[GIP-31/2] GEAR Liquidity Raise and Enabling of Token Transferability

Note: only change between this official proposal and the current draft with the discussion is clarification in a few places that still incorrectly labeled wETH as the bidding token (all gnosis auction sales will be done in USDC).

In response to: [OLD] GEAR Liquidity Raise and Token Transferability - #105 by Ceazor

This just encourages merch farmers that need to be offset by buyers that are hesitant bc they don’t know the value statement if the token. I think the vast majority of current farmers are ppl that believe in the system, or at least believe in the success. When the token is tradable, the only consideration for farmdumping is are the contracts solid, and is can the LP take the pressure.

Others have expressed that they don’t really want to deposit with uncertain reward value or even ability to sell. hard to say who is right on this one. If we don’t unlock, we probably lose some TVL. If we do unlock, some TVL probably stays in and stays mercenary. Given the LM program is short and not that many tokens, I don’t see it as a huge factor in the decision.

Obv, ppl want their apy, and they don’t want to be dragged along for long, and hype is a fire that burns fast. But if the LP can be quickly followed by at least staking for the share of fees that were for referrals, or some portion of that. People will have more metrics to consider risk of holding.

Everything is relative. Having no utility probably results in a lower token price than not having utility off the bad. I guess I’m not convinced that a higher short term price is worth it for potentially sharing paltry revenue - which comes with uncertain regulatory territory, risk of eroding runway, and dev resources. I also don’t understand why the market is so allergic to a simple metric of how much revenue the protocol earns, even if it does just sit in the treasury.

veTKNs are not a fool proof mechanic that will solve it. And veNFT are clearly superior. But these need to be considered carefully. Staking is almost a no brainer for this intitial phase assuming it’s not fed with inflation.

IMO veNFT / veTKNs are simply enhancers on the revenue share system. Without revenue or emissions (the latter gearbox does not have nor do we really need to pay ppl to hold the token with more tokens), ve doesn’t really do anything. If it was decided to share a tiny amount of revenue, then ve could be on the table for HOW to share that revenue.

Gear could also be used as a fee to access leverage. Paid as rewards to the supplies. Thus reducing inflation further.

This is kinda an interesting train of thought. I’m not sure if it’s better though. Borrowers already pay lenders directly - so what benefit does having two payment paths have? Is the intent that those with higher leverage should pay exponentially more vs someone with 2x leverage (rather than linear?). Ie, this feels similar to ve where it is more of moving things around rather than additive - but if we want to move things around to specific places and don’t like where they are right now we could certainly do that. THAT logic is I think where any good utility ideas would come from, if any (users of gearbox are doing THIS, and we really really want them to do THAT. Can we add GEAR token utility that guides them a bit more towards THAT, assuming THAT improves the protocol for as many / all parties as possible.)

Those are just some ideas off the top of my head there. But i would rather, personally, continue to hodl without any candles red or green while a clear understanding of the GEAR utility I’d developed and decided on.
What’s the concern with having liquidity if you plan to hold? Is it a concern about DAO using resources on this (selling tokens, holding POL), a concern of being pressured to sell, something else?

In general it’s about 1 year since v1 launch, there still haven’t been any serious efforts to add utility to GEAR (no in depth proposals, just ideas on discord). Are we willing to wait 1-2 years more? or does this vote look very similar 1-2 years from now, except gearbox has more PMF/revenue? I’ve yet to see a use case that I’m like “YES”, and therefore I’m yet to be convinced GEAR needs to be anything more than a governance token (i’m very wary of forced utility), with holders to some degree hoping that the industry matures to a point where revenue share may be acceptable, and non-negligible.

3 Likes

lets gogogogogo can’t disagree! Is time

My net is down, so I’m replying on mobile so I can’t quote.

Here are a few thoughts to yours

Building POL is the same as sharing the fees with token holders, except it has a 2nd benefit of allowing new investors to buy in. But this can also be achieved with bonds or OTC. POL is funded with (let’s say) ETH from treasury, and sellers will be able to extract that value, but pay a trading fee to do so, holders (assuming no LMining) are given nothing. Sure they get to vote, and govern, but shouldn’t these people be a priority for incentives. After all, they are the very people that provided to TVL.

Once the LP is built TVL will very likely increase, but new TVL will be dominated by merchs.

The securities concern is valid, and I have no idea on this…

I’m not saying that a veTKN model needs to deployed. Just a roadmap of what it likely to happen.

I don’t personally care about price action of gov tokens, I seldom do any swing trading or even pay attention to charts. But I do care about logical decisions.

With LP live.

You can still farm gear.(until this ends)
You can hodl your gear to vote.
You can sell your gear for ETH.(or usdx)
You can buy the token with no idea what it can do other than vote.

I highly doubt there will be any buying other then bot swing trading or whale donations. Especially with current market conditions. But I could be wrong.

Is the TVL an issue as things stand? I haven’t looked at metrics, is supply side TVL decreasing, more than what would be expected based on the FTX crap?

Here’s is a idea, instead of putting that ETH into POL, just vest it to the suppliers(GEAR farmers) That way there isn’t a race to sell the top of the POL. And people don’t need to choose to get that ETH OR maintain govern rights.and there is no securities concerns either.

That’s just a spit ball, but I highly doubt that anyone that wants the POL live wants it for any reason other than to sell into it.

Finally, I only started farmign GEAR since V2 and not with a crazy amount of it. So my thoughts are bias on this front. Some people have been farming for a long time, and putting in community work all that time, and deserve some “compensation”… I am also likely to have very little actual voting power to even push the needle. I haven’t even claimed my GEAR from the staking contract.

  • Personally, I think it’s perfect. Let’s do it together
1 Like

CAN not agree any more.Come on,let’s do it

1 Like

let’s make this happen, the market will tell us all.

1 Like

Plenty of good discussion points in here, I think a lot of them properly touch on why some may want to vote no vs yes, so I don’t really have counterarguments that haven’t been stated before and also agree that many of them are good considerations, and difficult to quantify.

one thing I would like to note → if a ton of people want to sell, why force them to hold? I’m not saying we shouldn’t, I’m asking for arguments for/against “ripping the bandaid off” so to say. Ie, that sell pressure does not go away, it just gets delayed by waiting longer to unlock. Why is or isn’t that better? I almost feel like it’s somewhat neutral.

TVL is good right now and has been pretty reflexive with CA demand - definitely somewhat propped up by GEAR incentives.

1 Like

Let’s do it,thank you for pushing it forward

1 Like

just start it ser,let DAO decide it

1 Like

This a brilliantly articulated proposal @ov3rkoalafied , and it undoubtedly took a significant amount of time to get to this point.

However I think everyone should be aware of this alternative: GEAR Strategy "curvebantegfkSBF"

Since both proposals are mutually exclusive, we should ponder them side-by-side. I expand on my reasoning in favor of the other proposal in the linked thread.

1 Like

The efficiency of DAO is too slow, I am not targeting anyone. A liquidity discussion has been going on for a month with no results. Reform still needs to be done

1 Like

Great update! I think it is a good time to launch. TVL will grow once the hype around the launch spreads across cryptotwitter discord/TG groups. GEAR as a governance token is good enough for now :slight_smile:

I have an idea about the utility of $GEAR, has it been discussed yet?

Utility: The credit line based on the amount of $GEAR locked.

Objectives:

  • Add an incentive to hold $GEAR
  • Add $GEAR locked as collateral to liquidate bad debts
  • TVL of $GEAR will naturally increase as the protocol grows (as total loan amount increases).
  • The more people who use a protocol, the more responsible they are for the health of the protocol.

Losses:

  • capital efficiency (But, can we lower the borrowing rate from current rate?)
  • UX ( users will need to buy and lock in $GEAR)

In the meantime, I agree with making the tokens transferable. But I am trying to imagine if $GEAR could be a more effective governance token.

Hmm cool idea, basically if AAVE let you borrow off of stAAVE, is that right? Not sure if it makes sense for ppl to be able to get liquidated that are supposed to backstop the protocol from bad debt, so may not make sense as a combation. Just as first impression.

Ok caught up on discord/forums. Surprised the combined Cider and Koala idea has gotten minimal engagement, as it’s currently my favorite option. Discord

  1. GEAR holders send their tokens to a contract, expecting half to be sold to create liquidity tokens they will own
  2. 1/2 of GEAR is sold via gnosis auction, relevant parameters from this proposal (need to confirm it is in fact half - depends if bids over clearing price get extra tokens or a rebate)
  3. USDC sold for ETH, paired with remaining GEAR. DAO also gets $500 of ETH and GEAR to make baseline POL.
  4. [need technical input] LP tokens put in staking contract with LM program targeting about 50% of LP to remain at 20% APR (arguably LM takes at least 4 years to be less effective than POL, not really worth the immediate dilution?). Users can unstake their LP tokens at any time.

Cider outlines many great reasons his approach is better than the current GIP 32, so here’s what this compromise addresses specifically related to cider’s proposal:

  1. dao doesn’t have to decide clearing / sale price
  2. way easier technically (pending #5), so much less delay. May not need audit either, so less cost too.
  3. simpler for buyers to interact with, and due to gnosis auction “fair price” potential less voalitilty for LPers to interact with when liquidity launches (less race against bots). I’d argue this is actually an amazing use of gnosis’s fair price (let market determine fair price via gnosis auction without the current GIP32 forced holding, then let market continue to operate starting at that price)
1 Like

Why do people who want to sell need to be LPs? One of ivan’s DM members thinks that those who want to sell gear voluntarily send to the gnosis auction, and then return them ETH. This mixed solution is that no one provides liquidity, except DAO’s 500k

Ah yeah that is an option too. I misunderstood the initial idea. We can do no liquidity, then simply launch liquidity at the gnosis auction price. That def makes it easier to manage on both buyer and seller side. Perhaps we still take a small spread to kickstart LM.

Also LM can just be done with bribes so yeah actually maybe the lowest dev effort is to just give ppl back eth or gear, then seed liquidity with our own 500k + gear, and LM from there.

Issue is getting the pool rewards set up from day one, which is why classic lm may be necessary.

I’d like to summarize a couple points that are I think major considerations in which proposal is accepted:

  1. gnosis auction made more sense when market was healthy and regulatory risk was lower. The market is now far less healthy, and there is more regulatory fear due to various retroactive reinforcements with inconsistent and undefined laws related to crypto. The current regulatory landscape and market health lessens the argument for gnosis auction.

  2. gnosis auction has a price discovery mechanism that results in people setting their max price, and knowing that is the best case scenario. Cider’s method does the same, but IMO it is extremely important to present the UI as “THIS IS HOW MUCH GEAR YOU GET AT MAX PRICE” when you purchase, with “this is how much you get at current price” smaller and below it. Otherwise the UX mimics a problem that we identified early on - ppl buy at some price, than that price gets “higher” as you get closer to the end of the sale period.

  3. as I understand it devs are familiar with curve. If we used balancer it would cause delays. It’s unfortunate to miss out on that partnership, but ultimately if we aren’t using POL then it’s not a huge loss to lose some rewards (and emissions are still usually quite efficient). IMO eth should still be the liquidity base, fbp can be considered in the future.

  4. using cider’s approach DOES require users to LP but in a way that they can still exit, with a penalty, with only ETH prior to trading really happening. So a user can still see a → put in GEAR, get back ETH or put in ETH get back GEAR option. This will be largely UI driven to properly communicate the penalty of exiting prior to liquidity being enabled.

  5. gnosis auction is still a better pricing mechanism IMO, as only the minimum price needs to be set (cider approach needs to set min AND max), but the dilution may not be worth this one benefit.

This proposal is option 2 in the GIP-31: Snapshot