Vote is basically unanimous on that first option, including myself.
Great work to the team on constructing the proposal.
I glossed over otto’s reply to that thread but now that I see it, I find that an rETH2/sETH2 pool is an excellent idea. I want to think that the assumptions you make here are going to play out as expected @kiriyha!
I personally think they will, but after the pool is created, there’s some concerns on my part about people swapping rETH2 for sETH2, in particular large wallets.
The top 10-20 wallets holding sETH2 will accumulate rETH2 very fast. With the growth of the protocol (new stakers), and given large wallets wanting to keep growing their stake through compounding, or a lot of smaller wallets wanting to grow their stake, It concerns me that the rETH2/sETH2 pool could end up eventually being depleted, as it is the only place currently available to compound the stake.
Therefore while I agree we should create that pool ASAP, and in order to avoid the depletion of it, it would be great if there were other ways to compound rETH2 earnings, whether that’s now or in the future.
I bring up the possibility of it being eventually depleted because there’s no incentive to hold rETH2 at the moment (unless you pool sETH2/rETH2 and gain SWISE incentives), so I would find it very rare that people would come and swap their sETH2 for rETH2, so most trades will be very one sided, rETH2 → sETH2, and will come at the cost of liquidity providers “losing” part of their staked ETH, sort of trading the earnings from staking for the earnings of the pool, which I’d guess will be fantastic during the first week, but not so much after a while.
I love this but I always think of the TORN airdrop distribution when I see LP incentives in the shape of governance tokens like SWISE, and I wish it was more common to consider the size of the contribution to the pool when assigning rewards to it. Not like an on-chain communism of sorts where everyone gets the same, but where rewards for monstruously large wallets could be tuned to fit a somewhat tuned log-like curve.
Obviously, the larger your contribution to the pool, the more you earn and the more you SHOULD earn, and sure, whales also like profits, and we all appreciate large liquidity. But given a long enough farming period and fast enough issuance, 2 things worry me:
- High inflation leading to price depreciation of SWISE.
- Large stakers accumulating SWISE a whole lot faster than smaller wallets (and either holding a larger stake in the protocol or dumping it on the market, nothing wrong with taking profits and de-risking, but this will inevitably lead to price depreciation). This will especially happen with the incentives of the rETH2 pool, as a huge stake → faster acquisition of rETH2 → a somewhat one sided pool (a single wallet holds 18.5% of the rETH2 supply, for example)
I think the selection of fees is great.
I have one last, unrelated question and that is, will there be a requirement to deposit LP token or will the rewards be distributed to wallets holding the LP token (i think it’s an NFT now for Uni V3?) corresponding to the specific pool position?
I still fully support this proposal and will vote yes on it, as this is very needed to grow the community and attract more stakers, but I want to see it play out better than how I imagine it.
If there’s anything I’m wrong about, as obviously this is all very speculative, I’d love to be corrected/cleared up.