My proposal is to distribute a portion of the $OPIUM tokens to insurance takers, just like how they’re distributed to liquidity miners right now.
Section 5.2 of the Opium whitepaper describes the $OPIUM token economics, and states that 60% of the tokens will be distributed to “active users”.
The definition of active users will be decided by governance as well on a regular basis.
Obviously, in the case of USDT protection, there are two types of users: Liquidity providers and insurance takers. Right now, a portion of the $OPIUM tokens is already made available to early liquidity miners, however, there does not seem to be any plans yet to make tokens available for insurance takers.
To ensure a healthy governance system, both sides need to be represented in the governance, as not to skew the project in favour of one side (in this case, the liquidity miners). Therefore I propose that insurance takers will be deemed part of the “active users” that are entitled to a share of the $OPIUM tokens.
I do not propose any specifics of such a distribution. I think this is something that we should decide as a community. A 50/50 split of the $OPIUM tokens between liquidity providers and insurance takers makes sense, but maybe the distribution needs to be skewed in favour of the liquidity providers, as incentivizing liquidity mining is also important to ensure enough liquidity is available to make taking insurance an attractive and sustainable option.
Totally agree in terms of general idea.
But about reward distribution I bet on more incentive drivers for insurance takers.
Just take a look on to cDAI_fixed_vs_turbo product. There is no pool utilization at all… (Ali, correct me if I am wrong here…)
If pools have a weak utilization - there is no much reason for liquidity providers to join in the pool next time, because their profits only bootstraped by $OPIUM airdrop but not an “organic” protocol-generated profits…
More of that…
Insurance takers actually take more risk to loose their moneys (insurance price), because there is no precedent of when USDT is droped so much from the peg (yes it was… but cmon…)))… But insurance makers - controversy… they are in pretty “calm waters” by providing liquidity… with sooo little risk to pay at the end.
So, my point is that we definetely should rebalance rewards weights to the taker side. At least 60\40
but maybe even more…
I agree that insurance takers are active users and should be represented in the platform governance. I believe that the distribution needs to be skewed towards liquidity providers as they have a slightly higher risk in the event the pool has to pay out a significant event. The insurance takers pay a fixed fee up front to cap their risk so the additional Opium distribution would still be be a significant incentive. We can vote on the amount (fixed per month vs target APY). We should target parameters like Total value staked and pool utilization % to tweak the program as needed.
Indeed USDC stakers should be rewarded for more OPIUM token as they are bearing the majority of USDT risk. But currently the utilization is also an issue since not so many people are buying the insurance, which may affect the revenue generation for USDC stakers and the healthy growth of the protocol (given the OPIUM reward may end in the future). It is helpful to grow the protocol on the user side if insurance takers could be incentivized, even in a small portion.
Seems like everyone here agrees that buyers should also be entitled to a portion of the $OPIUM rewards. Most of you also seem to agree that insurance sellers should be rewarded a higher portion of the rewards than buyers. Personally, that’s why I think we should start with a 25% - 75% distribution: 25% of the $OPIUM rewards should go to buyers. We can observe the effect of this change and make this percentage higher or lower depending on the resulting staking behaviour.
What do you think? Please cast your vote (just for signalling):
Which percentage of $OPIUM rewards should insurance buyers get?
0% for buyers - 100% for sellers (current situation)
Well, the main point that insurance can not be free! Otherwise people would sell governance tokens and that covers cost of insurance! Does not make any sense like this. So in the current proposal I would say no, but may be makes sense if those tokens are locked and can not be traded, in this case it would reflect philosophy of Opium to allocate ownership to the active users.
Unfortunately, the signalling vote was lost by a small margin. In the last few hours of the vote some “Against” voters joined the vote and flipped the vote from “For” to “Against”.
Looks like insurance takers will not be considered active users anytime soon. The insurance sellers will keep all the voting power over Opium and maintain their power to keep the rules of the system in their favour.
Hey Robdeprop, maybe the terms should be reconsidered
I personally like the idea of insurance buyers incentives, but considering $OPIUM rewards/insurance premiums ratio this insurance will not only be for free, but also will be profitable in any case. I mean even if insurance event is not triggered.
So it will only bring users jumping on free money and I don’t think it’s considered as a support for the project
Agreed. The buy-side OPIUMs could be locked in a stringent manner, e.g. linear release for 1yr or even 4yr. Or we can have something like CRV, the buy-side only receives time-locked OPIUMs (like veCRV), but they can vote or delegate.
Just because OPIUM rewards would be distributed to insurance buyers does not mean insurance would be free. If it WERE free, then normally the free market would make sure it’s not free anymore given enough time. Concretely put, when enough people buy insurance, the fixed amount of OPIUM rewards will be divided over enough people such that the value of the OPIUM reward does not weigh up against the cost of the insurance anymore.
However, even though distributing OPIUM is the most obvious method to me, I’m definitely also on board with discussing alternate ways to ensure insurance takers get included in the governance system. Locked tokens, NFT’s… It doesn’t really matter. In the end, giving insurance takers a voice in the governance system is the ultimate goal.