Algorand 5M boost - how much is Algofi getting, and how will it be used?

Temperature Check
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Is it going to be the same emission %s alongside Bank? Can these %s be voted on?

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since algofi has more TVL algofi should get a lot more then GARD. the final list of eligible assets will be published 31st Adri said in the algorand discord. then the final ALGO allocation should be known

there are 2 ways to distribute these extra ALGOs imo:

  1. use same percentage allocation which is used for BANK emissions

  2. vote on another allocation plan

i prefer 2 as i think the idea of those ALGOs was to get new capital in, so we should think about ways to do that. i personally think STBL2 lending pools could use some higher percentage allocation

there was a discussion in general regarding that: Targeted DeFi Rewards Program (Algorand GP6 vote)

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if algofi were to get 1.25M ALGOs (which is the max) and we would use the BANK allocation this would be the estimated APRs (using 0.23$ ALGO price and current TVL levels):

Contract Allocation estimated APR
USDC L&E 26.75% 8.3%
USDT L&E 2.00% 3.8%
ALGO Borrow 0.50% 0.1%
USDC Borrow 0.50% 0.08%
goBTC Borrow 0.25% 1.13%
goETH Borrow 0.25% 1.05%
USDT Borrow 0.25% 0.67%
STBL2 USDC Market Supply 32.50% 4.74%
STBL2 ALGO Staking 8.00% 31%
STBL2 goBTC Staking 2.00% 12%
STBL2 goETH Staking 2.00% 20.9%
USDC ALGO Staking 7.00% 27.6%
ALGO Vault 10.00% 0.12%
STBL2 BANK Staking 4.00% 62.8%
ALGO BANK Staking 4.00% 56.7%

some ideas:

  1. remove all borrow allocations and add that to the ALGO borrow because thats the one that is getting used a lot during governance
  2. remove ALGO vault allocation completely as there are already enough incentives to use the ALGO vault out there and it has almost no influence anyways on the APR. i would again add something to ALGO borrow and the rest to the STBL2-ALGO/goETH/goBTC LP farms

if we add ALGO borrow incentives people will probably use the vALGO-ALGO loops and the ALGO supply naturally rises this way and this incentivizes new money coming in this way

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Agree with these proposals

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I don’t think we should remove the vault allocation as a vast majority of Algofi’s TVL is from the vault. I understand the desire to adjust rewards to stimulate user/activity. But you shouldn’t slight the group that’s responsible for a large chunk of the TVL. Removing from vault may have the opposite effect. Ppl may leave because a better deal can be had elsewhere.

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but do you see how much additional APR 10% of the ALGOs Algofi get would give vault users? its literally nothing and most of it goes to VCs, which means its kind of wasted imho

while the TVL of the vault is most of the TVL of algofi it doesnt mean we should give people more free ALGOs if it isnt substantial. i think increasing ALGO borrow indirectly would incentivize people using the vault AND the lending protocol because they could use the loop strategy more effectively. TVL is a nice metric but vaulted ALGOs are not the TVL we should focus on if there already a lot of incentives to use the vault already

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I would vote on this.

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Hi lobo,

Thanks for raising the discussion. Just some of my thoughts:

  1. Removing vault allocation
    As @nmadon65 said and I kind of agree with him, I don’t see this results in a positive impact on the total TVL. In fact, people will find somewhere else with a better deal to join the governance. I would agree if we just reduce it by half and use it for something else.

  2. Increasing ALGO borrow
    I also don’t see this having any positive impact on ALGO. I’m also not a fan of looping strategy whatsover since this just artificially inflate the TVL, not healthy for Algofi or Algorand defi as a whole. Another potentially negative impact is that this will just encourage people to short ALGO (as it makes ALGO borrowing cost cheaper)

  3. I would prefer adding more financial incentive to BANK and STBL2-based LPs.

On a side note, I’m a bit unsure what’s the plan from the Algofi team to increase use-cases of STBL2 and BANK. At present it’s a bit empty on this front.

Thanks.

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  1. If other projects want to waste their Algo rewards to give 0.1% more APR to users and VCs actually getting all these extra ALGOs I’m fine with it. If we don’t make Defi usable on algofi and algorand in general all that won’t matter imo. I am bit tired of giving VCs rewards just so they increase our protocols TVL and don’t help at all besides that

  2. Looping increases the borrow APR which therefore increases ALGO supply APR which incentivizes people using ALGO lending pools and put ALGO into the lending market aka new money. Sounds like free natural incentives for me

  3. That’s what I want to use the ALGOs which would go to ALGO vault users, raise the farming rewards and get more TVL that actually helps the protocol and is not just a number people can look at and feel then better

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Thanks lobo for the responses.

  1. If I’m not wrong, you calculated that 0.1% based on the current deposited ALGO in the Vault. Doesn’t it mean that if people leave for other platforms (with a better deal than using the Algofi Vault), that 0.1% will essentially increase (which in turn means that the opportunity cost of using Algofi Vault will be much higher without that incentive for the Vault usage)? On a side note, I do have a very different opinion on VCs. They are not evils and should deserve to be incentivized. In fact, VCs are critical for any eco-system in its early stage. Without VCs and their fundings and contribution to liquidity pools, there will be no Algofi anyway. The fact that Algorand eco-system lacks liquidity is mainly because we haven’t got a lot of VCs. We need more of them (and their hard cold money) not less.

  2. Looping does increase APR. However, that is quite insignificant (as an absolute number). However, the fact that people is highly incentivize to borrow millions of ALGOs and short it is not healthy for ALGO itself. I would prefer giving that incentive for USDC or USDT borrowers.

  3. I think we both agree on this front!

Thanks.

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might increase slightly, dont see a world where it would be significant. only if BC really commits only 50% of their ALGOs to governance this quarter, but the vaulted amount hasnt dropped that much yet

did you see what BC did with humble? there was a gALGO-ALGO farm to incentivize new people coming in. BC put their stake in it, APR dropped to 0.x% and no new people were incentivized to go there. thats not evil?

if the few people who use Defi on algorand have any effect on the ALGO price i would be shocked tbh. since borrowing ALGO is also the way to liquify your vALGO the borrow costs shouldnt become too high

if we agree where do we get more allocation from to be used for farms then?