eIP 57: New Euler Distribution Strategy

[eIP] Euler Improvement Proposals Formal submission
,
1

Title: New Euler Distribution Strategy
Author(s): @Matt_StableLab @Bobbay_StableLab
Related Discussions: eIP 51, eIP 24
Submission Date: March 3rd, 2023

Simple Summary:

This proposal aims to adjust the EUL emissions to maximize their effectiveness at attracting new users to Euler.

Abstract:

In order to progressively decentralize governance of the Euler Protocol, EUL is distributed to protocol users over at least 4 years. This helps give the users of Euler a say in how the protocol should function. However, the current distribution is not efficiently accomplishing this mission. This also introduces a quarterly review of the EUL distribution scheme.

Motivation

While Euler continues to distribute 52,000 EUL per epoch, the number of EUL holders is not growing as intended. This proposal would alter the EUL distribution scheme to decrease emissions to 36,000 per epoch. This will allow more EUL to be saved for new initiatives Euler Labs is currently working on, such as EulerSwap. This will be a more efficient system to attract new users to Euler and help the protocol become more decentralized.

Specification

Current Cost

Currently, 52,000 EUL is distributed every epoch (2 weeks). This is ~$700,000 that the DAO is spending every month. This distribution system was created to help Eulers users have a say in governance. However, currently, this is not what is happening.

1156Ă—567 23.5 KB

Chart 1: EUL holders over the last 3 Months

Eul holders have only increased by 325 over the past 3 months (2154 to 2479). Three months is about 6 epochs which means the DAO is currently spending ~$6,343 to gain each new EUL holder. This clearly shows the current distribution mechanism is not effectively decentralizing Euler DAO. Instead, current users are gaining more and more voting power which could create issues.

1162Ă—557 33.1 KB

Chart 2: Euler DAUs over the last 3 Months

Additionally, over the last three months, daily active users have only increased by 26 (56 to 82), which means the DAO is spending ~$13,461 per new DAU. This demonstrates that the current distribution system is not sufficiently attracting new users. Instead, only those that already know about Euler are taking advantage of these rewards. EUL distributions should therefore be adjusted to better attract users to the protocol.

As Euler is currently working on many new features such as Euler Swap, Baby Euler and others, it makes sense to adjust EUL emissions and save some to be distributed to attract users to these new features.

Current EUL Distribution

Euler currently distributes 52k EUL per epoch since eIP 51.

  • 15,000 per epoch for staking rewards
  • 8,000 EUL per epoch via gauges to borrowers on each of USDC, WETH, and WStETH markets (24,000 per epoch in total).
  • 8,000 EUL per epoch shared proportionally among all assets with a Chainlink oracle (either now or in the future) (8,000 per epoch in total).
  • 5,000 EUL per epoch is distributed to Euler Boosted Pool on Balancer (3-month trial period)

Proposed Changes to EUL Distribution

Limit distribution to 36k EUL per Epoch

  • 15,000 per epoch for staking rewards
  • 4,000 EUL per epoch via gauges to borrowers on each of USDC, WETH, and WStETH markets (12,000 per epoch in total).
  • 4,000 EUL per epoch shared proportionally among all assets with a Chainlink oracle (either now or in the future) (4,000 per epoch in total).
  • 5,000 EUL per epoch is distributed to Euler Boosted Pool on Balancer (3-month trial period)

This would save the DAO 16,000 EUL or ~$115,200 per epoch/$230,000 per month. This extra EUL can be saved for future initiatives where they can be more effectively deployed to help attract users and decentralize the protocol.

Multichain

Euler will be going multichain, with proposals for Polygon zkEVM and BNB Chain and deployment on Base testnet. The first steps of these deployments are anticipated to be released within the next month. Therefore, Euler DAO should retain EUL to provide incentives on other chains alongside mainnet to incentivize usage on those chains. With the immediacy of these upcoming deployments it is important to adjust EUL distributions now to have adequate time to prepare for new deployments.

Quarterly Reviews

We also recommend that there should be quarterly reviews for the EUL distribution to provide a holistic view of the impact of this incentive mechanism and whether an increase or decrease is necessary. This review will provide cadence in evaluating the token incentive scheme in the DAO and enable the community to make an informed decision in evaluating the scheme.

For example, if EUL goes through another price increase, like in the past few months, then Euler DAO could consider reducing its token incentives.

Next steps

The Euler Foundation would need to make the following adjustments to the Eul Distribution scheme.

  • Lower distribution per epoch via gauges to borrowers on each of USDC, WETH, and WStETH markets to 4,000 per market (12,000 per epoch in total).
  • Lower distribution per epoch via gauges to borrowers among all assets with a Chainlink oracle to 4,000 per market (4,000 per epoch in total).
  • Implement a new distribution mechanism the redeploy the saved EUL once the community agrees upon the best method.

Relevant Links:

Pros and Cons of This Proposal

Pros

  • This would save Euler DAO $230,000 per month
  • Would save EUL to be used to promote new products
  • Extra EUL could be used in ways that more efficiently decentralize Euler

Cons

  • This could cause some users farming rewards to stop using Euler
  • If Eul emissions are never redeployed to a new emissions plan, it could stifle decentralization efforts
  • Yes, in favor of the proposal
  • No, against the proposal
  • Modify the proposal

0 voters

6 Likes
2

didn’t we just voted to increase distribution.

“current users are gaining more and more voting power which could create issues” this is viewed with a myopic lens, the slow dissemination of the governance token is one of the most successful in terms of lock stepping with the protocol development and achieving the goal of creating a community.

if the large holders sell, they distribute ownership, if they don’t, they form diamond hand community members. i don’t see an issue either way.

3

Euler DAO voted to decrease distribution but extend the program past its trial period. Within the recent decrease, Euler DAO moved around some of the EUL incentives to make looping LSDs more attractive to users.

There is a limited amout of EUL. StableLab believes that the program plays a key part, but with a combination of multichain and other initiatives in play, it would be in Euler DAOs best interest to retain more EUL, since the current distribution is not playing out as hoped.

5

Title: eIP 57: New Euler Distribution Strategy
Author(s): @Matt_StableLab @Bobbay_StableLab
Related Discussions: eIP 51, eIP 24
Submission Date: March 9th, 2023

Simple Summary:

This proposal aims to adjust the EUL emissions to maximize their effectiveness at attracting new users to Euler.

Abstract:

In order to progressively decentralize governance of the Euler Protocol, EUL is distributed to protocol users over at least 4 years. This helps give the users of Euler a say in how the protocol should function. However, the current distribution is not efficiently accomplishing this mission. This also introduces a quarterly review of the EUL distribution scheme.

Motivation

While Euler continues to distribute 52,000 EUL per epoch, the number of EUL holders is not growing as intended. This proposal would alter the EUL distribution scheme to decrease emissions to 36,000 per epoch. This will allow more EUL to be saved for new initiatives Euler Labs is currently working on, such as EulerSwap. This will be a more efficient system to attract new users to Euler and help the protocol become more decentralized.

Specification

Current Cost

Currently, 52,000 EUL is distributed every epoch (2 weeks). This is ~$700,000 that the DAO is spending every month. This distribution system was created to help Eulers users have a say in governance. However, currently, this is not what is happening.

1156Ă—567 23.5 KB

Chart 1: EUL holders over the last 3 Months

Eul holders have only increased by 325 over the past 3 months (2154 to 2479). Three months is about 6 epochs which means the DAO is currently spending ~$6,343 to gain each new EUL holder. This clearly shows the current distribution mechanism is not effectively decentralizing Euler DAO. Instead, current users are gaining more and more voting power which could create issues.

1162Ă—557 33.1 KB

Chart 2: Euler DAUs over the last 3 Months

Additionally, over the last three months, daily active users have only increased by 26 (56 to 82), which means the DAO is spending ~$13,461 per new DAU. This demonstrates that the current distribution system is not sufficiently attracting new users. Instead, only those that already know about Euler are taking advantage of these rewards. EUL distributions should therefore be adjusted to better attract users to the protocol.

As Euler is currently working on many new features such as Euler Swap, Baby Euler and others, it makes sense to adjust EUL emissions and save some to be distributed to attract users to these new features.

Current EUL Distribution

Euler currently distributes 52k EUL per epoch since eIP 51.

  • 15,000 per epoch for staking rewards
  • 8,000 EUL per epoch via gauges to borrowers on each of USDC, WETH, and WStETH markets (24,000 per epoch in total).
  • 8,000 EUL per epoch shared proportionally among all assets with a Chainlink oracle (either now or in the future) (8,000 per epoch in total).
  • 5,000 EUL per epoch is distributed to Euler Boosted Pool on Balancer (3-month trial period)

Proposed Changes to EUL Distribution

Limit distribution to 36k EUL per Epoch

  • 15,000 per epoch for staking rewards
  • 4,000 EUL per epoch via gauges to borrowers on each of USDC, WETH, and WStETH markets (12,000 per epoch in total).
  • 4,000 EUL per epoch shared proportionally among all assets with a Chainlink oracle (either now or in the future) (4,000 per epoch in total).
  • 5,000 EUL per epoch is distributed to Euler Boosted Pool on Balancer (3-month trial period)

This would save the DAO 16,000 EUL or ~$115,200 per epoch/$230,000 per month. This extra EUL can be saved for future initiatives where they can be more effectively deployed to help attract users and decentralize the protocol.

Multichain

Euler will be going multichain, with proposals for Polygon zkEVM and BNB Chain and deployment on Base testnet. The first steps of these deployments are anticipated to be released within the next month. Therefore, Euler DAO should retain EUL to provide incentives on other chains alongside mainnet to incentivize usage on those chains. With the immediacy of these upcoming deployments it is important to adjust EUL distributions now to have adequate time to prepare for new deployments.

Quarterly Reviews

We also recommend that there should be quarterly reviews for the EUL distribution to provide a holistic view of the impact of this incentive mechanism and whether an increase or decrease is necessary. This review will provide cadence in evaluating the token incentive scheme in the DAO and enable the community to make an informed decision in evaluating the scheme.

For example, if EUL goes through another price increase, like in the past few months, then Euler DAO could consider reducing its token incentives.

Next steps

The Euler Foundation would need to make the following adjustments to the Eul Distribution scheme.

  • Lower distribution per epoch via gauges to borrowers on each of USDC, WETH, and WStETH markets to 4,000 per market (12,000 per epoch in total).
  • Lower distribution per epoch via gauges to borrowers among all assets with a Chainlink oracle to 4,000 per market (4,000 per epoch in total).
  • Implement a new distribution mechanism the redeploy the saved EUL once the community agrees upon the best method.

Relevant Links:

Pros and Cons of This Proposal

Pros

  • This would save Euler DAO $230,000 per month
  • Would save EUL to be used to promote new products
  • Extra EUL could be used in ways that more efficiently decentralize Euler

Cons

  • This could cause some users farming rewards to stop using Euler
  • If Eul emissions are never redeployed to a new emissions plan, it could stifle decentralization efforts
3 Likes