BIP 66: Revise DIGG emissions, fund KPI options, and establish TCL

Category: Emissions & Treasury

Scope: Revise DIGG 12 week emissions plan; utilize treasury assets to provide additional funding to KPI options and establish a treasury controlled liquidity position

Status: Pending

Objective: Create deeper and more concentrated liquidity for DIGG in the near-term by increasing/consolidating emissions and re-funding KPI options rewards; while also establishing a treasury controlled liquidity at a relatively low cost and provide scalability as DIGG goes through a positive rebase streak and creates more BTC.

Overview:
In an effort to create deeper and more concentrated liquidity the proposal utilizes a multi-faceted approach to ensure both a timely and scalable solution that utilizes treasury assets in a prudent manner.

  1. Revised DIGG 12 week emissions schedule
  2. Provide additional DIGG rewards to KPI options
  3. Establish treasury controlled liquidity for DIGG

Specifics:

(1) Revise DIGG 12 week emissions schedule proposed in BIP 61 beginning in week 5 (August 5th) in the following ways:

Details:

  1. Shift emissions from Uni V2 to Sushi and allow LPs to withdrawal (no fee)
  2. Allocate additional 83 gDIGG (2.05% total supply) to short-term emissions boost for Sushi LPs beginning wk. 5 through wk. 10; totaling ~8 DIGG
  3. Revised DIGG 12 week emissions schedule would total 300 gDIGG (7.5% total supply), as there are already 217 gDIGG (5.43% total supply) included from BIP 61

The consolidation of emissions on Sushi coupled with a short-term emissions boost for LPs should cover migration costs, while also incentivizing new liquidity positions on Sushi. The short-term emissions boost would be weighted heavily at the beginning and slowly scale back by week 10. The revised gDIGG total allocated to emissions would by about 7.5% of total gDIGG supply.

Although less efficient, relatively speaking, consolidated emissions + boost should provide a sizable increase in APY and incentivise migration; while bringing in new buyers.

Additionally, this would lead to increased revenue as Badger DAO receives a performance fee from Sushi, provide an opportunity to focus on capital efficient liquidity strategies with Uni V3 and Sushi Trident, and additional time to educate market on more efficient strategies to emit DIGG rewards (i.e. KPI options)

Do you think we should move forward to revise DIGG emissions?
  • Yes
  • No

0 voters

(2) Provide additional DIGG rewards to KPI options. Currently 240 gDIGG (6% total supply) have been allocated to the KPI options rewards pool per BIP 53 by Jonto, but in relation to DIGG this pool has decreased ~71% due to negative rebases.

This proposal would allocate an additional 160 gDIGG (~4% total supply) to rewards to ensure funding of rebase mining in near future. In relation to DIGG, this would increase the rewards pool by ~67% (~16 DIGG as of today) and bring total rewards to 400 gDIGG (~10% total supply)

Details:

  1. Allocate additional 160 g DIGG (4% total supply) to KPI options rewards pool
  2. Rewards would be included in subsequent rebase mining event set to begin August 1st
  3. Options allocated to rewards will not increase and remain 177,739; effectively increasing the value of options at the start of the subsequent event.

Utilizing KPI options to unlock DIGG rewards is a more efficient form of emissions as they align incentives with behaviors; only emitting rewards if >5 positive rebases occur. Essentially DIGG rewards are earmarked for later use and not substantially different from holding in treasury. Since KPI options are not widely understood, the intent is to continue boosting APY while continuing to educate the market on how KPI options can be utilized to emit rewards.

Do you want to provide additional DIGG rewards to KPI options?
  • Yes
  • No

0 voters

(3) Establish treasury controlled liquidity as a means to further increase liquidity in a cost-effective way due to the small amount of BTC required today. This liquidity can scale as DIGG goes through positive expansion and there will be more BTC available from that LP, and BTC is generally what DIGG lacks. Keeping that in LP would already have the peg stabilizing effect, and there would be further options to utilize it in the future, while controlling its own liquidity.

Details:
The below options to establish treasury controlled liquidity are based on total DIGG supply and would require commensurate BTC. After deducting for emissions/options increase, the treasury accounts for ~22% of total DIGG supply.

  1. 5% = 19.6 DIGG + 16.78 BTC; 1.2 $M worth of liquidity
  2. 10% = 39.2 DIGG + 32.6 BTC; 2.5 $M worth of liquidity
  3. 15% = 58.8 DIGG + 50.3 BTC; 3.7 $M worth of liquidity
  4. 20% = 78.4 DIGG + 67.1 BTC; 4.9 $M worth of liquidity

The above numbers provided were for DIGG at 87% BTC. In the event that DIGG price increases between now and execution, the selected option to establish TCL would continue up to 1.15 DIGG/WBTC. If DIGG exceeds 1.15 DIGG/WBTC the decision to establish TCL would be at the discretion of the Council.

How much DIGG and BTC should Badger contribute to establishing treasury controlled liquidity?
  • 5%
  • 10%
  • 15%
  • 20%
  • none

0 voters

1 Like

I’d vote for 0.5% instead of none.

1 Like

Good proposal. Let’s do this!

2 Likes

After discussing with PO, I’ll vote 10%. He made the point that the impact needs to be large enough in the short term regardless of market conditions to help put DIGG in a stable state.

2 Likes

Let’s make it 21%, that has a nice ring to it as there are 21MM Badgers.

4 Likes

The only question i have on the TCL side is which number will be taken on the date of TCL. The price won’t be the same so the digg/wbtc ratio will vary. You have provided numbers in $, in digg, in btc and in total liquidity. It is unclear from this BIP which of these numbers will be used.

It would be easier for me to think about this in total Bitcoin denominated liquidity.

% of supply for TCL options is denominated in DIGG (rather gDIGG) to normalize allocations and more easily compare across entire BIP. Currently DIGG is below peg, if DIGG exceeds 1.15 DIGG/WBTC the decision to establish TCL for selected option would be at the discretion of the Council.

1 Like

Maybe we should consider moving DIGG into neutral rebasing territory before adding the funds?

Doesn’t take much now, but will be a LOT harder afterwards.

First off, establishing TCL while below peg is a better use of BTC funds and that is generally what DIGG lacks. Next, it becomes a difficult thing to time as the treasury could push us back to peg and then sellers could decide to take risk off the table. the concern you and others have raised is essentially if we double DIGG liquidity it becomes harder for buy orders to move above peg, correct?

IMO, I see this is as a nice opportunity for a savy investor. It would take relatively little capital to buy DIGG and move above peg prior, but after it will be harder to go up (or down). If the BIP passes and it is decided to inject liquidity, then that offers assurances that small buy/sell orders will not flip easily.

I’m not trying to offer financial advice, just saying I think it is better to let the market close this gap vs Badger.

2 Likes

Recommend including following disclaimer for option #3 establishing treasury controlled liquidity. If approved in snapshot, a minimum of 60% of liquidity would be provided immediately. Remaining liquidity would be distributed over 3 month period; timing and amounts would be approved at discretion of council to ensure ability to add additional funds at later time.

1 Like

It is unclear how much treasury bitcoin a vote for this snapshot bip represents investing. Which of the options above will be used?

The new snapshot structure is much better and will provide a clear decision.

As a long term Uniswap LP I can get concept of liquidity consolidation on Sushi. But I don’t get why we should boost emission there. From my perspective we should use that to fund uniswap LPs migration via metatransaction. I joined Badger as community that reward long term commitment. I provied LP for Badger from day 0 and Digg from almost the beginning. And I’m not happy that I will have to spent few hundrands USD to migrate my positions that did critical job at the beginning od the project.

From my perspective we should use that to fund uniswap LPs migration via metatransaction.

That would be a more complex solution that would take time to develop, and we generally try not to tap into the dev hours where it can be avoided

Yes sir, it better to force early users to do and pay for 7/8 transactions

that is why we included short term emission boost to help offset migration costs. No requirement to migrate, but trying to incentivize migration to Sushi.

1 Like