely that the community would not approve of this initial list).

Finally, per @knoshua’s question, I do think that the proposed budget covers existing pDAO funds san the Bankless payments.

11 Likes
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This is a good way to get the community involved in the decission making and capture all the talent that is available for free for the protocol to garnish and grow.

Also we need RETH demand and this aligns with that need.

Lets go for it.

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As you say, our snapshot voting is boolean, so we can’t quite do your vote as shown.
Still, we could do:

  • Discuss here until 8/12
  • Snapshot vote on budget percentages 8/12-8/19

Assuming that passes, we then do two linked votes in tandem:

  • Snapshot vote on committee directive 8/20-8/27; approve/disapprove
  • Snapshot vote on committee membership 8/20-8/27; approve/disapprove members - only in effect if the committee directive vote passes

Subscribe to me for more interesting strategies on how to get more than boolean out of boolean – this sorta thing comes up in Cosmos governance.

2 Likes
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My take is that this is income stream only at this time (and bankless can get paid from our bank). If we go on the proposed schedule, we’d be just few days before the next claim period, so that’s kinda nice.

2 Likes
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Highly supportive of this.
Considering the apparent overwhelming community support for this proposal it would make sense to move swiftly to a snapshot so that the upcoming disparity in demand for rETH on Optimism vs Mainnet is not as severe.

4 Likes
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I am in support of using pDAO funds for liquidity incentives, and of the initial budget that Jasper outlined.

2 Likes
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I’m very excited to see this initiative move forward! It’s critical that we get the pDAO empowered to start operations manually, since it may be quite a while until we can plan out a more robust technical framework for the DAO.

I appreciate the nomination for the committee, but I am underqualified to make decisions surrounding liquidity incentives since my area of expertise is more on the governance and tokenomics side of things. Therefore, I would suggest someone more familiar with the deep complexities of various defi markets take my place on a liquidity committee.

I am happy to be a part of a grant committee, but that’s best to discuss in another thread I think.

2 Likes
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I am in support of this proposal and of using the pDAO funds to power liquidity incentives. I also propose the grant committee discuss using pDAO funds to secure listings on major CEXs.

1 Like
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Yes. Yes. Yes. Exactly my thoughts. Time to get moving on this.

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I support this proposal and the budget concept lined out.

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Can I suggest we do the snapshot voting on percentages and snapshot vote on committee directive/members at the same time? Alternatively, we could reduce the voting time to 3 days and then socialize the votes in the ping server and #announcements channel.

Ultimately I’m trying to get us to live incentives as soon as possible and want to see us act expeditiously to get there.

I get that we need to go through the rounds in terms of standing up governance, but I also feel urgency to get this going as soon as possible.

6 Likes
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Highly supportive of this proposal and willing to see it treated with the same urgency as we had for bankless ads so we can have incentives running before the merge.

1 Like
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Doable, I think

  • Snapshot vote on budget percentages 8/12-8/19
    • Approve/disapprove
    • Not dependent on other votes
  • Snapshot vote on committee directive 8/12-8/19
    • Approve/disapprove
    • Committee unfunded until budget percentages approved
  • Snapshot vote on committee membership 8/12-8/19
    • Approve/disapprove members
    • Committee unfunded until budget percentages approved
    • This vote is thrown out if the committee directive fails
2 Likes
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Thank you for nominating me for the liquidity committee (as part of the OP multisig). Just copying a comment I left in discord:

I am happy to be a part of the liquidity committee, but only if I am not taking the place of someone more worthwhile.

I would say I am able to have a good high level understanding of defi protocols, requirements of liquidity and integrations, and able to communicate this eg in the OP proposal, as well as being a known and RP aligned community member, and being part of the conversation advocating for incentives in here for months.

However I will be honest and say I am not as mathematically inclined as others here in terms of eg making calculations to predict outcomes from liquidity strategies within a certain range etc nor do I have background in finance, and just wanted to be clear about what I can offer.

3 Likes
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I support this proposal.
I think time is a pressing issue in this case, the market will not be waiting for us, so I agree with Marceaus suggestion to speed up the process.

3 Likes
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Voicing my emphatic support for the outlined budget allocation and slate of committee persons. Unleash the pDAO to unlock the unrealized potential of our all-star community.

4 Likes