OIP-18: Reward rate framework and reduction

Jaiel The idea is to be proactive to prevent bad situations instead of reacting when problems are starting to emerge.

If you look at the runway graph, it's leveling off. At current rates it will start to decrease before long. You might say to yourself "Well we still have 300 days, what's the issue?"

A few things:
1) You say you want a real APY, but that can't be given without 365 days of runway. At minimum you should want to reduce the APY to reach that point for what you personally want. A rough roadmap for future reductions is laid out, so you can calculate what you get from there. A note on the main page indicating that is the APY expected for _X days would be a good idea maybe.
2) I would feel much better about investing in a protocol whose APY runway was up or sometimes flat rather than one that is fluctuating constantly
3) If we wait until runway is decreasing, we'd need to make a larger decrease to APY later to account for all the additional OHM outstanding that will still be accruing interest. We also might see a draw down in price as people react to a shortening runway, which has a feedback cycle of less efficient bonds that decrease runway further.
3a) if we act proactively, we can make smaller adjustments that have larger impacts on protocol health overall.
3b) this point is also the most important if you truly care about helping future ohmies, you're keeping more rewards for yourself.
4) 300 days is still peanuts in the bigger picture. Think on the timeline of 5 years.

Those are just a few of the points of reducing APY, but probably the most important to understand for the average ohmie.

And to the point some others have of whales dumping, that's always a concern for all projects and I don't think it has anything to do with APY (at these levels, bare minimum). Also, why wouldn't they dump more at a higher APY anyways?

Trying to punish whales won't end well. Best case scenario they sell and go somewhere else in a self-fulfilling prophesy.

I'm in disagreement with the overall framework for a few reasons.

1. Last time this discussion popped up it was rushed and there was a mini-exodus. That's bad for OHM. The high APY is the main draw to the protocol. We don't have much else to offer right now aside from cOHMmunity and incOHMMMMMe. The protocol needs to offer more before we kill our star attraction. TLDR: Bad PR.

2. Last time the overall market was in re-accumulation, while OHM had already tanked 80%. We are currently (arguably) back in a crypto bull-market. Lowering APY now could cause a larger exodus as folks seek larger gains - OHMies still gotta feed their familia. TLDR: Bad timing.

3. Now for useful input - I first and foremost agree with a reduction in APY -slowly- like a Sarlac. However, I think it's worth more deeply discussing other ways to manage supply, for the reasons stated above, such as finding use cases for burning OHM, or permanently locking it up, like in the LPs. Maybe we could incentivize permanent staking of OHM somehow. TLDR: Burn it to the ground. Or something.

I know this is a lot of "do this kind of thing somehow," but my main point is : What draws folks to OHM right now is high APY and flexible staking. To gut the main draw of the protocol at a time when folks might already be attracted elsewhere is risky. I propose we hold off from any further reduction in APY in the near-term (e.g. until EOY) and thoroughly discuss other ways to permanently remove OHM from circulation.

I feel like this proposal is coming too fast. We just got finishing implementing the last rate reduction and haven't even had time to see how this truly impacts the ecosystem. I'd prefer a longer waiting period (3-6 months) before any thing is changed again. This will allow us to study the impacts on the protocol and provide the proper time to gain consensus on a way forward. By all measurements to date we are healthy and thriving. Why fix something that isn't broken?

Additionally, we are in the expansion phase and want to get as many OHM out into the public as possible, Reducing this effort is counterproductive to everything we have preached. In the grand scheme of things 10,000 wallets is nothing. Perhaps we look at a rate reduction when we hit a milestone such as 100,000 wallets or 1,000,000 wallets. That way people have a mark in the sand they can plan to and supports the growth narrative.

Vote No on both for now……..need more time to evaluate

Personally I think it is too early for a second reward rate reduction for multiple reasons.

1.  I am convinced that APY is currently a much stronger driver of price premium than RFV. Psychology matters a lot more than economic rationality in price dynamics. The protocol is <6 months old, so IMO users do not yet see RFV as truly risk free yet due to protocol and smart contract risk. Conversely their mesolimbic system is being strongly activated by seeing the rebases - they appear tangible and immediate. At high reward rates, it is easy to ignore price ("so what if price drops by half? I will make it back in 50 days!"), but at lower reward rates it becomes much more important to have an internal model of price, as there is a good chance you are no longer on the fastest horse. I therefore think that reducing APY will have a strong negative effect on price, regardless of whether RFV grows.

2. High APY can only act as a driver of price if people have a reasonable expectation that it will persist for long enough to make money.The first reduction in reward rate was driven by a desire to acquire sufficient runway, and that objective was achieved. The reward rate has only recently stabilised since then. Changing it again so quickly would negatively impact that expectation of consistency, and would greatly reduce the premium people are prepared to pay for a given reward rate. I agree with some of the previous comments that this will paradoxically increase the volatility.

3. One of the reasons that RFV is growing slowly is because the policy team proposed targeting liquidity growth. A slowdown in RFV growth was an expected outcome of that change in focus. IMO a rebalance towards growing RFV should be at least tried before a reward rate reduction.

4.  We are in the middle of a bull run, with an expectation that BTC will retest its ATH in the coming month or two. Many investors' price targets for other tokens (eg. ETH) are high, and they will see investing in BTC or large cap alts as a safer ride, compared to waiting a longer period to achieve the same level of growth holding a new project like OHM. Better to wait for a period where the options for profit are fewer. We have ample runway to wait it out.

For these reasons I think it is important to wait longer before reducing the reward rate. I like the idea of a framework which gives forward guidance on future rate reductions, but I think it should be a function of supply growth and time (given sufficient runway).

One final point - i agree with other commenters here that 2 weeks is far too short a time for the taper.

[ps. I messed up my forum vote due to misreading the slightly ambiguous vote headings. I vote NO to both proposals]

As said in discord  my opinion is that this OIP is poorly drafted given potential negative impact it might have on (3,3).

Now, not to say it shouldn’t be done, or that having a framework is bad thing, it just lacks clear and detailed explanations. Devil is in the details, and road to failure is paved with good intentions as history teaches us. I’ll give my best shot at being as constructive as possible for my smooth brain.

1. Will this keep my Market cap share i.e. if currently I hold 0,001% of MC, will I keep that same 0,001% at 1b supply? If yes example calculation based on proposal should be added because it would logically explain which return could someone expect if we reach certain MC.

2. Logic behind such steep rate reduction from 1m - to 100m supply is unclear. Why those exact figures, and not higher or lower? Same question for rest of the table.

3. Framework table is heavily misleading because of Min/Max. I’d suggest to create spreadsheet and curve graph with rate/APY reduction tied to 1m supply increase. This way it would be much clearer to understand that MIN is at top of the range, and MAX is at current point. It would allow us to put this on autopilot, and avoid these discussions down the road. Add a simple calculator tied to it.

4. I get it that giving timeframe is potential liability, but we should be able to say: If all going according to plan we MIGHT reach 10m in 8-12 months, and 100m in best case scenario in 24 months.

5. We are introducing market price parameter but we cannot give a spread we would be targeting, so it creates confusion. Why not adding inverse bonds in the same time with clear thresholds to increase confidence? Or just tie this part of discussion to RFV, or other parameter we have decent control over.

6. We should give clear reasoning why current APY is preventing us from new partnerships, and list which ones are we talking about to have all cards on the table.

7. Not same as OIP-11 there was only 4000 ohmies at the time, and many taking time to understand and help protocol grow. Now we have 50% ohmies being here less than a month that came in with 10k APY promise. We should enable them to double their stack around the terms they came in with. (not one of them to be clear). Negative impact would be much bigger compared to then.

8. Why is vote tied/bundled? It should have option to say yes to a framework not tied to proposal but in general.

9. Please add disclaimer that discussion, and voting deadline might be extended if needed to reach consensus?

Why don’t we start with today’s RR, and start either supply or time based reduction step by step from here instead dropping it to 0.29 immediately? This way we could enable new ohmies to double their stack in less than 2 months. It would be easy fix, because protocol is very healthy right now, two months will not break it, it should be easily presented to potential partners how it will evolve, and new ohmies entering in mean time will have a clear picture what they could expect based on framework. This way we take care of our community in true (3,3) manner with minimal risk for protocol, and clear sky for the future development. Olympus is flying because of sinergy between you big brains and amazing community lets not forget about it.

On the other hand as one of those that never sold, I support the idea of Aludel like approach if it could be done.

Hope this helps.