Sundae Yield Farming v2 has launched successfully and is in full swing; to date, 35,127,952 SUNDAE has been delegated to various pools, with ADA/SUNDAE receiving 56% of the vote, DJED/iUSD receiving 20% of the vote, and WMT receiving 9.9% of the vote.
The initial settings of the yield farming program were set fairly conservatively: The top 20% worth of pools would be considered for rewards. The goal of this threshold was to prevent the rewards from diluting to 30+ pools, and to prevent someone from creating a bogus pool in which they control all the tokens to siphon off rewards. It has been effective at that goal while the Sundae community bootstrapped their initial preferences.
However, this also means that while any pool has more than 20% of the delegation only the top pool by delegation will receive rewards.
We propose a few possible changes to the settings of the yield farming program, to be enacted 3 business days after the conclusion of this vote, which will allow other pools to begin earning rewards, and attract liquidity to the DEX as the program is intended to do.
Summary
We considered and discussed many options with the community, and filtered it down to a few popular options below:
Vote No Change to make no change to the current operation of the program
Vote Give SUNDAE/ADA special status to give the ADA/SUNDAE pool (pool 08) special status, so that it qualifies for rewards regardless of it’s delegation, allowing ADA/SUNDAE token holders to more confidently delegate to other pools in the interest of the protocol
Vote Adjust pool rewards threshold to 80th percentile to adjust the algorithm to select the top 80th percentile of pools, rather than the top 20th percentile of pools.
Vote Adopt Both to adopt options 2 and 3 simultaneously.
Conclusion
Please indicate below whether you would like to see an on-chain vote for this proposal. Per the governance procedures, once we receive 20 “Interested” votes, we will create the on-chain proposal for voting.
Another popular option that was discussed in Discord but not included was the following:
Allocate a small percentage (such as 1-3%) of daily rewards to compensate SUNDAE delegators that voted for pools other than ADA/SUNDAE
Our plan is to conduct this vote, see how it changes behavior in the real world, and consider this option only if the option selected by this vote doesn’t achieve the results desired by the community. That being said, if anyone feels strongly about this, they can always create their own temperature check / governance proposal.
From a discussion in discord, this explanation helped many people understand.
Here’s a worked example with the current delegation numbers;
There is a total of 34535143.290735 SUNDAE delegated
ADA/SUNDAE has 19294085.112703 SUNDAE delegated to it, or 55.87% of the total
DJED/iUSD has 7186570.878297 SUNDAE, or 20.81% of the total
ADA/WMT has 3488456.810841 SUNDAE, or 10.1% of the total
Other pools have decreasing amounts and percentages delegated to them, so are omitted
Right now, we:
Sort this list from most to least (so, the order above)
we start taking pools until we reach 20% of the delegation cumulatively
so, this stops after the first pool, ADA/SUNDAE
then, from the remaining pools, we distribute rewards proportionately to their delegation; since there’s just one pool, it receives all the rewards.
If proposal 2 passes, then nothing changes about the above process; but if ADA/SUNDAE were ever to drop outside of that 20%, it would be included anyway , and always receive some rewards. This would, potentially, allow ADA/SUNDAE liquidity providers who are worried about losing rewards to delegate elsewhere, knowing that they’ll always receive something, even if it’s slightly less rewards.
If proposal 3 passes, then we’d raise the threshold to 80%; In this case, we’d pick the ADA/SUNDAE pool, and we’d have 55.87% of the delegation cumulatively, which is less than 80%, so we’d continue. We’d then pick DJED/iUSD, and have a total of 76.62% of the vote, which is less than 80%, so we’d continue. We’d then pick ADA/WMT, which has 10.1% of the vote, putting us at 86.72% of the vote. This is above 80%, so we’d stop. Then, we’d recompute the percentages based just on this qualifying set:
The total delegation among pools receiving rewards is 29969112.8018 SUNDAE
of that, ADA/SUNDAE represents 64.38% of the delegation
DJED/iUSD represents 23.97%
ADA/WMT represents 11.64%
So, those are the precentages of the daily 444,115 rewards that they would receive. If both 2 and 3 pass, then both of the above would be true: we’d raise the threshold to 80%, and ADA/SUNDAE would always be eligible for rewards, even if it was outside of the top 20%.
Based on a suggestion in Discord, I rephrased option 3:
Vote Adjust pool rewards threshold to 80th percentile to adjust the algorithm to select the top 80th percentile of pools, rather than the top 20th percentile of pools.
I believe option 2 and 3 will definitely lead us towards the main objective of the reward program. Giving Sundae/Ada pool 8 special status will encourage Sundae holders to diversify their delegation for the greater good.
I’m liking the 80th percentile threshold a lot more than 90th percentile to combat dilution. Maybe 70th would be even better, as I believe the delegations will become much more diversified and spread out in the near future. Since we can make adjustments and agree on principle, 80 might be fine for the next phase and if not we can re-adjust. This is a great proposal and I’m looking forward to a community vote!