Decrease OETH Drip Duration

Summary:

This proposal is to update OETH’s drip duration from 14 days to 7 days.

Background:

When reward tokens are harvested, the resulting yield is received by the Dripper contract and slowly distributed to OETH holders (instead of immediately upon harvest). This creates a smoother, more predictable yield and prevents attackers from being able to front-run large liquidity events for the protocol.

The OETH dripper's duration was changed from 3 to 14 days last month following a large build-up of AURA and BAL rewards tokens that were to be converted to OETH and distributed to holders as yield. Rather than have a one-off, temporary spike in APY for a few days due to a yield surplus, the DAO voted to drip the yield out over 14 days.

Currently, OETH is facing the opposite problem — a one-off, temporary decrease in yield due to an accidental lapse in the Curve voting incentives campaign. For context, a portion of OETH’s yield comes from incentivizing users to vote to increase rewards for the ETH/OETH Curve pool. The incentives were unfortunately not scheduled last week over the holidays and therefore the OETH yield will likely be lower than expected for a short time. New incentives have already been queued up for this week, which should return OETH yield to business as usual.

Knowing that the incentives campaign has been resumed, the DAO can expect the OETH yield to dip and then recover. There is, however, an opportunity to adjust the drip rate to partially offset the short-term drop in yield generated. Decreasing the drip duration would increase the distribution of yield over the short term, thus minimizing impact on holders.

Adjusting the dripper from 14 days to 7 days would approximately double the drip rate, and thus partially mitigate the expected drop in yield. This would also have the added benefit of bringing the OETH drip rate in line with the OUSD drip rate to reduce any confusion between the two.

Recommendation

Decrease OETH’s drip duration from 14 days to 7 days.

[Note: In the interest of avoiding any delay, I am submitting this Snapshot proposal on a parallel path to the on-chain governance proposal. Given the required time for on-chain voting and the 48-hour timelock before any changes to the OUSD or OETH contracts can be executed, if the proposal passes, the update would likely be live early next week (week of January 8th).]