A proposal for Performance Mining V2

#1

I’ve been thinking about how we can more closely align DHT with the platform itself. Taking inspiration from platforms like Curve and mStable that have a boost for stakers, I think dHEDGE could implement something similar.

While it would be of interest to more closely align DHT with users of the platform we don’t want to make it too cumbersome for users either.

After running the numbers, it turns out that ~80% of users earn 100 DHT or less per month from Performance Mining while 20% of users (whales) earn ~90% of the monthly DHT rewards.

With this in mind, I suggest the following changes to Performance Mining:

  • Earn up to 100 DHT per month with no vDHT staking requirement
  • For rewards over 100 DHT per month you need to have staked DHT according this formula: Max monthly rewards = vDHT/12
  • Remove vesting. Currently, DHT performance rewards are paid out with a 3 month lag. The benefit of paying out DHT with a lag is unclear

In reality rewards would be based on daily snapshots of invested capital in eligible pools. Monthly payments are done to lower the operational burden of payouts.

The above suggestion would for the vast majority of users mean no change, while whales would need to stake DHT. Since whales earn most of the rewards, this would mean that unless they staked DHT, the yield % would go up as they wouldn’t be eligible for rewards, potentially creating a positive feedback loop.

After feedback on this suggestion, I’d be keen to put this up for a snapshot vote.

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#2

This is certainly up for discussion of course, but it should be combined with the other thread I think into a proposal to vote on: Upcoming Quarterly Rebalancing and Distribution

Looking at the original performance mining setup (Performance Mining - dHEDGE Docs), it is a way to reward good performing pools, which is great if a pool starts up, but not when it has also attracted a big following. That is what the fees are for of course.

As the platform I think is starting to offer a good proposition to managers and investors, I think that the above proposition is a good thing. Certainly with the new upcoming platform. However, I would just pay them out in dtop, if possible, based on the uber pool, as this one also grows if the performance is good and the project advances. It also has no further impact on dht then.

“Boosting” the payouts based on project longterm investment is a great way to get stable pools with managers that have a longterm interest in growing their pool and sustaining it for a longterm. So, I support the fact by tying it to vdht. People who invest in this pool would also be more sure that the pool is maintained by a person with a longterm investment in dhedge. So, I would even mark a pool with a special badge that show people that the managers has invested a certain level into the dhedge project themselves.

So,

  1. agree with linking it to vdht to limit, but also boost performance mining
  2. I would assign a badge to poolmanagers and their associated pools that shows that they have vdht invested and so, show longterm involvement. I think this only benefits everyone. I would also with levels of investment, but entry shouldn’t be too big of course.
  3. Maybe payout in dtop from uberpool, instead of dht? It’s all based on project-success/performance. Limits should be clear and related to performance of dhedge so we don’t drain the pool. uber pool receives 10% of performance. So, a good performing manager with a vested interest may keep a little bit more maybe?

Personally I think that in a decentralized setup point 2 (trust and longterm management) shouldn’t be overlooked. Supporting a good performing manager shouldn’t be overlooked of course. That’s what it’s all about after all!

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#3

I created the following feature-request to add a badge for the manager’s vdht-holding and this way show their longterm involvement with the project: https://dhedge.canny.io/feature-requests/p/badge-that-indicates-level-of-vdht-that-manager-owns-and-associated-pools

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#4

The initial incentivization has been quite good imo. The distribution is mildly concerning, but also completely expected. Fighting the pareto distribution isn’t easy, and might even be counter productive. I’ll have to think through this more thoroughly but here are a few quick thoughts:

  1. Removing the vesting period should help smaller participants because they are inherently more sensitive to time/lockup

  2. What if performance mining paid directly into the pool rather than being claimed by individual accounts. This achieves several ux improvements; passive compounding; less gas; familiar yield farming style UI ie the perfomance mining apy is displayed next to the pools performance like CRV boost. If v2 can support any erc20 then payouts can enter the pool as DHT and hopefully stay there as DHT. Perhaps this puts too much power in the hands of the pool manager?

  3. I concur with Runex above about assigning badges or finding some way to display loyalty/ encourage reflexivity. Maybe even increase the gamification aspect in the style of Curve, although this definitely rewards big players more.

#5

I agree with aligning DHT rewards to long term supporters of the protocol, ''boosting" benefits to DHT stakers is great for continued growth.

A display to indicate which managers have staked DHT is cool idea, knowing which managers align closely with long term vision is great data for users to have.

On the point above around paying performance mining DHT directly into the pool, it is an interesting concept. It limits the ability of individual users flexibility to stake DHT or even add to their stake, so IMO doesn’t work.

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#6

Really interesting point about having DHT accrue in the pool instead for the investors directly. It is still going to the investors and as you say in V2 the pools should be able to contain DHT. What do you think would be the pro/cons of this approach?

#7

After thinking it through, it’s probably a dead end. Or at least a feature that I would be unlikely to use myself, as I would rather have my DHT staked than pooled.

But just as a thought experiment, probably it would look something like this. Pool managers are given the option of enabling delegated performance mining. Once switched on DHT rewards would accrue directly into the pool. Probably the claim function is just delegated to the pool manager. The benefit for users is being able to just watch their holdings grow without needing to do anything or participate in staking, governance, lockup, etc.

My thinking is that there will always be some users who don’t care at all about the platform and don’t want to do or learn anything. The best way to handle these people is to give them a lazy option that delegates their power to someone more informed(while still helping them profit). In some ways this is really at the core of what Dhedge offers as an investment platform. Where this idea maybe gets interesting again, is if you allow the pool manager to stake the pool DHT as a delegated voter, and circle the vDHT back into the pool.

Could a bad actor or malicious manager abuse that power? My assumption is that pool managers are already incentivized to align with the platform and stake.

The cons are pretty straightforward, it’s a distraction when really we just want users to stake. It introduces complexity to the UI and to the platform. Delegated staking assumes a DHT/vDHT market.

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#8

One more addition:

Perhaps vDHT stake inside of a pool could act something like Curve’s Gauge. Pool managers use their staked DHT to gain a performance mining boost. Either boosting by vDHT as a percentage of pool or linearly depending on who we most want to incentivize.

#9

I’m not sure here. Why would I want to delegate my vdht as a simple pool-investor? I would prefer that the vdht staked here is individual and shows the longterm-engagement of that user with the platform.

If you mean that vdht can be delegated to a poolmanager as a kind of voting how much trust vdht-holder have in a pool-manager, that’s something different. Of course, what does that add? It’s like a network of trust in a decentralized environment and somewhere I have to attach myself to that network. It could have some value for some, but I would rather say that actions speak louder than words or trust by reference. Not saying that delegation is bad on its own, but the impact should really be well-defined. Like as a trustbadge, assisting the pool-manager to get a higher mining boost. I would limit it really to that, but maybe that’s what you meant?

Abus wouldn’t really be possible I suppose as someone needs to stake anyway and the boost-function is limited somewhere anyway. The manager could abuse your trust of course, but I suppose that nobody would vote for a manager with their vdht if their initial actions proved otherwise. Whatever is decided, the uberpool shouldn’t be drained of course, but assists to incentivize good performing managers over a longer term. The better they perform in the longterm, the better for the platform. So, a boost could be earned based on performance over the last 2 months and will be applied than also to the next 2 months (sliding window). Anyway, everyone should be able to understand it easily :).

Maybe the vdht-holder could delegate some of their vdht to promising startup-managers each x period. I think that that would be the more intruiging option. However, it should be clear then from data, how good a new manager is performing. Initially the performance fees are maybe lower and this could attract possible new talent this way.

Just ideas here…

#10

I think where we’re thinking in different directions here, is that you’re coming from the perspective of an active user/investor. Someone who cares about voting and reputation.

My thinking is more towards the retail style investors that don’t care in the slightest about DHT, might not even know what it is, and are only loyal to profits. They only want to see number go up. By rewarding them in the pool, they see exactly that, just number go up denominated in dollars. The pool manager makes the decision of when to claim, and whether to hold, stake, or sell. The user still owns the capital they just don’t need to manage it.

Which is largely how I see dHedge operating under greater adoption. We’re already popular with lots of good pool managers. What we need is users that want to put in capital because they know others can manage it better than they can. This is hard to find in a bull market, because everyone looks smart when all the assets are rising. Who is going to voluntarily cede management of their funds to a pool that doesn’t beat the market? Lets be real, even the best managers aren’t going to beat a bull market consistently. Not while maintaining responsible allocations and taking profits. Good managers are made apparent after a crash. And this is when we have an opportunity to reach out to the retail players who got rekt on dog tokens and shitcoins. Put your money with a talented manager and you will never go broke. With performance mining, number goes up even when the market goes sideways.

But as I said I’m not entirely sold on this, it’s just a thought experiment. For myself and most of the people already here it wouldn’t be interesting and might even be problematic, because if you’re already here then you probably aren’t the type looking for zero effort profits. You’re studying this space, and seeing with a long time horizon. I’m excitedly checking in all the time to see my rewards, and compound them. I don’t need a manager, I am a manager.

So what is better for growth? An elaborate technical platform that assumes knowledgeable participants (manager-centric). Or maybe all technical matters go to the managers and users just see performance cards (Tinder for funds)

#11

All of the above suggestions have a place. I agree with Eli that users who invest can be classified as those who understand how everything works and those who want to invest quickly and without much fuss. The first group can use all the functionality and features of the platform, which increases the chances of earning more. And the second group needs a simple, intuitive tool for hedging risks and capital growth. Traditionally, banks work with the clients of the second group with the help of Wealth Managers. In our case, this function fulfills primitively by DTOP.
We should not forget that one of the problems is the outflow of capital from the Managers. Perhaps we should consider an option where performance mining will be tied to a timeframe of funds lock that an investor has invested. The platform will guarantee him APY for that timeframe in DHT. In the event of termination, we can use penalties as well. With this option, DTOP will have more demand, and Managers will try to get into it.

#12

This is a good point, probably better to give the investors the flexibility to do what they like with the DHT, keeping, staking, selling etc rather than the pool manager.

#13

I think it might hard to let pool managers stake, because those tokens will be locked up, and we can only have liquid assets in a pool, otherwise investors can’t exit with their fair share.

#14

This needs to be wrapped up in a proposal. Else it was all for nothing :). I’ll see if I can spare some time on this somewhere, but feel free to chip in.

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#15

The initial post could probably be copy pasted right in, as it appears to have broad support and is a simple yes/no vote. Everything after that is less actionable.

I would move it to snapshot myself, but I feel a bit awkward owning it in that way because I’m only contributing distractions :rofl:

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#16

@phenrikand Ok, can this posted as a proposal then please? I would make the denominator an option in the proposal maybe. It’s not that I don’t agree with the /12, but a year of multi-year lockup is maybe long for people who start and a smaller denominator might provide more initial incentive. I’m not completely sure as the goal is also to align with the project and the dht-token that backs it. So, 12 would be ideal, but maybe /6 is a good start? vdht decreases by time anyway.

So, I would make the denominator maybe an option:

  1. /12
  2. /9
  3. /6
  4. Do no agree with proposal

Else, just post the agree/do not agree option and we’ll see how it goes. I think it would be best to have this before v2 goes live and I see the devs like the idea of the badges representing the vdht held by the pool managers, so it would all align.

Thanks,

Michel

#17

Yes happy to move to a snapshot on this. But just to clarify, the original post above suggest to remove vesting. The 12 in the denominator is just a factor for vDHT, so nothing to do with forcing investors to lockup for a certain time, only that they need a certain amount of vDHT to claim more than 100 DHT per month.

#18
  • I think removing the vesting is supported in this thread as the vdht-involvement replaces the vesting in another way.
  • I’m aware of the denominator. I would just suggest to give some options as a denominator of 12 may be large for pool-manager that start and only have a small pool. Of course, this is about an incentive/bonus-system, so it shouldn’t be too bad. I was just wondering if lowering it a bit, may create more involvement/vdht-backing than setting it to 12. Maybe if you set it to 6, there will be more vdht in the end, than 12, as it will be payed back sooner, which makes it more accessible for small pools too. It’s difficult to know now of course, but I think it’s better to give this option to stakeholders as a way to manage the bonus-involvement(/stake) requirement for the >100 dht “bonus” rewards.This can always be reevaluated in the future of course, depending on how it goes.
#19

Yes can make it a variable for the snapshot. Note that it would be the Investor that gets the perf mining rewards that need to have vDHT (not related to pool managers or size of pool)

#20

Yes,

sorry that’s true. However, my comment is also applicable to the investors of course. It’s weighing investor involvement into the project versus bonus rewards for investing. Setting it initially too high might be not correct, but it could, later on, be increased of course, if more trust has been established into Dhedge.

Thanks