[Discussion] Activating MKR Staking Rewards

This is unfortunately vulnerable to Sybil attacks.

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to an extent if left without constraint…the point was to raise the notion of a regressive component. For sure we could limit the minimum MKR required.

Yes, understood and sorry if my post was unclear - I think we are on the same page. I just wanted to emphasize that we should be looking at minimum rewards to secure the protocol and no more. There is a lot of comparison of our rates vs that of Aave or Yearn on this thread and it’s easy to get into a bidding war with them. But we really don’t need to if there are enough Sleepers out there.

BTW I’d much rather wait and see the effects of delegation before doing anything that looks like rewards.

And this is a valuable point by @swakya, in my opinion. If we’ve got enough altruistic delegators (I certainly would fall into this category), we might need no or very small staking rewards.

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This is the way

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Let’s also add my favorite point.

We will want to see various governance participation metrics as rewards are turned up.

  1. To see what rewards levels get any additional participation
  2. Where return fall off occurs.

Also not sure if this can be done, but can rewards be related to some participation metrics?
i.e. vote/hat participation. I think the real issue is securing the hat but I also think these rewards should have some relationship to participation.

I also am not entirely sure how to deal with incentivizing the larger voting blocks. I honestly think delegation may help with that. Which is another issue. Somehow this voting rewards implementation needs to be distinguished from other changes to governance.

It might be that something as simple as delegation gets us far more MKR governance participation than rewards does alone. We really want a way to distinguish this vs. doing two things simultaneously and wondering which one got us the biggest bang for the change/buck.

I don’t know which is easier to implement (delegation vs. staking rewards) but changes to these should be staggered AT LEAST 3 months apart to get cleaner response signals.

Last point I made elsewhere. If these rewards come in DAI they could easily be coupled to SC DAI or other payouts saving distribution costs. Also a consideration to have an option to receive these on a sidechain/L2 would be nice as well.

@hexonaut nice to see you pushing this in a way that connects to MKR burn events. I think these incentives really need budgets because you may want to modulate rewards based on burn but you don’t want to axe them entirely with no burn. Some of the most important times for governance participation where when Maker system was stressed the most. Keep this in mind. Continuity is important for people. Nothing worse to a return seeker than returns that fluctuate massively.

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I think that delegation is probably less contentious than staking rewards. If one of them should be done first it is that.

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Because the optimal Yearn strategy will be to deposit MKR into Aave to borrow Dai and farm with the Dai not lock it up in the chief. So you still end up with MKR on Aave. With the right intermediary smart contract to get around the deposit-vote delay, Yearn could even still use the MKR to vote in Maker Governance. If you don’t want MKR on Aave to be used for a gov attack, just get Aave to turn off borrowing MKR.

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Yearn is great for gas aggregation. And some possible tax benefits.

This is not going to happen. Yearn tried this and was resoundingly told no.

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The best strategy is currently a Yearn vault, but not if we turn on rewards. It will shift the balance towards locking your MKR in the chief. My point is that you cannot both farm with Yearn and lock your MKR in chief because farming with Yearn requires locking your MKR in Aave which prevents you from also locking it in chief at the same time. So you have to pick either or.

I also want to avoid just telling Aave to turn off MKR borrowing. That may solve the problem temporarily, but another lending platform will almost certainly list MKR in the future. Maybe a platform less friendly towards Maker.

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This may be true but if the majority of MKR is on Aave now and the majority of liquidity is on Aave and they turn borrowing off, I think most MKR holders would prefer to stay on a platform that doesn’t allow shorting of their collateral. Sure it is possible that in the future another lender could have both and maybe have better rates to siphon off MKR collateral but not for the foreseeable future so short/medium term it seems like a reasonable option.

As for YFI trying with Aave: They did it in a hostile way to start which probably didn’t work out in their favour and if we are going to build a stronger relationship with them in regards to D3M they might look at us differently. If that still doesn’t work we could see if there is a price (from us) where turning off borrowing would make sense. Streaming a payment to them in return for the risk/reward on both sides might be a reasonable compromise.

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One thing I want to say is that MKR yield through staking rewards is pretty much risk-free, except for the risk when depositing MKR in governance contract which is more or less battle tested. Yield made by borrowing stablecoins on your MKR at Aave and deposititing them onto some farm may be higher, but you have Aave protocol risk, liquidation risk and SC risk of farming venues.

With that in mind I think some equilibrium can probably be reached where 10% of MKR is staked which at 25% burn represents around 12% risk free yield. So some of the MKR supply at Aave should probably move to governance contract because some MKR suppliers don’t want to risk too much.

I just hope this doesn’t lead to having large amount of MKR being stuck on some old hats, because some people who deposited MKR in governance contract would vote only occasionally. This is what concerns me a bit.

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Also we don’t necessary need everyone out of aave, if we can decrease by 20 or 30%, it removes 90% of the governance attack risk / ES risk too.

I believe with regards of what Primoz said we can easily remove this 30% with less reward than the farming reward.

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May be missing something, but where does a DeFi Chad even earn 4% annually from farming MKR token? Don’t see any MKR vault on YEarn.

My understanding was Aave lending was the only “low maintenance” yield you could get in the token right now (and it’s actually 0%)

Would love to be proven wrong though. Thanks I’m advance

You are correct they don’t offer a MKR vault yet, but you can borrow stablecoins on Aave and use the Yearn stablecoin vaults.

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It’s not a juicy yield, but you can get 1.98% on MKR in Gemini, which also has the bonus of being an insured deposit.

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@hexonaut @PaperImperium thank you both

Was aware of both of those (solid) options… just thought I might’ve been missing some 4% simple deposit vault hidden in plain sight lol

Much appreciated (and congrats to all on the price run today)

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Bancor has a MKR/BNC that fluctuates wildly. Today: 1.73%. Last week: Around 6%: prior week 15%. Supply and Demand at work, but as MKR market cap grows, Degens will find a way to make yield.

Funny enough: I was looking for a solution to find yield as I have been accumulating MKR for some time. This thread really gives me a solution that I feel great about. I hope we can continue to push this forward…

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MIP49 will be submitted for the May governance cycle, so you’ll have the chance to support it in a few weeks if you’d like :slight_smile:

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