Rethinking dials current allocation for the future of mStable

Summary

mStable is heading towards a high growth phase with the upcoming launch of its V2 this year.
In order to do this, the project needs to make sure it secures two major things:

a) Maintain mUSD’s industry-leading yield (which is closely linked with Save utilization Rate and mUSD liquidity stickiness), at least until users and integrations can migrate to v2

b) Protect MTA’s value to give more firepower to V2 incentives and to prepare for a major capital raise later in the year which can happen only if MTA trades at a decent price (the team puts this figure at least $1-2/MTA)

We believe these two key goals, both oriented to the long-run sustainability of the protocol and MTA value, can be achieved by smart governance.

Abstract

a)

Save, mStable flagship product is powered by a complex and wide ecosystem: Feeder pools, mUSD / Curve 3CRV pool, lending rewards, native AMM fees. One of the reasons why Save APY has historically outperformed its peers is the relative low Save utilisation rate i.e the fact that a decent part of the total mUSD supply is held outside mStable Save and leveraged.
More here (https://mstable.app/#/musd/stats)

In this framework, retaining and attracting sticky mUSD liquidity outside Save in the high TVL pools of the mStable ecosystem is important. This can be done with smart MTA incentives allocation. More on this after.

b)

mStable released earlier this year its Emission Controller, inspired from Curve’s Gauge controller, which dictates reward distribution in the mStable ecosystem for the next 6 years (~30m MTA) . All the current Vaults in mStable are represented as dials. Dials represent voting destinations within the Emissions Controller contract, $MTA stakers can determine the amount of MTA which are sent to a dial’s recipient contract.

As we speak, the Emission Controller distribute 160,768 per week towards 17 different dials. It’s fundamental that this distribution are done in the best interest of the project. For instance, the Treasury DAO dial is currently solely 6.1% of total emissions while being the ultimate protector of MTA value. An optimised allocation of the weekly rewards would give more firepower to incentivise V2 (by allocating MTA back to the Treasury DAO) and optimise a major capital raise later in the year (reduce emission by sending MTA back to Treasury DAO).

Rationale / Analysis

To retain mUSD liquidity in a cost-efficient manner and strengthen the existing high TVL pools, mStable governors could choose to allocate MTA weekly rewards towards selected dials for the ecosystem.

By doing this, mStable would send a strong market signal to its existing partners/pools and potentially even increase the liquidity in highly efficient liquidity pools by rewarding market participants. The ROI of 1 MTA reward in a high TVL pool is far most important than in one with low liquidity.

Please find below a tab showcasing the current weekly rewards allocation vs. the TVL brought by the recipient’s contracts and the assessment of the dial economical output.

Next Steps

Core contributors group believe that with a more thoughtful strategy (explained above), we can achieve a higher mUSD TVL, retain our industry-leading Save rate while emitting fewer MTA which will support its value.

Executing this strategy is even more important in the context of us building mStable V2.

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Thanks @TClochard. This is much needed analysis.

I personally suggest that governors immediately stop allocating rewards to these pools:

  • GUSD
  • BUSD
  • alUSD
  • RAI
  • FEI
  • tBTCv2

This is no reflection on what I think of these amazing partners but looking at these numbers, it’s clear that continuing to fund these pools is not in the best long term interest of the protocol.

I will then place incentives on these dials to help support mUSD’s industry leading Save rate:

  • 3Crv/mUSD Votium
  • Polygon Frax Pool (if we get more action here, I will ask Frax to increase their incentives too as well as possibly Polygon)

Finally, I will be placing more voting power on these dials to support MTA’s value and our ability to fund powerful incentives for v2:

  • Treasury DAO

This is an important moment for mStable and MTA Governors to work together to support MTA’s price and value as well as mUSD’s Save rate through intelligent governance. Looking forward to seeing the result of this proposal!

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This is my updated vote. Share yours!

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I echo these sentiments as well; some of those pools are very inefficient indeed with self-serving farming.

It’s also encouraging to see that the stkBPT pool share is currently much more in line with the stkMTA share (relative to the amount of MTA staked) – this is much fairer imo.

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This is a very informative post! Much appreciate giving some visibility on actual economics. This is missing currently, so there is no source to make a good decision for Governors to allocate towards the dials that make the protocol the most money.

Taking the opportunity now with the cheap gas and reallocating my vote.

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Appreciate the effort and analysis. This is one of the most important data to decide which dial to choose. I hope we can keep it up-to-date. I will definetely keep an eye on this!

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I don’t understand. I’ve read this a couple of times, and I don’t see a specific course of action anywhere in it.

Are we advocating to put something in the Staking app to inform voters of dials that have the best returns?

Are we advocating to remove dials, or put caps on inefficient pools?

Are we advocating to increase communication around the Emissions Controller so that there are more governors participating (which might have a large effect on the distribution)?

I’m not trying to be confrontational, but I can’t support this because (as far as I can tell) there’s nothing to support. “Vote better” isn’t a course of action.

As I pointed out in another thread, this is a gauge being a gauge. When deploying it, it’s entirely natural to assume that some Governors are going to use it to get rewards for their own liquidity. And since there’s basically no fees on those pools, the LPs get screwed without MTA as an incentive. Now we’re saying “no one is using these, so we’d like to take the MTA away too.” It seems antagonistic to me. It would be more graceful to simply sunset the feeder pools IMO.

In any event, I was 100% on the Votium dial from the start, and I think I’ll leave my vote there.

Hey, thanks for your feedback!

In actuality, this is not a real proposal, since this will not result in any formal proposal, any official vote or any changes to the mechanics of the works in the Emissions Controller.

You can think of this as an informed suggestion to allocate the MTA Emissions towards dials that align with the protocol thesis and also have a strong value add. This is a mere presenting the data of the impact of the emissions. For once, I was very intrigued to see that we incentivise some pools a lot compared to the TVL they bring.

Of course, it is still up to each staker to decide, but what we think is that there is just too little information to base your decisions currently on.

And as you said rightly so, this is a gauge being a gauge. That is all we do too.

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Thanks Dim. Good to know I wasn’t hallucinating or being super dense. :slight_smile:

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Fully aligned and I think 2 major places we should incentivise liquidity in: 1) MTA pools to support MTA price and liquidity, 2) ecosystem pools to leverage mUSD outside of Save and simultaneously creating utility for mUSD

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Thanks a lot for this great post. Just going to bounce some thoughts based on previous feedback:

Personally, I think we should remove the RFC handle to avoid confusion with an actual proposal, and simply sticky this post to the Governance section with a “Last Updated/Epoch” handle, so Meta Governors can make an informed decision on the current state of the Emissions Controller allocations, with suggested steps to create a more healthy distribution if they feel so inclined.

Seeing the great chart above, I think it could be awesome if this chart was updated once per epoch to show what the state is, as to give Governors a sound idea on how to move forward for the following epoch. Do you think that’s possible without asking too much from your time @TClochard?

Overall, I firmly believe this is the correct approach forward, and happy to see this here!

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@mZeroNine @trustindistrust @dimsome
Just changed the label and title of this post to make it clearer
As other contributors precised, the main purpose of this post is informative and simply aim at giving a data perspective on dials, assessing their utility within the mStable ecosystem and showing which of them being or not economical.
Vote is and will remain your own decision :slight_smile:

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I would like to add that mUSD Vault and Polygon mUSD Vault additionally make high USD earnings, and the numbers presented in this graphic do not capture that. In order to capture a more realistic TVL for each of the pools which reflects the fact that the mUSD vault gets USD rewards, the following math is a useful trick: Take how much of the total mUSD supply each vault has (e.g. 40% mUSD vault and 30% Votium) and then allocate that proportion of mUSD Vault to the respective pool. For example Votium would be 30% (Votium) + 12% (30% x 40% – which is Votium’s share of the contribution to mUSD Vault’s USD yield). Similarly, mUSD Vault should only be 16% of TVL. So the MTA Emissions per TVL for mUSD Vault is more accurately modeled as 164.8% (yellow) and the Votium would be even lower at 20%. On top of that, this all ignores that Votium provides CVX and CRV rewards to the mStable treasury. Tagging @lonetree because ser posted something of this nature.

Side note: For Polygon the Frax Pool MTA per TVL would be closer to 30% and the Polygon mUSD vault would be closer to 300% (red).

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I’m here to chime in and state how important I feel it is to continue supporting the Polygon Save product, and not just the Ethereum version. The Polygon version has made it viable for users with smaller stacks to utilise and get involved in the protocol. I, for one, would not be remotely interested in mStable if it was an Ethereum-only platform.

As derc states on the Discord: “after factoring gas cost it would take months to break even on mainnet. Low cost blockchains remain an important part of our strategy to reach more users”.

Best wishes,

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I want to second this opinion. The Polygon ecosystem has been my sole way of interacting with Defi and mStable has lead the way in my understanding of defi because it has been made accessible to me. I find a lot of value in the Polygon save product but have no way of steering such value through voting because it happens on Mainnet.

If we assume most Polygon users use Polygon because of accessibility, then we could also assume most can’t afford to vote and thus have no real say in the direction of the protocol through such voting.

So I come here to ask you to kindly consider those users as you vote and steer dials (especially now Matic rewards are gone). Of course this is only as long as there is proportionate value brought by having the Polygon product which may not always or currently be the case. I don’t know the numbers though I think the dune charts tell the truth.

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