Let's Talk Liquidity Rewards That Maker Is Entitled To But We Aren't Collecting

Back in mid-June the head of Centrifuge said this. Has RWF or anyone else asked @Protocol-Engineering about how to implement this? I know I forgot, so I suspect others did as well.

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As you see, regular investors on the Tinlake platform receive 10x what Maker does for its only Tinlake-Associated vault. We’re losing money by not collecting these to then sell for DAI (or even use for governance votes, though I’d prefer we collect the revenue). And we have only ourselves to blame.

On our New Silver vault alone, this is an estimated $1.69 million in yearly revenue we are missing out on, and for zero additional cost or risk. We currently collect around $190k on the exact same vault debt. We also have only 3 ilks projected to earn >$1 million/year. We can make that 4 with NS simply by collecting these rewards.

This is akin to not bending over to pick up a $100 bill on the sidewalk.

How can we get the collection of these rewards online ASAP, given the tens of millions we are soon to provide in liquidity to Tinlake platform?

Because this has fallen through the cracks (partly my fault for not following up on it in the last month and a half because I had my day job and other things on my plate), and these are rewards we are entitled to as the largest provider of liquidity, let’s figure out what we need to do to get moving on this.

The sun is always shining on MakerDAO, which also means we won’t be caught sleeping in. Let’s push this into an executive as soon as we have a technical solution.

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If the community has collectively decided to permit these Centrifuge assets (and all their concomitant and well-described risks) on the protocol, the least we can do is take the money off the table.

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I’ve put some time thinking about that, discussed the matter with @spin, but didn’t find any smart contract solution/legal that we can implement for now.

The cropjoin MIP is almost 1 year old with no executive in sight. The easier Sushi version is not there yet neither. The Centrifuge version would be another order of complexity as the token is to be claimed on Polkadot.

Even with wCFG (which is assume is safe but didn’t check what is the link with CFG), selling the rewards on the market will probably crash the wCFG price.leading to not much revenues (as you pointed out we get a lot).

The easiest solution I see for now is to use a legal structure (like the Cayman Foundation) to hold the DROP token and use it to claim the rewards. Let’s be honest, it will take a few months to get there (then a few months to implement it). Any significant earning might have vanished by then.

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wCFG is an official version for CFG and I know they have a bridge for swapping the two.

Perhaps we can simply ask for them to be sent manually to us every month? We don’t need a legal agreement, as we have plenty of leverage should CFG rewards suddenly stop for us but not for other investors on the platform.

This represents close to 90% of what we are entitled to currently, so that should probably be the first step, since there isn’t opposition from Centrifuge.

We can figure out at what speed we can sell the tokens without crashing the price once we have them in hand.

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It is my understanding that Centrifuge (the startup) is treating CFG as securities (which is why they avoid commenting on the price or answering some questions). So Centrifuge Chain (the DAO) can probably issue CFG tokens (taken from where? I guess the rewards are handled by a smart contract, you can start by auditing it and check how it works) for Maker but Centrifuge (the startup) is probably not able to touch them. In DeFi simple stuff are complex.

So while the ask for CFG is fully legit, the question is the priority. Strategy vs tactic. RWA ecosystem development versus yield-seeking.

So that’s a good point that it may be technically complex to implement.

I would still like for us to ask. I can run over there to their forums if there’s not another method that’s better.

But as the biggest participant in the platform, it seems like we should be getting the same 30% +/- that all the other DROP investors get. Especially since we’re the swing provider of liquidity for any pools we are in.

The worst that can happen is they say no. Though i can’t imagine why they would since it’s a blanket reward for both investors and Issuers.

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wow, I did not realize just how much the protocol is missing out on.

Do we know how long these liquidity mining rewards will last?

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Oooof, first thing that comes to my mind is tax implications? Who’s going to pay the capital gains tax on such? Hopefully not MKR token holders!

Also, if possible–IMO they should be held and staked (which incurs more taxes), but personally I like to see MakerDAO build a diversified asset portfolio of protocols into the balance sheet–again, if possible.

As a friend/patriot used to say, “it’s unamerican NOT to pay taxes” :sweat_smile: :man_shrugging:t4: Of course other friends wanted to kick him in the arse for thinking such :))

Oh, and lets not forget the EU and other Jurisdictions.

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I will need to check, but I believe the rewards are set to .001 CFG per DAI per day. CFG/wCFG is trading around 95 cents as of writing, but is obviously quite volatile with a range of around 55 cents to around $1.05 since its very recent ICO a few weeks ago. Taking the low end of that range at 55 cents, that’s around $3,000/day we are not collecting but are entitled to on the NS-DROP vault as of writing.

They adjust them via their governance votes. They recently had a drop to these (still high) levels, and would expect a continued decrease over time.

I don’t see why the protocol would be more taxable from collecting and selling/holding these tokens than it is for anything else. The entire transaction is on-chain and Maker itself is not domiciled anywhere.

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Update: I broached the topic with the Centrifuge community.

Initial reaction seems positive. I’ll keep us updated on this thread as this develops.

Update: A starting point for making this technically feasible has been laid out. Lucas suggested we revise MIP21/MIP22 to make this easier.

This seems like a great long-term goal for us to control the DROP tokens anyway, so this may be a way to fund that PE time? Happy to hear thoughts from those in PE, as I know they’re always slammed.

This was the next stumbling block, but we know the various rates of CFG rewards and the DAI provided ton any given day, so this should be something I or someone else on Maker’s end can estimate manually. For anyone interested, rewards were .0042 CFG/day/DAI from October until on/around June 14 when they went to .002 CFG/day/DAI. From there they were lowered to the current level of .001 CFG/day/DAI on/around June 30.

Using even the all-time low price of CFG (.55) as a benchmark, you can see that this amounts to several thousand dollars per day. In the New Silver vault alone, we are entitled to ~$3000 from just today (5438.676 CFG * .55 price). Note that CFG/wCFG trades at a price of .90 at the time of writing.

If it turns out that there is a more specific formula than simply CFG per day per DAI, we can, of course, make sure we use the correct one.

I will continue to update here, including getting a commitment from Centrifuge’s community to track and eventually deliver the significant rewards from providing liquidity to date.

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To conserve thread space for future readers, I will update here to provide a record of estimated rewards owed Maker as a liquidity provider. Request the .csv file to see the complete estimate. I will continue to update until we have confirmation from Centrifuge that the estimate is correct and a commitment to deliver rewards at a future date, and discussion on the Centrifuge forum can be found here.

Update Aug 4, 2021: With a small drawdown in the NS-DROP vault, today’s estimated CFG/wCFG liquidity rewards earned by Maker are 4950.944 CFG. With additional DROP ilks passing the executive today, Maker’s share of CFG rewards should grow significantly in coming weeks.

Rewards not collected today only:
-Using the conservative, all-time low price of CFG ($0.55), this is $2723 in rewards (equivalent to ~2.5% of today’s revenue).
-Using today’s market price as of writing ($0.97), this is $4802 in rewards (equivalent to ~4.5% of today’s revenue).

Rewards not collected in total (awaiting Centrifuge commitment to deliver to Maker):
-Using the conservative, all-time low price of CFG ($0.55), this is $289,313.999 in rewards.
-Using today’s market price as of writing ($0.97), this is $510,244.688 in rewards.




Update: Did the tally based upon DAI outstanding * daily CFG rewards. Rough estimate is that as of today, Maker has earned 521,000+ CFG tokens.

In today’s prices, this is roughly $463,000 of rewards. Using the conservative, all-time-low price of CFG/wCFG, this is roughly $286,000 of rewards. In terms of governance clout, that is halfway to earning Maker 1 seat on Centrifuge’s 7-seat council that governs it.

Needless to say, the cash value and governance value are both quite large. What we do with the rewards is not for me to say, but given how much liquidity we are about to deploy to the platform, I could see Maker controlling several seats on their council. Once the current executive passes, Maker will be entitled to a much larger share of rewards.

I have not yet heard a response from @spin here or at Centrifuge on that estimate, but am confident they will honor some approximation of it. After all, Maker would not have been purposefully excluded, and any business partner acting in good faith would treat all liquidity providers the same.

I will continue to keep the DAO posted as this proceeds. The additional revenue or governance influence would either one be a big asset to Maker.

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Just a few points here—I believe the Centrifuge Community should make All decisions regarding their token—not a co-founder, or any single human being. I would like the decentralized Governance ethos/process to stay intact.

IMO it’s very important for crypto communities to align themselves via a decentralized governance process—and as a community (Maker) who strives for DAO excellence—we need to let Governance Protocol token holders make these decisions—not co-founders, or individual community members. I like to think that every DeFi protocol has its own community speaking up (for the most part DAO members do)—even if token ownership is currently uneven.

Also, should every DeFi protocol that has used DAI for growth also award MakerDAO with protocol Tokens? Should the upcoming Paxos PSM reward MakerDAO with PAX tokens? Should the next LendCo also issue MakerDAO private equity? Are we going to spend tine and chase down every community and ask for retroactive rewards? See this Compound discussion with over 300+ replies in over 6 months

And last but not least, MakerDAO and Centrifuge are writing history by introducing RWAs via Decentralized Finance. Let’s stay focus and make this a relevant growth opportunity. Focus on the bigger prize Maker Community.

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As per suggestion, I put this before the Centrifuge community rather than assuming a centralized individual would be authorized to say yes or no.

Unfortunately, the early replies have not been encouraging, and @spin has stated that treating Maker’s DAI the same as all other DAI is “an unacceptable burden on Centrifuge.”

As a delegate, however, I have committed to several MKR holders already to making sure Maker receives fair treatment on this matter. I am confident a solution can be found that brings our protocols closer together, and does not leave Maker as the only party deemed not good enough to earn Centrifuge governance tokens.

@PaperImperium , you are pretending to represent the wish of MKR holder able to decide for the DAO. Most people will interpret that as you assuming you are representing the wish of MakerDAO.

I am, however, here on behalf of some very large MKR holders (more than enough to pass an executive) who feel Maker is being treated unfairly.

Would you be so kind as to start a Signal Request to validate that? And if doesn’t succeed like your previous drama-related signal requests, please stop making MakerDAO looks bad. MakerDAO is there to create the future of finance and not to entertain the DeFi space.

You are 100% right to open a discussion to ask for CFG rewards (also I think this is just wasting time). But you tend to generate more chaos than good. This is creating a toxic environment (filled with harassment, baseless accusations, constant misrepresentation of the truth,…).

If very large MKR holders are reaching to me saying that hunting for CFG rewards is a priority, let’s so be it. So far I’m hearing the opposite.

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I think let’s give their community some time to respond. I don’t think this is a dealbreaker by any stretch, but it’s important that Maker be treated as an equal to others.

But let’s just put a pin in this and give their community a couple weeks to weigh in. That seems like the fair thing to do.

I pleased that you will stop pushing this issue for a few weeks then. Let’s discuss again in September.

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