APY handling way in L2?

Plans are underway to deploy the Dev Protocol to L2 (Optimistic Rollups), and all the changes for deploying to L2 have been developed. But there are some considerations, and I would like to discuss them.
Repo: GitHub - dev-protocol/protocol-l2: 🗞️ Dev Protocol for Optimistic Rollups

TL; DR

What do you think that the APY is lower than L1 at the beginning of L2?

Difference between L2 and L1

Unlike many sidechains, L2 is the best scaling solution for Dev Protocol in that it has the security of L1.

However, L2 is not the same as L1 and looks like a different chain to L1 from smart contracts.

In Dev Protocol, there are the following differences between L1 and L2:

  • L1 has non-circulating supplies such as ecosystem funds, and L2 does not.
  • L1 has 1,644 Property tokens (a.k.a Creator tokens), but L2 does not.

Due to these differences, the beginning of L2 offers a lower APY than the L1. This is because APY is determined by “total supply to staking ratio (higher brings lower APY)” and “number of assets (higher brings higher APY).” L2 has a higher staking ratio than L1 and fewer assets than L1.

Solution

Dev Protocol’s Policy contract is the most important part of controlling APY and is controlled by governance. Use different policies for L1 and L2 to eliminate the difference.

  • Staking ratio: Increase the reward per asset.
  • The number of assets: Use a virtual number of assets.

Staking ratio

Increase the annual reward amount per asset. Use the L1’s annual reward amount per asset just before being deployed in L2 so that L2’s policy can calculate the near value of L1’s annual reward amount by the ratio of circulating supply to staking at that time.

Currently, the annual reward per asset of about 304,790 at the total supply to staking ratio of 5.08%. To reach this value at a circulating supply to staking ratio of 32.42%, L2’s Policy will use 0.00007 as the maximum reward per asset and second. *In L2, seconds are used as the time unit instead of the block number (=increases every 15 seconds in L1), so 1 year is calculated as 31,536,000 seconds.

Number of assets

Virtually uses the number of L1 assets just before being deployed in L2. And the increase in assets does not affect APY until the actual number of assets reaches the virtual number. In other words, the number of assets is always treated as 1,644 in L2 until the number of assets exceeds 1,644 (currently).

I look forward to any feedback!

I hope L1 and L2 are as fair as possible and work with few changes. I welcome your feedback!

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I would also suggest setting the interest rate for L2 higher than L1.

I understand that the number of Property contracts authenticated and the number of staking are related to the annual interest rate.
I think it would be a good idea to add a policy setting to them to encourage people to migrate to L2 by giving them a higher rate than L1.

I am aware that L1 is scheduled to be discontinued eventually.

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Perhaps the best way to approach the transition would be to go “all in” on layer two?

If it truly is the more sustainable place to be, it would be less painful if everything was migrated together or sufficient incentives were in place to encourage the move over to layer 2.

Don’t underestimate the power of liquidity though… If the liquidity remains on layer 1 it’s unlikely layer 2 will see much traction?

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This is what I think about this.
Higher apy on L2 to attract more users.

imo the all-in L2 strategy is the best bet we can make at the moment.

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I agree that L2 still has only a secondary role in accessing DEV tokens, as most of the liquidity is still in L1. Another important point is whether CoinMarketCap and CoinGecko will watch the DEV on L2 DEXs. In that sense, I don’t think we’ll be all-in to L2 in the coming weeks, imo. Therefore, I think that APY that is similar to or slightly higher than L1 is appropriate for L2.

Of course, I understand that once a protocol is in motion, it is exposed to the free market and cannot be controlled. Therefore, what is important in this discussion is “what kind of initial conditions should be used”.

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Definitely! All-in I meant as a process. The incentive of L2 APY being higher is only an incentive if the lower L1 APY exists.

Once the balance (staking inflow) has tipped over to L2 we can think of what to do with L1.

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Regarding this, I think I can start e-mailing them beforehand and explaining the situation. I know that CoinMarketCap solves the issues in a few days.

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Given that Arbitrum will make Dev Protocol usable due to lower gas fees, we need to create an incentive to attract more users to L2. Both APYs will be disconnected, so even if we offered a higher APY on Arbitrum, the only thing it would do is, we’d attract some first movers by this higher APY, but, in the end of the day, the unstaking on mainnet would just cause both markets to reach a higher equilibrium APY (compared to mainnet) due to arbitrage.

So, since our goal is not that, but, it is to cause an inflow of staking to Arbitrum, AND given the fact that we can’t introduce a cap on mainnet (at 33% for example), this is what I propose:

We use Treasury funds to ’ manipulate ’ the apy by staking on the DEV pool on stakes.social, then using those rewards to fund the incentive on L2.

This way we can keep it at ~ 33% and the incentive would actually work.

:slight_smile:

Yes i think its a really good idea. Most of the people will want to move their funds to L2 since it is what will make the protocol usefull. I still believe it will take some time. Because not many people are into L2 and will not know much about bridging etc…

At this point what will attract stakers will be the higher APY on L2. I think APY on l1 should stay the same. But for L2 it should be maybe %60’s for first few months. Until %75+ of funds move to L2, the APY can turned into its ideal numbers.

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