Build KPI Options with UMA to speed Kashi Adoption

This is a proposal to launch Sushi Swap KPI options, using the UMA protocol. Inspiration taken from this interview between Clayton from UMA and 0xMaki from SushiSwap.

What is a KPI option?

A KPI (Key Performance Indicator) is an incentive used to grow a certain metric. There are several approaches that could be used by SushiSwap, which we will explore here.

An example of a KPI option is the UMA KPI option. On march 31st, UMA completed an airdrop of 1 million KPI options tokens (uTVL-0621) to 7135 addresses that had participated in the governance of those protocols. UMA targeted Sushi Swap,Yam, BadgerDAO, and Balancer. Some of you in the Sushi community were probably recipients. Those options are then redeemable on 06/21, with a payout based on the TVL of UMA.

What can UMA do?

Well, Sushi Swap is a community just like us SuperUMAns, in that we share the same values, and the same goals, GROWTH and adoption. UMA’s infrastructure can be used to launch these KPI Options as well as to co-promote our coordination.

Suggested Targets?

Clayton Roche from UMA, recently had a chance to interview the great 0xMaki where he had some suggestions he would like to see.

#KPI option 1: When the liquidity pool (the metric we would use) hits X amount, 10m to 50m was suggested, the KPI token would double in value.

#KPI option 2: When Sushi Swap hits xxx,xxx trades in the next 3 months (KPI options could be the incentive to achieve that goal.)

#KPI option 3: When TVL on Kashi hits 100m. A KPI option could be given out for migration from Lvl1 to Lvl2 to encourage the growth in that pool.

Concerns for the Sushi community?

One concern that 0xMaki had was the system being manipulated. This could happen if, despite a widespread airdrop, the options were collected by a few whales who would game the system. This concern needs to be addressed in the design.

KPI Options for SushiSwap Proposal

UMA’s community of “Super Umans” visited the SushiSwap discord to discuss this proposal with the community. Based on responses we gathered from those who participated, focusing on Kashi adoption is the key goal right now.

Furthermore, it seems that people are most interested in targeting TVL in Kashi.

Risks + Mitigations

To mitigate the risk of someone concentrating a lot of options tokens then manipulating TVL, I propose that the Option be pegged not to TVL at the moment of expiry but to the 30-day average TVL at expiry.

This would make it quite costly to manipulate TVL, because someone would have to lock their own capital for that entire period to increase the value of their own tokens.

Another risk is the Sushi tokens being held in UMA’s contracts. It has been audited by Open Zeppelin. There have been no security concerns with UMA’s collateral storage.

The concerns with UMA are typically around the financial engineering of a particular synthetic, for example, if the value of a collateral were to drop suddenly and positions were unable to be liquidated in time to keep the synth fully collateralized. This scenario simply does not apply to KPI Options, as they are fully collateralized by definition.

Airdrop Proposal

We propose that Sushi consider locking 5 million SHUSHI tokens to mint the call options, so there would be a maximum upside of ~$60 million. However, the target TVL for Kashi for this maximum payout should justify such a high possible payout.

It is certainly reasonable to have these tokens expire valueless if the target is not hit. In UMA’s case, for our airdrop, we decided to have them expire at a minimum of .1 $UMA, but Sushi is under no obligation to do that. There is no downside to this in terms of distributing Sushi if the goals are not met! If the goals are not met, the foundation behind SushiSwap would just retrieve their tokens.

  • In UMA’s case, we distributed most of the options but withheld some for the community, to be distributed as incentive-aligned bounties.
  • We propose that Sushi run this campaign targeting developers + reward them alongside hackathons.
  • Especially for developers, if they are rewarded in such a way that by collaborating with each other they can maximize their own payout, you might see a new type of buidling emerge.

Open Questions + Next Steps

What should the payout ranges be? What TVL level in Kashi would justify distributing $60 million in SUSHI for?

Who should receive them?

The next steps are:

  1. Gather community feedback from Sushi and integrate into a proposal that specifies more details of the airdrop + construction.

  2. Solicit someone, ideally from the Sushi community, to take point on writing the UMA Improvement Proposal for the Option token. UMA would pay a bounty for this and would accept a matching bounty from Sushi if they were inclined!

Primer on KPI Options

“Everybody is a winner in 2021” - 0xMaki

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I think these options could be very timely if set in motion quickly. The AAVE/Polygon marriage is likely to spur a lot of “pay to borrow” initiatives, and Kashi would be behind the ball if they didn’t do at least something like this.

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TVL is not a super interesting parameter for Kashi, we should not artificially inflate it as it would then subsidize loans and disincentivize organic lenders.

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Hey Clearwood- This is interesting to me. After watching the linked video above, 0xMaki suggested TVL for Kashi which I understood to indicate mush more usage/volume in general. I agree with you that the aim should not be to artificially inflate it, but ultimately I guess I was thinking more along the lines of what @Feld commented on. This could be a catalyst to help adoption of Kashi.

Is there another metric that you think would be more valuable to measure? Something like daily/weekly active users?

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I believe any or all of the above. 0x Maki had suggested when Kashi hits X amount of users, in X amount of days ,or months.

Thats what is cool about these KPI options,is they can be tailored, however the Sushi community wants. The infrastructure is there to deploy it fairly quickly as well from what I understand.

They are very good about answering any questions people have over in their discord.

I believe that we will always have metrics problems if the betting market is larger than the primary market.
I don’t think we should bet such a large proportion of the treasury on it.
The best metric would be value generated for xSUSHI holders which should be significantly larger than our downside risk.

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Target xSushi holders as airdrop recipients? Once Kashi hits X amount of users at such a date,KPI options are redeemable as X amount of xSushi. More than likely recipients will roll that back into Kashi, win win.

Also I believe 60m was just a suggestion. It definitely could be adapted for a more comfortable number more suitable for the Sushi community

Given solely targeting TVL doesn’t seem to make sense, perhaps we should be incentivizing both depositors and lenders simultaneously.

One idea could then be to target borrowing volume too in addition to targeting supply side KPIs?

I do think that using KPI options to incentivize Kashi usage is a good idea in general though, we just have to make sure it is as well designed as possible before doing it.

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Hi @ClaytonUMA,

I Co-host the Sushiswap Forum Community Call Thursdays at 2 PM PST. Would you or any other UMA representatives be open to joining us to discuss this proposal in the next week or two?

The metric that I would choose for a KPI option would be Time Weighted Average Loan. I may flesh out some of my views on Kashi improvement in a future thread, but I think this metric more actively fits actual adoption. Another more complicated metric could be deviation of TWA ultilization of X choosen pairs from the goal utilization of 70-80%.

I have all sorts of ideas as for possible metrics for an airdrop. I would use this airdrop both to drive desirable metrics (Reward Kashi early adoption, Reward Volume on our exchange in particular the smaller transaction users, Reward those who didn’t dump their vesting) and to reward those who have been destroyed by impermanent loss supplying the Sushi/Eth pool (50 days ago I entered this pool and I am down 7% verse holding including earned SUSHI and fees). I understand that this is a risk of LPing and an outlier as the price action has been the worst since Nomi the dump, but even an extremely loyal sushi fan like myself is tempted to move liquidity elsewhere as the 28% we are giving is laughable regardless of the IL.

I have interest in helping draft a UMAIP, if none have expressed interest or if someone would like support/collaboration.

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Yes I’m sure that can be arranged i will contact Clayton

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We will have someone there to represent UMA thanks for the invite. This will be a great partnership.

UMA will have someone there to represent, and answer any questions you guys will have. Sounds like we can piggy back onto your existing UMIP as well so this can be done a bit easier. @Mhairi and @Hagz48 can be there. If you can let us know were we can get on, that would be great. Looking forward, and thank you.

Hey @orionmuir,

I’m just getting up to speed with the discussion around KPI options for Kashi (thanks @Hagz48 for inviting me overr) and happy to join youse for your community call on Thurs 6th April at 14.00 PST (21.00 UTC). How do I access the community call?

A KPI option can be as straightforward or as complex as you wish, the main thing is making sure that it can be messaged succinctly to recipients, so that they know what kind of actions they are trying to encourage for Sushi to most effectively mobilise its community to achieve its aims.

All of our UMIPs are available on our github, so feel free to have a nosey and take a look at how they are written and what is required. Come on over to our discord as well and we will make you feel at home. Our SuperUMAns are pretty awesome at helping out when folks want to write new UMIPs, but I kick around, if you have any specific questions that you need a quick answer to.

See you Thurs - if there’s anything you want clarified in advance, drop me a message.

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The community call is on the sushiswap discord channel in the #voice-lounge at 21:00 UTC.

I would love some more discussion by the community as to what metrics they think would be good for the option and for the airdrop. My suggestions were just first impressions hoping to get a dialogue started and to get some feedback.

Hopefully between Thursday’s community call and Friday’s Core team youtube stream we can get some creative ideas.

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Mhairi and I will be there. She can answer just about any question you can think of.