Full Discussion

https://forum.piedao.org/t/doughpamine-programme-termination/1409

Summary

The Doughpamine programme was launched on April 2021, and has been running for 18 months with a total distribution of 18.8 million $DOUGH to liquidity providers so far.

The rewards distribution had both positive and negative effects on the DAO: bootstrapped liquidity on one end, but potentially contributed driving the $DOUGH token value down significantly by being a source of sell pressure in the market.

We propose to terminate the Doughpamine programme in order to stop the bleeding.

Authors

PieDAO Core Contributors team and Treasury Committee members.

Passing Thresholds:

• 5% or more of veDOUGH supply must participate (19.432.867,18 * 0.05 = 971.643,35)
• 60% or more of participating tokens must vote FOR

Background & Motivation

PieDAO currently incentivizes 4 liquidity pools (a.k.a. Farms). These liquidity pools have been distributing 18.8M $DOUGH rewards until period 18 (block 15625918). Note that of the total incentives distributed only 20% were immediately liquid, while the remaining 80% would vest linearly over one year.

Pool	Dapp	Liquidity	Incentives (last period)	Cost of liquidity
PLAY-DOUGH	Sushi	$129,273	$9,268	$0.86
DOUGH-WETH	Sushi	$104,316	$6,620	$0.76
DOUGH-ETH	Balancer	$31,546	$1,324	$0.5
BCP	Balancer	$358,988	$2,648	$0.09

Cost of Liquidity

As visible from the table above, around 80% of the Doughpamine incentives are being distributed to pools that have very high costs of liquidity. At current market conditions, the $Play/$DOUGH pool is paying $0.86 for each dollar worth of liquidity in the pool. This figure has also reached $1.52 in the past, meaning rewards substantially outweighed actually provided liquidity, resulting in quite an inefficient incentive programme.

Currently, the weighted average cost of liquidity sits at around $0.7, of which 20% liquid and 80% escrowed and subject to linear vesting over a year. The fact that the DAO has been overpaying for liquidity provision has certainly been contributing to the $DOUGH sell pressure, possibly inducing a resulting poor price performance.

We can conclude that:

1. Renting liquidity is a costly operation for the DAO’s Treasury
2. $DOUGH rewards are impacting $DOUGH’s market price and accelerating its downward trend.

Specification

Objectives

• Stop distributing $DOUGH incentives to LPs in order to decrease the token dump trend, and decelerate the token depreciation.

Plan

• Stop incentivizing pools immediately after the voting end.
• Set Pool Reward rates to zero.
• Make an announcement in Discord and Twitter in order to inform members and Liquidity Providers.

Schedule

The rewards distribution will be stopped effectively after the snapshot vote, considering it ends in favor of this proposal (+60% FOR).

Team and Roles

Core Contributors

• Communication and socialization
• Devs to set reward rates to zero on the Pools

Benefits & Risks

Benefits

1. Stop the continuous selling pressure that this programme brings.
2. Stop renting liquidity and prepare for a Liquidity owned model.

Risks

1. Provisioning on these pools would no longer be relevant for LPs, potentially making them halt their contribution to the pools impacting the available liquidity, or unwinding their positions.
2. LPs to continue dropping their $DOUGH rewards as their vesting ends.

Mitigation actions: the DAO is designing a $DOUGH buy-back program aimed at both reducing the liquid $DOUGH supply and contrasting the market selling of liquid $DOUGH in light of possible LP positions unwinding. Further details on the buy-back program will be announced on a dedicated forum post.

Closing notes

In this proposal, we are presenting both a problem and an immediate action that we see fit to take place in order to decrease the selling pressure of the $DOUGH token. We aim to stop the bleeding and to stop renting liquidity while we find a more sustainable model. Please find the options to issue your vote.

FOR: To stop incentivizing pools AGAINST: To continue incentivizing pools Need more Information