TLDR: Continue the eBTC minting incentives program using the ibBTC rewards.
Background
Since its launch and until July 24th, Badger offered a program to incentivize eBTC borrowing funded by Lido. This attracted multiple users and led to a growth on TVL. Although some users gamed the campaign, some others put their eBTC to work in one of the offered venues. The campaign showed that having minting incentives in addition to integrations and avenues for eBTC should introduce growth and acceleration into the protocol. One key aspect to change though is that the campaign should incentivize eBTC minting as opposed to collateral addition to the system.
Proposal
Use part of the assets from the ibBTC funds to incentivize minting of eBTC according to the following parameters:
Parameters
The program will:
- Run indefinitely (with active monitoring and re-assessment from the Treasury on performance. Success will be measured in terms of non-treasury eBTC’s Total Supply growth).
- Target a 10% APR with a $30K/month cap
- Distribute BADGER tokens on a bi-weekly basis from the ibBTC rewards multisig
- Distribute the rewards according to the amount of borrowed eBTC (as opposed to the current collateral amount target - this should incentivize supply growth more effectively).
- Won’t require a minimum CDP age since rewards will be distributed in real-time (every 8hrs through Merkl).
- Distribute BADGER retroactively to current minters to ensure continuation from the Lido incentives program, which ended on July 24th. This will be done in accordance to the new program rules.
- Have the ability to blacklist participants (DAO owned CDPs such the treasury’s or the MEV bots).
Metrics of Success
How long will the investment thesis take to play out?
With Leverage, steBTC, BSM, collateral integrations and cross-chain initiatives coming into action soon, organic demand drivers should incentivize minting after some time.
Will the treasury recoup funds or does the investment represent an outlay?
Incentivizing eBTC minting should lead to an increase in eBTC supply which should then lead to a higher PYS capture. eBTC growth will lead to further integrations and products to be built on top from which the treasury may earn more revenue.
What are the risks associated with each investment?
- Protocol risk (0 - 10): Likelihood of a smart contract or a system of smart contracts (protocol) is exploited or funds are lost
<3>: There is a possibility of going for an in-house solution or outsourcing this to Merkl. In both cases, the infrastructure is battle tested and has been around for a long time.
- Liquidity risk (0 - 10): Liquidity risk refers to how easily an asset can be bought or sold in the market.
<1>: There’s plenty on-chian Badger liquidity to efficiently buy the required amount every month.
- Market risk (0 - 10): Market risk is the risk that arises from movements in stock prices, interest rates, exchange rates, and commodity prices. Metrics to consider : VaR, skew, sharpe.
<4>: Committing to monthly BADGER amounts using spot prices may lead to undesired APY results (up or down), nevertheless, given the short time frame for each commitment, deviations shouldn’t be too bad.
- Credit risk (0 - 10): The risk of loss from the failure of a counterparty to make a promised payment, this should cover airdrops expected.
<0>: No counterparty reliance
- Execution risk (0-10): How long will it take to execute, how many signers on a Multisig or queue of things that must be signed first.
<4>: Dependent of the implementation of the infrastructure for distribution.
