[GIP-1] Setting a conversion rate for SPIN to GYFI and GYFI claim options

TL;DR

• We propose to set the SPIN-to-GYFI conversion rate at 1066 SPIN per GYFI. We propose that SPIN holders can boost their conversion rate by up to 150% by choosing to lock up their tokens.
• Currently, around 300m SPIN are allocated. At the above proposed conversion rates, this corresponds to 2.05% – 5.14% of GYFI total supply allocated to SPIN holders (where the range depends on the lockup option chosen by users).
• We propose to increase the cap on SPIN from 500m to 700m. If all 700m SPIN are allocated and at the proposed conversion rates, this corresponds to 4.79% – 11.98% of GYFI total supply (again, where the range depends on the lockup option chosen by users).

Background/motivation

This GIP contains two related topics:

1. What the base conversion rate from SPIN to GYFI (Gyroscope’s Governance token) should be
2. What the claiming options for GYFI should be

These decisions should be made by the Gyroscope Protocol’s governance community.

The initial total supply of GYFI is set at 13.7m tokens. Additional distribution properties of the token were ratified here.

Out-of-scope for this GIP are other important topics such as an airdrop to Founding Member NFT holders, methods the DAO will use to bootstrap liquidity and other key topics. These will be covered in future proposals in the coming weeks before January.

First token distribution is anticipated to be in January 2025, but the precise date will be the subject of a future proposal.

Summary of proposal

1. A rewarded time-locking mechanism. At the moment of any future airdrop, every user will be faced with a choice:

   1. Option 1: fully-liquid GYFI tokens. Any user will be able to convert their SPIN to GYFI at a rate of 1066 SPIN per GYFI. A table of APRs implied by different FDVs is provided below for reference. There will be no vesting of tokens up to a cap. The cap will be set high so that it only affects the very largest SPIN holders. This is standard in most projects.
   2. Option 2: lock up GYFI for 9 months and receive 40% more GYFI than Option 1. The locked tokens will start to unlock immediately over the course of 9 months linearly.
   3. Option 3: lock up GYFI for 18 months and get 150% more GYFI than Option 1. There will be a 9 month cliff, so that users receive no liquid tokens before month 9 and then tokens linearly unlock from month 10 onwards.

2. Users will be able to choose a combination of options 1-3: of their initial GYFI allocation, they can choose just one option or split their allocation across multiple options. For example, a user may choose to receive 20% of their GYFI immediately (without an additional boost) and 80% according to Option 3.

3. SPIN holders above a large threshold will be subject to an additional linear lock-up of 6 months on top of the three options presented above: these holders can choose, for the part of their token that lies above the threshold, the modified options 1 (6 months linear unlock), 2 (15 months linear unlock + 40% more GYFI), and 3 (9 months cliff + 15 months linear unlock + 150% more GYFI). This means that holdings above the threshold are always subject to a mandatory lockup, and holders can choose to lock their tokens up for a further amount of time to receive additional tokens. The threshold will be chosen such that only few, very large SPIN allocations are affected.

4. In addition, a ‘surge’ SPIN scheme will be set up, to run a campaign for 3 weeks targeting even higher APRs.

5. Define an extra 200m SPIN to be held in reserve above the 500m prior cap. This SPIN is to be used in the event the 500m SPIN cap is met as a measure to keep incentives fluid into and beyond the token launch until any replacement incentive programs should take over. With more clarity now on the token distribution timeline and many scaling factors now coming into play for GYD and E-CLPs, this is a prudent backup measure to ensure growth remains fluid. Note that, since this proposal fixes the SPIN/GYFI conversion rate, emission of more SPIN would not dilute existing SPIN holders in terms of GYFI received. Governance could later vote to further extend the SPIN program beyond the 200m SPIN boost if it deems it beneficial.

If this proposal passes, it is proposed that the team maintaining the frontend reflect the decision on the SPIN/GYFI conversion rate and make it easy for users to understand what it means for them.

What this means in APRs for different FDVs

Assuming no tier boost and SPIN earned via a 10x rate:

FDV at launch	Option 1 - fully liquid, no boost	Option 2 - 40% boost	Option 3 - 150% boost
$30m	18%	25%	45%
$50m	30%	42%	75%
$75m	45%	63%	112%
$100m	60%	84%	150%
$200m	120%	167%	300%
$500m	300%	420%	750%

Users who have earned SPIN tier boosts receive APRs that are significantly above the baseline with no tier boost. For example, assuming a tier boost of 1.5x (Tier 5) and SPIN earned via a 10x rate:

FDV at launch	Option 1 - fully liquid, no boost	Option 2 - 40% boost	Option 3 - 150% boost
$30m	27%	37%	67%
$50m	45%	63%	112%
$75m	67%	94%	168%
$100m	90%	125%	224%
$200m	180%	251%	449%
$500m	450%	630%	1125%

Feedback from Step 1

This GIP has evolved significantly following multiple rounds of feedback from the Community, both on the forum and on Discord.

The main community concerns were:

• Both vested and unvested options were discussed, and many community members felt that there needs to be fully liquid option. The new proposal provides both liquid and vested options. Users who want to commit to a longer term position in the project can get very generous allocations while users who prefer immediate liquidity can choose rewards that remain above comparable rates on their TVL (based on the 10x SPIN rate or the combination of SPIN and BAL rewards that was prevalent before the 10x rate was introduced).
• Uncertainty about the timeline for distributing GYFI to SPIN holders. Guidance is given in this proposal that the target of first token distribution is January 2025 with precise date the subject of a future proposal. Timelines will be able to be much clearer from here on out.
• A lack of information about the team and investor unlocks. All of this information will now be collated and shared with the community in the next 2-3 weeks.
• There was concern that SPIN holders were not being rewarded for the length of time they have provided liquidity. It should be remembered that since SPIN is earned on a $-hour basis, the length of time commitment is already directly rewarded in the SPIN total. The SPIN tier bonus rates also add an effect on top of this: users who use the system longer get tier boosts to their SPIN earnings. Gyroscope OGs, such as founding members, also receive a free tier boost.
• There was concern about governance capture. It should be noted that the Gyroscope Governance system is specifically and fundamentally designed to avoid this issue in its multi-stakeholder design. See the docs here.
• There was concern about what the GYFI distribution might be for other groups (like Founding Member). As said above, these matters will be addressed in a follow-up proposal. As a reminder, founding members receive a free SPIN tier boost, and so already receive large bonus potential within SPIN itself.
• It was raised that there should be a plan in place for future SPIN/GYFI incentivization past the token launch. We have added a plan here for a reserve amount of new SPIN to fill any gaps in incentive programs and that could be phased out when other incentive programs take shape.