[Informal Poll] Offering DAI borrowers MKR to increase borrowing

I posted this as an idea in a few places.

Here is a thread that went no-where probably because the idea wasn’t clearly laid out.

If we want to further incentivize players to borrow DAI governance could offer MKR as a DAI borrowing reward to all vaults. Using MKR to incentivize additional borrowing would allow us to raise SF rates. By offering more MKR value than the DAI being received in the SF is potentially a valid way to do the following:

  1. Allows for Maker to create negative rates by offering more MKR value than DAI fees raised by SF in surplus.
  2. Encourage more borrowing (may not be good if this drops CRs)
  3. A more robust sell/buy MKR economy and hence more MKR - DAI liquidity generally.
  4. A way to set positive SFs and balance these with MKR reward to increase capital flows around MKR-DAI pair.
  5. Another way to distribute MKR more widely and possibly get vault participation in MKR governance.

Generally the thinking is that with SF at 2% we could offer 1% MKR mining reward for borrowing and 3% SF to give an effective 2% fee rate. Or we can offer 3% MKR return with a 2% SF to give a -1% negative rate to borrowers.

The con here is that it would apply to all current borrowers and also that it would dilute MKR potentially but this could be offset by surplus buying back MKR.

To this end I am putting up a simple poll on the subject to gauge governance on the topic and whether this should be persued in detail or not.

A Yes basically means persue the topic.
No means don’t persue this, and Abstain/Invalid you can give your own reasons for why you chose those options.

  • Yes - governance should pay MKR to DAI borrowers to incentivize borrowing. (offer MKR farming)
  • No - MKR should not be used.to incentivize borrowing
  • Abstain - I can’t vote for or against for some reason. Please note reason below.
  • Invalid - I believe the poll to be invalid. Please note reason below.

0 voters

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I feel like more and more signaling requests are getting posted. Unfortunately the quality of initial posts (that is following guidelines, i am not necessarily talking about content) is going down. Maybe every signaling post should have an option to vote/signal, not only abstain, but also that signal request is invalid.

Ah yeah - I forgot about the ‘abstain’. Poll resubmitted with Abstain and Invalid options.

No problemo :slight_smile:

My comment was not directed explicitly against this post…

Yeah but I think your comment is valid. We are getting more signal requests. Not sure how we can point people to the guidelines page and to have a standard set of features all polls should have.

Yes/No at a minimum and Abstain/Invalid as valid polling choices. This is something for the Governance Facilitator I think.

For myself it would not incentivize me to sell the borrowed DAI. Nevertheless, there is maybe something to do with the concept.

@MakerMan You should add a second poll with the fixes and delete the first poll (delete the poll, not the post). There’s only been 4 votes so far.

Also you definitely need show who voted and Abstain.

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Yeah I just axed the first poll and started the second with Abstain and Invalid options as well as show who voted and hide results until voted.

Sorry for the mix up on this.

I am unsure on whether you are trying to create an actual signal request here or not. It seems like this is more of a request for discussion on the topic. Anyway, I added the active-signal tag to your post. If you want to make this an actual signal request, the poll should allow multiple options to be selected.

Although I understand that these options seem mutually exclusive, I personally sit in the space between “yes” and “abstain” if only because the idea is a bit vague atm. Here is the link to the signal request guidelines: Practical Guide to the Signaling Process

Overall, I like the idea of some form of mkr yield farming at this point. It seems like the idea has been successfully tested on many platforms and in a conservative form can be a useful tool to incentivize behavior. I think we need to flush out the details more though. I’m also not sure whether mkr holders would be keen on dilution unless there was clear improvement to the way the protocol functions.

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I think what annoys me the most here is that often I just want to put up a poll to look at it and then edit it. I wasn’t sure I wanted this to be a poll that led to an on-chain poll of any kind it. As I included in the original now edited post with now poll edited/changed a few times. I now have multiple options and this is simply a poll to gauge community sentiment on whether or not to persue this further and flesh out details.

I agree with the above comment in that I have thrown this idea around as well as a variation - using another MKR token (like MKR-R for rewards) to reward Maker borrowing that later could participate in governance or swapped for DAI or MKR proper…

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Right, yeah there’s definitely “informal polling” which often gets confused with signal requests… maybe we should have a tag or have “[informal poll]” in the title or something to separate these from signal requests… then people can play more fast and loose in those posts and we don’t have to share the practical guide link in every topic that has a poll. I dunno maybe @LongForWisdom has some thoughts around this.

Yeah I am not sure. @LongForWisdom will definitely have some ideas around this. I will go with whatever signalling is appropriate. I always had a hard time deciding the tags to use on a post. Is there a place where these are described that I have not found yet? Like the difference between governance and governance and risk or active-signal and signalling?

I am thinking more and more what we are seeing is people using polls really as ‘informal polls’ mostly to gauge sentiment on a subject. I am also thinking an informal poll should have as a requirement abstain/invalid with reasons given below along with the choices. I also agree that some statement about what the choices mean in the post regarding the poll is appropriate. It was why I gave some examples of why using MKR as a reward for borrowing DAI against the SF in DAI being paid was a way to generate more DAI, but also as an approach to generating an effective negative rate for borrowers that doesn’t break any of the wallet mechanics that other negative rate mechanisms were presenting.

The bonus of this model is that while it will look to dilute MKR if the SF is bumped up as well the real effective rate becomes MKR value - DAI SF being paid.

Could use [Poll] in the title. Use tag ‘polling’, instead of ‘signalling’, ‘active-signal’.

Though maybe this is a signal request.

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I didn’t even see polling in the signal request - I literally had to search for it vs. being able to see it in the list. Changed the title to include [Informal Poll] and removed everything with signal to polling. Now I wait for @LongForWisdom to come in and just go all over this. Going to make me gunshy to ever put up an informal type poll again or at least I will be better informed and I read the signal guidelines a number of times now (changed since the last time I read it).

I honestly don’t know now what this should have been. I know I really just wanted a general signal from the community on whether there was interest in working on such a beast at all. Given how yield farming has taken off it seemed prudent to ask the community to give a signal on this topic and to initiate discussion.

One thing I looked at was the whole pre-MIP discussion as a choice. Making me think we need something like Informal Polls to gauge community sentiment guickly so people can toss out ideas and community yeah or nah persuing them more formally or laying them to rest informally. This way when people want to submit an idea they can look through the list of stuff already polled on and make a decision to re-up an old idea for new discussion or just leave it rest dead.

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Sorry @MakerMan. There’s nothing you did wrong here, I agree this points to ambiguity in our guidelines. You’re cool, no worries.

Let’s get back to the topic. Will offering yield farming incentives even help us significantly? We still will be unable to compete with any new crazy yield shenanigans with new protocols offering 100% or 1000% APR. Who would we be trying to meet with this? Maybe the yield for COMP? I imagine the incentive doesn’t matter terribly unless we can undercut another major player.

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Hey @befitsandpiper this is why we do these things - we learn and discussss. I’m good. I really was just annoyed that I felt like I annoyed other people.

Well I like to ask “What is the goal?”. As I posted above I think offering MKR as a reward can allow us to use two financial levers to give an effective return rate on our vault behaviors that can go to negative rates without breaking anything. It may further incentivize borrowing where people might have not (but this may have negative effect on CRs). It might also kind of break the bad behavior - via liquidation mechanisms (particularly if we go negative rates).

Offering our vault holders MKR rewards may get them into governance and using MKR as the reward against the SF as the fee we basically create a potentially much more liquid and rich MKR-DAI exchange economy.

I am not entirely sure we will beat out other competitors COMP and the like but I think it could put us in the game there. I think my key points was offering MKR as a vault DAI borrow reward was a way to still have a positive SF on vaults while incentivizing behavior with MKR rewards. We could even adjust these rewards on a per vault type basis but I think this gets us into another massively complex management tool. I would just advocate having a rate and turning it on/off on certain vault types. I also don’t know if this means a new smart contract sub section (called rewards or ‘food’ if we follow the naming nomenclature on the contracts) that would need to be built and audited.

Conceptually I was thinking about a way to get to negative rates that breaks nothing, has minimal overhead and allows us to also raise SF to get a more dynamic DAI economy connected to MKR token proper. I also thought doing this might give us some PR exposure and bring us into the farming economy in a key way. Does the gains and costs to discuss and implement offset risks and rewards. Of that I am uncertain which is why I put this up for polling and discussion.

In fact, I want to oppose it, but the entire market is flooded with farmers’ mining industries, and we cannot go against this trend. We can only use this trend to introduce similar mining rewards to create a favorable environment for future development. I think that when Maker launches loan mining rewards, it will at least have a sensational advertising effect on the market.
If the SF and the rewarded MKR can offset each other or have a certain surplus, the MKR will not be diluted.
I will choose to agree.

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Maybe this would prop up the system vanity numbers, but as an MKR holder adding a mechanism to inflate the supply outside of the lender of last resort responsibilities is a no-go for me. MKR has value to me because I can own a fixed percentage of the system. If that starts being inflated away I would probably dump a large part of my holdings in favor of something like YFI that has a fixed supply where their community is already discussing burning their ability to mint new tokens.

If the goal here is to fix the peg, I much prefer cleaner solutions like lowering the CR of fiat-backed stablecoins to enable huge leverage for shorting Dai.

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Yeah, I think I’m going to start policing these a bit more heavily now that we’re getting so many. Not sure that we need an ‘invalid’ option necessarily. But I always like to hear ideas.

Implementing this now. Seems like a good idea, and it gives me an easy way to police signals without deleting them.

Would second this. Keep on keeping on.

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