This proposal has a flaw that makes it nonviable in its current form. I’m still posting it publicly in case there’s a kernel of a good idea that is helpful to anyone else. I’m going to follow up with another stab at addressing the issue posed here.
Summary:
Introduce a system that lets LP’s who are not interested in governance (or time locking their CRV) use their farmed CRV to delegate their voting power in return for a CRV boost.
Abstract:
For reference, this proposal was inspired by a question posed on the yearn gov forum. The question is: what financial incentive could appeal to the LP not interested in governance or time locking, other than dumping farmed CRV?
Motivation:
- Improve CRV tokenomics
- Give LPs who aren’t willing to time lock CRV a way to support the ecosystem and get paid to do it
- Improve engagement with Curve’s governance process
Specification:
Create a delegated veCRV functionality that behaves the same as veCRV, but splits its behavior between 3 parties. Delegated veCRV benefits the requestor by boosting their LP CRV (based on the quantity of veCRV minted), and not requiring a time lock. It benefits the recipient of the delegation by giving them voting power (based on the quantity of veCRV minted). It benefits all veCRV holders by not paying trade fee income to either of the two parties. This prevents delegated veCRV from diluting the trade fees earned by veCRV holders, and at the same time reducing outstanding supply of CRV that would otherwise get dumped on the market.
Create a new Delegated Voting gauge that allows governance to allocate a portion of inflation toward supporting requests for delegation. There must always be >=CRV in the gauge than all outstanding delegations. This is because the delegation process will lock the requestor’s CRV as delegated veCRV, and the gauge acts as a reserve to pay back the requestor at any time. Thus, the requestor is not beholden to the veCRV time lock functionality.
EXAMPLE
LP Elpie wants to delegate his CRV because he doesn’t care about voting and doesn’t want to be subjected to a time lock. He requests to delegate veCRV, which triggers a check of the Delegated Voting gauge. There is 10,000 CRV available in the gauge, which is greater than his 1,000 CRV delegation request. Elpie can delegate his 1,000 CRV!
Elpie selects an address that owns some veCRV who he trusts will vote in his interest. Kendrick Llama is a man of the people, and Elpie chooses to place his trust in the llama. Elpie’s CRV is locked as delegated veCRV, and he earns a 2.5x boost to his CRV yield. Llama receives the delegated veCRV for a 4 year lock, which grants him extra voting power that he wields with the utmost integrity. Remember, CRV has been locked, so it is out of circulation, but veCRV holders have not had their trade fee income diluted with the addition of this new delegated veCRV.
After a few months, Elpie decides to pull his liquidity and sell his CRV, as is his right. He redeems the 1,000 CRV from the Delegated Voting gauge. Llama continues receiving the benefit of extra voting power for 4 years, when the delegated veCRV expires. The unlocked CRV is then automatically deposited back into the Delegation Gauge to provide a reserve for future delegation requests.
For:
Although the CRV tokenomics are designed to incentivize LPs to lock CRV and be involved in governance, there will always be a demographic of LPs who do not want a say in governance, and do not want to time lock their CRV. We should give them a financial motive to participate in the well being of our ecosystem so they have an option besides immediately dumping their CRV yield.
Beyond the implications this has for the CRV token price through reduction in outstanding supply and concentration of trade fees to dedicated veCRV holders, delegated voting could have a huge psychological impact within the community. Community members may feel more inclined to be outspoken about their positions and seek to attract delegated veCRV. This may result in more engagement and public awareness about Curve and its governance.
Against:
If Elpie is able to initiate a time lock and withdraw his CRV at will, there’s nothing stopping him from repeatedly time locking and withdrawing until he has expended all of the CRV in the Delegated Vote gauge. Imposing protections against this abuse negates the purpose of making Elpie’s CRV available to withdraw at will.
Poll:
No poll because this is a withdrawn proposal