Keep Proposal Overview: Shifting Incentives towards Coverage Pools and TBTC v2

A proposal titled “Shifting incentives towards TBTC v2 and Coverage Pools’ was recently introduced by Keep Network community member Ben Longstaff. The proposal addressed a need to adapt the current incentives in Keep Coverage Pools to provide greater adoption to TBTC 2 through the bridge transition between TBTC v1 and TBTC v2. This is to ensure that incentives are aligned with the launches and needs of the protocol as it transitions to TBTC v2.

After community discussion and calls, a second version of the proposal with one amendment in regards to the allocation of liquidity to the pool of TBTC/ETH was then introduced by Evandro Saturnino and voted on successfully by the Keep community. Now, the community has voted to move incentives toward tBTC v2 and coverage pools. This means that rewards allocations are changing, and the update represents a major community-driven step towards Keep Network v2.

The proposal’s main intentions:

• Launch a v2 TBTC token so we can begin working on integrations with major networks
• Allow for a graceful unwinding of the tBTC v1 bridge when the tBTC v2 bridge is launched
• Change liquidity incentives so we can reward behavior that we need for the new network and bridge
• Transition the v1 tBTC bridge to be secured by our KEEP-only Coverage Pool.

Below is an excerpt of the first proposal “Shifting incentives towards tBTC v2 and Coverage Pools” about how the bridge will work and what the next steps of the transition will be:

How the v1 <-> v2 TBTC vending machine works

In v1 a user can deposit BTC to receive a non fungible TDT token specific to the Keep that holds the users deposit. The user can then exchange the TDT token for a fungible TBTC v1 token through a vending machine contract.

TBTC v1 is always backed by BTC.

A new vending machine contract to exchange TBTC v1 for TBTC v2 and unminting TBTC v2 for TBTC v1 will be deployed. This means that TBTC v2 tokens that are minted by the vending machine contract are backed by TBTC v1 tokens held in the vending machine contract, which are backed by BTC held by the Keep created for the deposit.

Once the tBTC v2 bridge is released users will be able to mint TBTC v2 directly with BTC. TBTC v2 will always be backed by either BTC or TBTC v1 that is in turn backed by BTC.

An overview of the minting mechanism:

• Everyone can mint TBTC v1-> TBTC v2 and unmint TBTC v2-> TBTC v1 WITH or WITHOUT a fee
• The DAO can raise or lower the redemption fee — this is important in case we want to pause unmints
• This strategy should be active all the time until the tBTC v2 bridge is ready.
• Holders will migrate to TBTC v2 because there will be incentives there.
• Holders will migrate to TBTC v1 in case of a collateralization ratio drop.

Proposed High Level Timeline for Rewards Transition:

• Launch the TBTC v2 token, transfer ownership of the minting fee to the DAO
• Move rewards from where they’re unnecessary to where they’re needed the most. Almost all v1 TBTC pools are no longer useful, and we need to incentivize v2 TBTC pools in order to get people to lock up their v1.
• Launch the KEEP-only Coverage Pool
• Move rewards from KEEP-only pool to the KEEP-only Coverage Pool
• Maintain rewards for KEEP/ETH pool because liquidity is essential for proper functioning of KEEP-only Coverage Pool

Changes from Proposal v1 and the successful Proposal v2.

Currently, the Keep Network team allocates:

• 25k KEEPs as an incentive for those who provide liquidity to the tBTC/ETH pool in Uniswap
• 170k KEEPs as an incentive for those who provide liquidity to the KEEP/ETH pool in Uniswap
• 250k KEEPs as an incentive for the Saddle stableswap pool

Totaling 445k KEEPs allocated weekly as incentives of liquidity rewards.

Additionally, per month the Keep Network team currently allocates:

• 200k KEEPs as an incentive for KEEP-only staking pool

What was kept from the first proposal:

• Move rewards from v1 TBTC stableswap pools to a new v2 TBTC stableswap pool on Saddle (250K KEEP)
• Move KEEP-only pool rewards to our Coverage Pool when it’s deployed (200K KEEP)

What has changed from the first proposal:

• Maintain the current incentives of 25k KEEPs weekly in TBTC/ETH pool unchanged. (Instead of cutting it off completely)

The second version of the proposal, which has been voted on and passed by the Keep community, will play an important role in providing the stability and liquidity necessary for Keep to transition to v2 and TBTC v2.

The Keep team is committed to ensuring that everyone is fully informed in this time of rapid development and positive change on the protocol. Everyone is welcome to move to coverage pools as soon as they are deployed. For more information on the timeline and process, join the Discord! Check out the proposals on the forum for more detailed information on the specifics of each proposal.

Terminology

• Vending Machine — the new set of contracts which, when deployed, will enable a mechanism to mint and unmint TBTC v2 tokens by depositing TBTC v1 tokens
• TBTC v2 — the token minted from the new vending machine, and eventually from the tBTC v2 bridge
• TBTC v1 — the token minted from using the tBTC v1 Bridge currently operating on Ethereum and the Keep Network
• tBTC v2 Bridge — the new set of contracts which, when deployed, will enable minting of TBTC v2 on Ethereum with BTC
• Threshold Network — the network formed from the merger of Keep and NuCypher, and on which tBTC v2 Bridge will be deployed
• KEEP-only Coverage Pool — the new set of contracts, which, when deployed, will enable a buyer of last resort for TBTC v1 tokens on the Keep Network

Questions or comments? Join our communities on Discord:

Keep Network — chat.keep.network

Threshold Network — discord.gg/6jQ9tz9BXY