Motivation
This post addresses why we would want to and how we could go about increasing treasury funds and seeks more formal opinions on if we can do this in Saturn 1. It also serves as a precursor to necessary Saturn 2 discussion on what to do with surplus_share (part of the value capture in Saturn 2 that we are supposed to vote on before Saturn 1).
Increasing pDAO Treasury in the short term (Saturn 1)
After previous GMC/Core Team meetings, as well as the discord discussions here Protocol Funding Beyond RPL Inflation/Speculation and elsewhere, there appears to be alignment on at least looking into increases to protocol funding. Ultimately, this means diverting funds from Node Operators to the pDAO treasury.
Reducing rETH yield could technically also be considered, but we are saturated with NOs and will likely be for a long time.
The goal is to be able to fund larger marketing initiatives (including hiring external marketing agencies), incentives, bribes, integrations, etc. to drive rETH adoption. Improving rETH’s APR might help attract small buyers, but large-scale adoption requires deep liquidity, which means we need big buyers. The treasury should be equipped to fund initiatives that make rETH an attractive choice for those with significant capital.
As of this writing, the pDAO treasury (entirely denominated in RPL) is valued at $238k.
AlphaGrowth directly told us that, in their opinion, their efforts at increasing rETH adoption have been more hindered by lack of protocol funds than by rETH efficiency. I am understanding of how RP has handled itself in the past—avoiding a direct protocol fee (yes, I know inflation is effectively a fee), not paying for listings, etc.—but a new era is upon us.
Goal: Grow the treasury in Saturn 1
Reminder: In Saturn 1, RPL inflation will still be 5% with NOs getting 70%, oDAO 2.5%, and pDAO 27.5%. NO commission will be 5% base (no_share) and RPL stakers, who must be Node Operators, share from the 9% commission pool based on how much RPL they have staked (voter_share). Thus rETH still pays 14% commission.
Below is a more curated list of growth scenarios than appears in the discord thread. This is NOT meant to replace Saturn 2 surplus_share ideas; LP, buy and burn, etc., are good goals which add value to RPL, but they are not likely, imo, to give short term treasury boost.
Calculations in here are very rough and assume RPL = $5 USD and ETH = $2,000 USD.
1. Divert a portion of no_share or voter_share to the treasury
This would provide a direct ETH income stream.
Based on rough calculations, 1% of commission would generate approximately 18 ETH per rewards period—which may not be significant enough to make a meaningful impact on treasury funding, but it is not nothing, and it is ETH, not RPL. Note that a drop in commission is offset by more capital efficient 4 ETH pools.
Example: voter_share commission 9% → 8% ⇒ Increase per year of 235 ETH / $470K to treasury.
2. Increase RPL Inflation to the Treasury
This would provide a Saturn 1 “lump sum” of RPL to the treasury.
For example, adjusting the current pDAO 28.5% allocation to 48.5% while reducing the NO allocation from 70% to 50% would nearly double the pDAO’s RPL stream. This would still leave NOs with a portion of inflation while ensuring greater stability for the treasury. However, this would still be subject to RPL price fluctuations, meaning its effectiveness would depend on market sentiment and demand for RPL. Since this change would dilute RPL value for existing holders and stakers, the question is whether this level of dilution would be tolerable for the stakers. Note that after Saturn 1, NO inflation is going away completely anyway. This shift could happen immediately, after a certain time period, or in stages during Saturn 1.
Example: NO 70% → 50%, pDAO 28.5% → 48.5% ⇒ 195K RPL / $1M more per year to pDAO (would mean higher inflation after Saturn 1 than the expected 1.5%).
Difficulty to integrate these into Saturn 1
Langers has opined that neither option is necessarily difficult nor time consuming. Bringing ETH in as a funding stream should be relatively simple (though this is still being analyzed). It might take more time to be able to spend the ETH as treasury payments are currently RPL limited.
Questions:
How much do we need in the treasury?
It is difficult to answer when you’re use to not having money.
Would we have paid $1 million for ledger integration? I don’t know. In my opinion, though, marketing and BD could be greatly improved with more funds to spend. One thing on the GMC wish list, however, is being able to afford a professional marketing team to push rETH.
Issues:
At the beginning of Saturn 1, we want mass migrations of NOs. It is a valid argument that ANY reduction in NO benefits might dissuade migration. That must be weighed over whether we believe increasing treasury spending to grease the wheels of rETH adoption is suitably important and possible.
My opinion:
I would like to see both options above pursued. A “one time” Saturn 1 lump sum transfer of RPL to the treasury at the expense of NOs (which we are swimming in currently) and a direct ETH funding stream into the treasury because I do not believe we should rely solely on RPL inflation along with speculative token value.
I am sympathetic to the argument that maybe it should wait until after Saturn I has had time to allow migration of minipools to megapools, however.
For the reader, consider:
- Do you think Saturn 1 should build in a way to take ETH as direct income to the treasury (whether it is used immediately or not)?
- Do you think in Saturn 1 RP should take some amount of NO or Voter share as ETH income to the treasury?
- Do you think in Saturn 1 RP should divert some fraction of NO RPL rewards to the treasury? Keep in mind that RPL stakers will still get ETH rewards, this is just RPL rewards.
- Do you think RP should do 3 and/or 4 immediately in Saturn 1 or wait in order to persuade NOs to migrate from minipools to megapools?
Saturn 2 - UARS
When Saturn II arrives, we will further need to decide what happens with “surplus_share”. This is a percentage taken from voter_share (RPL stakers’ ETH revenue) that can be used for other purposes (but usually meant to increase value to RPL via buy and burn, LP, etc.) and can be tuned based on what the protocol needs. See RPIP-46.
This part of this post is a reminder we need to vote on this issue before Saturn 1 and to remind people that the treasury building above is not trying to replace the work done for UARS and Saturn 2, it is a separate step. At most it tries to move some functionality up to Saturn 1 (in the form of diverting some voter_share and/or no_share to the protocol).
Issues to consider with Saturn 2 and surplus_share relate to how and if some percentage of RPL stakers commission should be diverted to benefit the protocol or RPL as a whole, rather than just the stakers.
The details of that discussion should probably take place in another forum post, but there might be some overlap in here.