The idea behind this post is to talk about removing the single-sided staking rewards for agEUR.
Not contributing to agEUR expansion
A few community members have expressed the fact that agEUR single-side staking, though helpful to grow TVL at the beginning, is not pushing the expansion of agEUR outside Angle’s protocol. Indeed, this liquidity would be more useful if it were put at use on external liquidity pools or money markets.
Better external opportunities
Now that agEUR is bridged across many ecosystems, with Avalanche added recently, new opportunities to grow and strengthen the agEUR are arising.
More efficient to grow agEUR
Core team members believe that continuing to incentivize agEUR single-sided staking on Angle is sub-optimal for the growth of agEUR, and propose to stop it. In this case, the goal would be to redistribute incentives in pools involving agEUR, on mainnet or other networks, in order to grow its liquidity and market share.
Overall, growing agEUR use cases and liquidity remains the main job of the protocol right now, and this proposal would move in this direction. After some discussions, a Snapshot will be held to vote on this proposal
I support it. There may be a shock in the agEUR supply once this is removed but I expect that people will see the increased APRs in other places/pools and stake their existing agEUR
If we were to support lending, I’d typically go with Euler which I think is safer than Rari. Problem is that if you incentivize borrowing or lending on Rari or Euler: the same agEUR could be incentivized twice.
A lent agEUR could be used to borrow against and hence to stake somewhere else. Similarly if we make a staking contract for a debt token, people could still provide liquidity somewhere else with the borrowed agEUR and would be receiving twice as much rewards.
But if we turn off the option to use agEUR as collateral, doesn’t it solve double rewards? Just put incentivizes for lending or borrowing and set collateral factor of agEUR to 0%
Good idea! The only drawback here is that we’d need to re-create our own market from scratch with liquidity in it. I am not saying we should not do it, but it’d take significant time and efforts
Hi, while I understand the above argument, I believe that stopping agEUR single-sided staking entirely is a mistake in that it penalizes small investors in the protocol (like me). Due to the high gas costs of Ethereum, investing in single-sided staking agEUR is the cheapest way to introduce liquidity into the protocol (through Ethereum mainet) for small investors. I believe that the protocol also needs small investors.
Hello, I would like to elaborate a little more on this subject. The single-sided staking agEUR allows small investors to deliver resources to the protocol, useful for their investment strategies and consequently useful for the development of their treasury. At the same time, these small investors pay very high percentages of their investments in ETH gas costs, having as a supposed guarantee of return the expected rewards. Furthermore, if this proposal goes ahead, the implicit need to change the respective investment strategies of small investors implies the payment of more ETH gas, which is prohibitive for smaller investment amounts. I believe that small investors are an important asset for the protocol as they contribute to the dispersion of capital invested in the protocol, avoiding the concentration of TVL on a reduced set of whales that can, at any time, transfer their capital to protocols considered more profitable (notwithstanding the introduction of veANGLE). For all the reasons mentioned, I am not in favor of the complete elimination of single-sided staking agEUR rewards (it will always be preferable to consider a reduction). Finally, I encourage the protocol’s governance to develop or integrate mechanisms that allow the participation of small investors in the development of the protocol’s treasury, such as: babylon.finance, among others.
Hey @pedrolopes.vng, you make totally valid points! I think it’s important to clarify a few things thoguh:
Funds on the agEUR single-side staking contract will have to be migrated whether it is incentivized in the future or not, requiring gas costs for stakers either way.
The rewards distributed to specific pools should be in no way expected as guaranteed. They are explicitly subject to change in weekly Snapshot votes. This will change next week after the release of the dao app and the ability to get veANGLE.
Unfortunately, building on Ethereum is synonym with high gas fees, for both users and protocols. I think everyone can agree that this is a big drawback for using any protocol on the network, and this is why agEUR was quickly bridged to other networks (see here). A reason for stopping agEUR single-sided is also to redistribute those incentives to active agEUR on these cheaper networks, allowing small investors to benefit from those rewards at a smaller cost.
I think you’re right in saying that thinking about the small investor is important, and we are always trying to keep this in mind! Hope this helps.
@pedrolopes.vng I’d be interested to discuss Babylon with you. I made a proposal for a euro stable related garden as part of their seed initiative. The proposal wasn’t accepted and that’s partly my fault for not following up enough due to bandwidth prioritisation on another project. It’s not too late though to create a garden anyway, outside of the seed initiative so maybe we can swap notes on that.
Ideas of alternatives to agEUR single-sided staking:
If agEUR has a Tokamak reactor, we could incentivize tagEUR
Incentivizing lending on places where agEUR has a collateral factor of 0 meaning it cannot be used to do loops of lending, borrowing and lending to artificially accrue the lent agEUR balance
Rari Animal Kingdom pool could be a good place
For your point 2, just so I understand clearly (sorry, I’ve still one foot in TradFI )
Person A deposits agEUR in the Fuse pool
Person A receives an APY paid in Angle (incentivised)
Person A can’t borrow agEUR from that pool (i.e. to prevent the loop)
A separate Person B could however borrow the agEUR deposited by person A.
Hey! You cannot incentivize borrowing on Rari unfortunately, since it’s a Compound fork, people do not receive any debt token for borrowing there.
But there’s some problem with incentivizing borrowing, people could do loops: like lend, borrow, lend, borrow, to increase their borrow balance, then stake and artificially get a high APY
I hope the agreement does not damage the people who have chosen to trust, which could seriously affect the credibility of the agreement.
For on this cancellation, I hope the protocol can provide the same amount of compensation as the gas of staking + unstaking.
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