[DISCUSSION] Token Utility: Discounts and Feature economy

One thing that isn’t clear to me is how to / whether to implement a veGEAR model. It always appeared very restrictive to me and leads to certain levels of centralization through boosting protocols. Perhaps a certain amount of innovation is due here.


I’ll support this. But we have to remember now it s still a bear market. We can’t exclude harder time will come

Ah I see - so basically allow protocols to direct incentives to specific use cases of borrowed assets. They wouldn’t need to reward ppl as much b/c they are earning leveraged yield, wins all around. First impression is that this is pretty damn awesome, and yeah seems to achieve something like what tokemak wanted to do. It would require enabling volatile LP pairs on gearbox, which some have seemed to think isn’t worthwhile. I think it has a use - increase yield without having to LP to tighter price ranges, at the tradeoff of more long tail risk. Idk how popular it would be, but with incentives perhaps that becomes a valid use case.

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ve to me can mean a lot of things - fundamentally, it means lock tokens to have more power over emissions/profit distributions/voting. There are also ways to cater against boosting protocols. veALCX kinda does this via the mana system and not having boosts, but we’ll see if one gets built anyway. But I agree that the worst case outcome is a protocol decentralizes, just to have a cvx-style layer run on like a 2/3 multisig take all the gov power…

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Not sure about multig personally, we should think about this

I was thinking @stormg idea may be on the right track. The borrow limit of user is determined by the amount of gear staked by users.

However, we will not entirely gate-keep the protocol. For example, there is a “free” tier where users can borrow up to $X amount, whereas, users who stake gear can borrow up to $(y * X) amount (or any other tier models). The gear stake can follows the ve-model (although i personally dislike the model).

Additionally, I feel that by requiring users to lockup gear to increase borrow limit will reduce bad actors looking to exploit the protocol since they have a “stake” in the protocol now.

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The GEAR generated is what we will use to incentivise CAs, same thought there. Totally agree w the concept

That restricts growth. Why won’t they go ahead and use a gearbox knockoff instead of buying high amounts of GEAR? Shouldn’t hinder usage for token at all

Sorry but buying Gear in which way will restrict the growth? i don t get your poin man, but please kindly explain me your point :slight_smile:

  1. In fact this practice was always profitable for whales until gear reached $1. At least I think it’s cost effective to buy 5% of the total collateral value of gear tokens to get 5 times the principal leverage, i.e. I buy $0.05 of a gear, deposit 1u, and I get 5u of the generated revenue. And now it’s even only $0.014. This is good for the long term improvement of gear price. It does not become a hindrance. You may ask me, what if the price of gear reaches $0.50? Wouldn’t that be a very high threshold? I want to say, then we have become a legend.

  2. need to buy the gear collateral, so as to help maintain the stability of the price, that is, veGear (need a reasonable model, which will have to discuss, I see this part has been a few good ideas), or even the introduction of the concept of time, the longer the deposit time or LP time, the higher its reward multiplier, I remember alchemist doing this.

  3. Speaking of buyback and destruction, a portion of the agreement proceeds could be used periodically to buy back and destroy, or it could be linear and continuous, in the form of a stream. There could also be some proposals to destroy a portion of it on a regular basis.

  4. As you say, if they choose to use a Gearbox knockoff without having to buy a lot of token, it would indeed be more cost effective to stand to just dump the tokens staked out or just not want to suffer losses at all, but:
    (1) Not all projects are safe for people to deposit their money in, security issues cannot be ignored, many defi projects have The security risk of being stolen and the potential risk of rug. At least I think our GEAR is very trustworthy both technically and in terms of attitude towards security construction.
    (2) projects that don’t need to buy tokens at all to participate, their token prices will only keep falling because only the whales keep selling their stake earnings or get most of the tokens to eventually propose and vote on proposals that only benefit themselves, which again will make people lose confidence. Again, this will discourage people.
    (3)With this method, because it is a hard requirement, there is a high probability that our token value will increase, which keeps us from being like other imitations that do not need to buy tokens and will only go down, discouraging retail investors and those who come later. Because not only do we have a higher apy to entice people to deposit the stablecoin or ETH, there is also the expectation that the output GEAR value will eventually get to $1.

I hope it can be understood, my English level is limited :smiling_face_with_three_hearts:

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  1. Extremely growth restrictive, can’t restrict protocol access to increase token buy pressure. Goal isn’t to pump the token at the cost of the protocol

  2. This is possible to implement on LMs, ye. Who should buy though?

  3. We do not have a revenue stream that is strong enough for this at the moment. Even if we implement a positional fee and allocate 20% of all revenue to buy back, that’s only 120-140k$ worth of buyback. Impactless. Using that 120k$ for more DAO resources though will help grow more

  4. We have knock offs that are putting in effort to become competition, while point 1 is valid it doesn’t hold if a knockoff becomes a year plus old and becomes trusted. Again, read my point 1. Can’t sacrifice protocol for token


I chatted with Redacted about the future of the token. All preliminary, nothing much for them to do right now, but we had some good discussion points/brainstorming I want to share here:

  1. Supporting van0k’s idea: No one wants to pay lenders except the DAO itself. Conversely, if a DAO gets an aspect of their protocol incorporated into gearbox, then it should make that aspect more efficient. Thus, the there is an arb there at which the protocol can bribe more TVL into their pool, saving money + getting more users / etc.

  2. Redacted does a lot of liquid wrappers, like pirexCVX, etc. In theory this means you could use gearbox to earn leveraged bribes → great for making the bribe ecosystem more efficient. However, an oracle is needed here. Conversely, I wonder if it would be feasible to allow ppl to lock GEAR as cross-collateral for their locked positions. Liquidators recieve the locked tokens and at time of unlock the difference is covered with the locked GEAR? Alternatively, just give liquidators GEAR tokens, user gets their locked tokens back and may re-buy GEAR if desired with those when they unlock. NO oracle needed for the wrappers in this scenario.

  3. If you allow veGEAR bribes to exist, then the protocol could simply recycle profits into bribes for veGEAR holders, rather than directly sharing revenue. Thus you’re paying for a service (voting), rather than just sharing revenue. Somewhat similar, if you require 80/20 BPTs for veGEAR rather than straight GEAR, then ppl are providing liquidity and thus again providing a service, not just getting a dividend

  4. If the above bribe system exists, you can align incentives by dictating that each enabled strategy will recycle 50% of profits back into its own bribes. Thus regardless of who you vote for you get some share of bribes, BUT, there is a flywheel effect where the most profitable pools will continue to attract the most votes, without ppl needing to worry about the greater good vs their own good.

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I wanted to chime in here and say that while I’m totally not sure what “good tokenomics” even means, I do think that we should take a lot of time here to figure out what makes sense and we should basically go as slow as we need to here (whilst observing what other projects do, where they succeed and where they fail, etc). Basically, I agree with @RV_ivangbi, let’s not rush this, better to have no utility than badly designed ‘utility/tokenomics’ that we’re then stuck with.

I say this basically because my gut feeling is that venomics (in the style of curve) somehow feels wrong to me. I am not a fan. To me venomics has always felt like a really complex system that optimizes for the wrong things. e.g CRV tokens go to pools with low volume, various projects and whales play zero sum games with each other with bribing, blahblahblah. In a perfect world (to me), the token somehow facilitates user actions such that those providing the most value to the protocol (which in the LP case, means providing liquidity for the most in-demand assets) receive the most rewards, whether thats in organic or token yields.

I know venomics is trendy rn and is one of the models that at least seems to not lead to awful outcomes, but I just want to give my 2 cents and say that I think we should hold out for something better. I don’t quite know what it is yet though, still pondering.

As I see it there are a few broad models that we could investigate here (or alternatively a combination of these)

  1. Aave style safety model (AAVE token acts as backstop)
  2. Curve style Venomics
  3. Maker style revenue share via buy back and burn, but OTOH tokens are minted to cover bad debt
  4. Simple revenue share (Buy Back and build, buy back and burn, fee distribution)
  5. Alpha Homora Style, staked tokens unlock higher leverage
  6. Not sure if this exists elsewhere, and I think its a dumb idea but for completeness I will say it, maybe staked tokens can unlock additional pools/strategies/bots?

am I missing any existing or potential token models here?

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I addressed a lot of these concerns with my post above yours and I still lean towards continued evolution of ve being a good thing, but I agree they are valid and gearbox doesn’t necessarily need to be an innovator. Gauges I think are a very powerful tool of defi that basically lubricates the whole system, and when done exclusively with revenue is a sustainable and impactful growth mechanism. But yes lots of ways it can just become a crappy whale game.

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@ov3rkoalafied @mugglesect
For the 2.1 release, we’ll introduce a new Credit Manager(s) where probably all the degen stuff will go (i.e., high risk, low liq, high APY). These Credit Managers will have lower borrowing limits and also a limit imposed on the number of CAs that can hold a particular asset. I.e., think in a ballpark of $100k max borrow and the number of accounts that can hold a token is max exposure to token (determined by Risk DAO) divided by max borrowing limit. The “tickets” that allow to hold an asset on your account would likely be NFTs, so it seems that economy around them could be a nice additional avenue of utility.


Yesss, exactly what I meant. This will be boss. Let’s offer this only people who stake gear. Supply is limited anyway so would work

Feels the arguments against a ve system appears rather moot. And have explained in various ways it can be designed in a benefitial way, so wont go in the details there rather focus on how the insights can be interpreted for needs of Gear itself.

Mostly aligned with van0ks idea & ov3rkoalafied’s additions to that. Gauges gives a lot of operating efficiencies on many ends + flexibility on further usecases.

  • To underline: I think considering a vote market for incentivising borrowing, and making that on a per strategy basis, makes a lot of sense, given that would be incentivising direct usage. And incentive would go to an actual ninja and not an idle whale. While bribers would be our already existing partners for those said strategies. Win win in my book.
  • Not mentioned above, I quite liked how AURA incentivises (or used to?) relocking. Maybe a similar incentive can be formulated for repayments within the veGEAR. Ninjas to earn x% veGEAR if they repay their accounts fast/lumpsum(however behavior is desired to release some stress from lenders.)
  • Advise strongly against using veGEAR as collateral, not only introduces a lot of risk to the system also defeats the purpose of the lock in the first place. Putting a dent in the value proposal of veToken.

Very good discussion, was refreshing to read & thanks for everyone bringing valuable opinions on the table.

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Guess I will be outvoted here but I’ll just publicly state for anyone who’s delegated coinz to me that I will be voting against any proposal for venomics unless otherwise convinced in the meantime. I think we can do better and there’s no rush.

On board with Van0k’s suggestion of GEAR being used to allocate amounts of particular assets you can hold in a CA if those assets have exogenous max exposure risk limits tho.

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you keep calling things venomics but that’s really broad, can you clarify where your specific gripes are? Is it gauges? locking requirements? Something else?

@Van0k one oddity of gauging CA accounts:

Right now, yield rates > lend rates. Lenders then get extra GEAR rewards to increase their APR. Ie, could have 3% lend rate on ETH + 3% GEAR rewards, 6% stETH yield, leverage users get 3% APR x leverage, lenders get 6% APR.

If you LM CA accounts, you would potentially end up with a scenario where the base yield strategy is generally negative, but then LM takes it over the top. So for example 7% lend rate on ETH, 6% stETH yield, 4% base yield in LDO rewards. At 5x leverage you would be recieveing -5% APR on ETH but 20% APR on lido for 15% total. Not sure if this is the best UX and it feels like it’s a very likely outcome?