[Consultation] Setting a conversion rate for SPIN to GYFI

Gyroscope Improvement Proposals Consultations
1

Background/motivation

The SPIN points system has proven to be a very effective way to drive users to the system, with 54% of GYD holders and 21% of LPs choosing to opt for SPIN rather than for liquid rewards.

However, it could be clearer to the Community if and how SPIN will convert to Gyroscope’s GYFI token. Knowing this would make it easier for community members to compute:

  • Their eventual GYFI stake in the project community members if SPIN converts to GYFI
  • For different FDV levels at a possible future token launch, the APR that the SPIN would imply.

This decision should be made exclusively by the Gyroscope Protocol’s governance community.

Background information on GYFI

Gyroscope’s governance token is called GYFI. The initial total supply of GYFI is set at 13.7m tokens. Additional distribution properties of the token were ratified here.

Summary of proposal

This proposal is to fix the conversion rate of SPIN to GYFI at 1,065 SPIN/GYFI.

What that means in GYFI

At a conversion rate of 1065 SPIN/GYFI, the % of the total GYFI supply that will go to SPIN holders will depend on the final amount of SPIN that is distributed.

See below for what that means in terms of the number of GYFI and the % of GYFI supply.

SPIN GYFI amount % of GYFI supply
267,000,000 250,516 1.83%
270,000,000 253,330 1.85%
350,000,000 328,391 2.40%
500,000,000 469,131 3.42%

What that means in APRs

Realized APRs will depend on the market valuation of GYFI after the liquid market for GYFI exists (which would require a separate decision by governance). The following table illustrates the APRs that would be implied by a range of possible network valuations for a user at SPIN’s Tier 1 boost rate.

GYFI FDV ($) Implied APR of 10x SPIN rate
$30m 18%
$50m 30%
$75m 45.21%
$100m 60%
$200m 120%

A user who has reached higher Tier boost rates will earn at accordingly higher rates (e.g., 1.5x the rate for Tier 5).

Note: this proposal does not cover the conditions for liquid distribution of GYFI. The Gyroscope DAO is envisioned to consider the timings and conditions of liquid distributions in subsequent proposals. For example, governance may decide to distribute non-transferable GYFI tokens or make the distribution subject to additional restrictions such as lockups or release schedules. Any distribution would take place at a time determined by governance.

Comparable yield rates

The conversion rate suggested in this proposal comes after a study of comparable liquid yield rates required to incentivize capital for new stablecoins in DeFi. The following table summarizes some comparable yield rates. Note that these comparison yield rates are in liquid token rewards whereas SPIN rewards are not liquid.

Incentivized yield source Yield rate
crvUSD/USDC Curve pool, Convex boost 7%
crvUSD/GHO Curve pool, Convex boost 11%
crvUSD/DOLA Curve pool, Convex boost 12%
fxUSD/USDC Curve pool, Convex boost 16%
fxUSD/DOLA Curve pool, Convex boost 19%
USDA/USDC Velodrome/Aerodrome 15%
DOLA/USDC Balancer pool, Aura boost 13%

As specified in the Governance Process docs, since this proposal concerns an off-chain topic, the next step following this Consultation would be to create a [GIP] on Snapshot.

If the proposal passes on Snapshot, it is proposed that the team maintaining the frontend reflect the decision on the SPIN/GYFI conversion rate and make it easy for users to understand what it means for them.

Risk assessment

To the best of the proposer’s knowledge, no specific risks are associated with this change.

9 Likes
2

This allocation don’t seem fair and very meaningful to me to be honest. These are people who provided LP for more than 7 months now. They are actual users, and one of the most important participants of the protocol.

Currently LPs have the least amount of voting power at 1110.59 total across all LP vaults. It’s even less than any other single vault which is currently active (even if we would give them all GYFI vault voting power). So unfortunately LPs won’t really have much power in the actual vote.

3.42% max allocation seems low, especially considering that 65% of the total supply is allocated to the community and also duration of this campaign is way longer than some other campaigns (we started on 19th of March 2024).

We’ve seen other protocols with way lower community allocation distributing 10%+ of the total supply, and their campaigns took less than 3 months. We’ve got 65% to distribute to community, we have plenty to distribute later on as well…

We are speculating here about FDV, and the implied APR. I think that anything $50m+ is very optimistic given the current metrics.

I would suggest to allocate 10% of the total supply, as was initially hinted in the tweet x.com

EDIT: To make this clear, this 10% would be pro rata distributed to SPIN holders.

We’ve already brough this up in the delegates chat before, and such low numbers were never suggested by any delegate, so what is the reason for such low allocation suggested by the team?

Thanks, I look forward to discussing this further.

13 Likes
3

Fully agree, it’s extremely greedy for such a long-term event. Giving less than 10% is just inappropriate

5 Likes
4

Totally agree with PanCake. That would be a huge disappointment. Never give up on your first supporters. Since we have a discussion here - I would support mr PanCake on his take.

3 Likes
5

I’d like to see a better SPIN to GYFI conversion for the first campaign (accumulated SPIN until now) and the suggested SPIN to GYFI conversion for the continuing program

65% is allocated to the community, wouldn’t be fair to allocate just 2% GYFI to the already distributed SPINs for a 7 month period with several (unknown) risk components to early users.

Agreeing with Pancake on this, albeit 10% might be too much. Halving the SPIN/GYFI ratio would honestly already be fair

6 Likes
6

It is unfair, this proposal means more money more power for the whales. can think of better methods and proportions

2 Likes
7

If you’re truly considering fairness and keeping early, genuine users satisfied, then the rewards for early supporters should be calculated separately, entirely independent of the spin.

Someone who’s been with the project from the start is absolutely not the same as someone who is just wealthy.

The latter only believes in money, but an early user believed in the project itself.

2 Likes
8

Fully agree with PanCake.
Some Liquidity Providers have given up their potential earnings for more spins for quite a long time and 3.42% seems very low and feels almost disrespectful.

3 Likes
9

Agree with your take here. 10% is in line with the initial airdrop distribution for most other projects. And as you pointed out, those projects tend to have a much shorter duration for the initial pre-TGE farming period than the SPIN campaign has.

Also to note, users who participate in this initial pre-TGE period take on the most risk given the uncertainty of the protocol in it’s early days compared to more established blue chip protocols. Which is why the initial distribution should be generous enough to help offset that risk.

Allocating 10% still leaves a substantial runway of 55% of the earmarked 65% GYFI to the community for post-TGE campaigns, and for GFF (Gyroscope Founding Frog) members.

Lastly, I agree that the most fair distribution method is pro-rata (linear), which also prevents sybil abuse.

1 Like
10

Looks fair enough.
I want to mention that setting a maximum allocation seems essential to prevent an uneven distribution of governance tokens to whales.

Please consider this in the distribution plan.

1 Like
11

I tend to agree with the author’s points. LPs play a crucial role in DeFi protocols by providing liquidity, and they should be incentivized accordingly. While community engagement is important, LPs directly contribute to the functionality of the protocol. A higher allocation and voting power for LPs could be a fairer approach.
finally I agree with PanCake user

2 Likes
12

Agree with PanCake.

I noticed there’s a lot of discussion around how much GYFI NFT holders should get versus Spin holders. Perhaps there should be a holistic plan on how to distribute the initial amount of GYFI so that everyone can have the full picture? Discussions can be more constructive that way as well.

Imho, the LPs are bringing the most value to the project right now and they also bear the most risk. Hence they should be compensated equitably. 10% seems fair.

1 Like
13

This proposal is well-structured, but I can’t fully support it at this stage!
I believe it’s essential to consider and accept all components of the governance system as a cohesive whole, rather than in separate parts.
The idea of addressing other elements (such as LPs, NFT holders etc) later on doesn’t provide enough assurance as there’s no guarantee the future direction will align with my current expectations.

I suggest a more complete proposal that covers all governance elements. For example, it’s still unclear to me whether NFTs are excluded due to their impact on spins or if they will have their own share? among other questions

5 Likes
14

Gm @ftl-labs, thanks for the proactive approach toward the SPIN <> GYFI conversion.

I believe taking the APR-based approach and working from there is a fair and reasonable strategy.

I see two limitations in the current proposal that I believe can quickly be addressed.

  1. The current conversation rate utilizes implied APR using the current supply of GYD and the current % of locks. I believe we should push to grow the total GYD and percentage of GYD earning SPIN.

As such, I propose slightly increasing the GYFI distributed by ±25%, with the goal of growing the SPIN-earning GYD supply by the same percentage by the end of the initial SPIN program. This setup would also reward those who stacked SPIN early on, as they will proportionally have earned more SPIN per GYD.

  1. I believe it’s crucial current GYD holders have some perspective on what to do with their GYD after the initial SPIN campaign. I suggest we lock in one or multiple GYFI reward programs or follow-up programs to be approved ahead of the end of SPIN and initial distribution of GYFI.

Curios what the topic KPIs for Gyroscope post-GYFI launch are? As those KPIs should be the foundation for any follow-up programs!

15

Hi, thanks for the proposal. I would consider the allocation of 10% of the $GYFI supply with a vesting period of 12 months. In current market conditions, and seeing Gyroscope TVL stable for months , i would’nt be very optimistic for FDV at the beginning… looking forward to see Gyroscope growing

16

Before creating a token we should consider what do we want to accomplish. We want:
i) to retain current liquidity;
ii) to draw attention to the project;
iii) to attract fresh liquidity.

I suggest starting with very low FDV ($10-20m) + very high rewards for LPs (15-20%) + very high rewards for new LPs for a next year (30-40%).
Because of low FDV especially comparing to other projects and VCs round Gyroscope will be considered undervalued. Therefore LPs will see this as an opportunity as they will be able to farm a fair chunk of the project’s governance token. I’d assume higher than usual % of them would consider holding instead of selling or continue providing liquidity (depends on how successful the team would be with finding PMF).
Gyroscope’s features, pros and cons will be discussed and spread as well driving extra recognition and awareness.

And lastly about some ways to retain fresh and old liquidity.
-staking GYFI to boost your SPIN rate (i.e. GYFI rate);
-70% penalty for claiming the airdrop right now instead of staking for N months, where max N = 12;
-LPs may unlock the airdrop faster by providing extra liquidity for certain period of time (e.g. user that has 1k liquidity provides 1k liquidity more to unlock airdrop 2x faster)
-the longer your liquidity stays untouched the higher the boost.

Obviously, the team will not consider this proposal as they would prefer to store that GYFI for the future that probably will never come or come too late when liquidity or attention to the project dries up.

1 Like
17

Some good points there. I like your thinking, and it makes sense.

I just can’t agree with the rewards for LPs for next year/future. I don’t like that we would give more rewards to LPs who joined later, rather than LPs who were providing liquidity since the beginning. That doesn’t seem fair to me to be honest. But again, this would go through governance, and if that’s what governance wants, then that would happen.

18

I completely agree with you. Having a comprehensive plan that covers all possible allocations would be ideal, allowing every member with potential eligibility to join in, discuss their own interests, and weigh the trade-offs. This approach not only helps everyone understand their own rights more clearly but also lets us assess the value of each part of governance more thoroughly.

2 Likes
19

lets do this . am totaly agree with thw whole conversation

20

I think this approach effectively rewards people who have backed their commitment with their money, while also ensuring that shares are not diluted in a way that could lead to dumping on the protocol or significantly reduce the voting power of the established community.