ENZIP 13: INTRODUCING AN ENZYME AFFILIATE PROGRAM

[perhamgirl]

ENZIP 13: INTRODUCING AN ENZYME AFFILIATE  PROGRAM 

Title: Introducing an Enzyme Affiliate Program

Author: Luca Mossini & Mona El Isa, Avantgarde

Status: Draft - discussed in council meetings, never formally specced out.

Type: ENZIP

Created: Sep 19th, 2022

Background

The general idea for an Enzyme affiliate program has been lightly brought up and supported in past Enzyme Council discussions (initially by Will Harborne). However, nobody has ever formally thought out or presented how this could work in practice. Hence, we’d like to put forward a trial proposal here.

Motivation:

The proposed trial program will last for six months.

In running this program, we want to achieve the following:

• Growth in TVL.

• Greater awareness of Enzyme and its overall benefits (for depositors, managers, DAOs, institutions, etc)

• Increase the number of MLN holders

Design goals:

• The rewards should be linked to the direct source of fees for the protocol in order to be sustainable over time. 

• It should be simple yet effective. 

• The program should not be “gamable”.

Reward Pool:

We proposed 25,000 MLN (about $500,000 at today’s value) be set aside and allocated towards the initial trial affiliate  program.

Program details:

After some research, thought and discussion we’ve settled on the following proposed program details:

It is proposed that this program pays a fee rebate to affiliates that bring new managers with associated TVL to the platform. 

1. Trial will commence on an agreed date and last until all MLN from the predetermined capped budget are spent.

2. We recommend that the budget for this trial program is denominated in MLN and capped at 25,000 MLN.

3. affiliates can apply to get whitelisted and must be deemed eligible.

4. Eligible affiliates  will get whitelisted.

5. New vaults created on Enzyme must list a whitelisted affiliate’s ID.

6. 40% of the net protocol fees paid in MLN by the vaults will be rebated to the affiliate. 

7. Rebates will be paid in MLN

8. The cap may be reduced or raised at our discretion before completion of the program.

9. The program will be terminated once all of the 25,000 MLN have been distributed in rewards.

10. Once the MLN provision is exhausted, the Council or a trusted council delegate will assess the effectiveness of the program and will determine whether it makes sense to  extend the initiative, iterate on it or to terminate it.

11. The Council or a trusted council delegate will be  responsible for checking affiliate applications on a weekly basis.

12. The Council or a trusted council delegate will be  responsible for checking & approving affiliate fees and reserve the right to deny rewards if they are suspected abuse cases.

EXAMPLE 

Assumption all fees paid at same time, end of 6 mth period

MLN = $100 at time of fees paid

Whitelistedaffiliate	Average AUM over 6mth period	Protocol fees paid in MLN	Fees paid in MLN to affiliate
John (0x….123)	$10,000,000	250 MLN	100 MLN ($10,000)
Paul (0x….456)	$50,000,000	1250 MLN	500 MLN ($50,000)
Mike (0x….789)	$40,000000	1000 MLN	400 MLN ($40,000)

Glossary

affiliate : Individual or company who meets eligibility criteria. Their role is to introduce new vault owners/managers to Enzyme.

Vault owner / manager: individual or company who creates a new Enzyme vault with the objective of collecting capital (AUM) and deploying it on a series of DeFi strategies. 

Eligible : An eligible affiliate  is one who meets all the eligibility criteria.

Check & Approval — the process of filtering abuse cases (eg. affiliate  being the same as the vault manager)

Deny rewards: affiliate  rewards that are not going to be allocated because they are suspected abuse cases.

Whitelisted: affiliate that is known and has been authorised by the Council to introduce Enzyme to new managers in exchange for an agreed success fee.

affiliate Fee: receivable reward agreed with all affiliates, without exceptions or special agreements, that is payable by the Council upon successful accrual of protocol fees.

Eligibility Criteria

• The identity of the individual or the company who applies as an affiliate must be known. 

• The affiliates must present a formal application that includes background information  and clearly state why they think they qualify for such a role. 

• The affiliates must present the specific communication strategy they intend to employ in order to introduce Enzyme to new vault managers.

• All relevant applications are approved by the Council. Detected abuse cases lead to automatic exclusion from the program.

[exa256]

This is a great initiative, reminds me a lot of KPI options from UMA.

• Is my understanding right that the MLN affiliate fees will always be lower than protocol fees paid from the vault? ie. as a means to prevent reward mining

• It will be hard imo. to prevent collusion between affiliate vs. existing vault managers. I would recommend vetting new vault managers as well as the affiliate.

• 6 months would be quite short imo, considering that capital raise would slow down drastically in this climate- it will take some time before new managers would reach 7-8 digits AUM. Should this program be incentives for a) new vault managers outreach or b) new AUM? If former- it could be better to set up incentives similar to exchange's trade mining programs. If the latter, I suggest longer time horizon for average AUM or even scale rewards with the age of the vault.

[perhamgirl]

Hi @exa256 , thanks for your feedback! In response to your questions:

Is my understanding right that the MLN affiliate fees will always be lower than protocol fees paid from the vault? ie. as a means to prevent reward mining

Yes, that's correct. The idea is that the mining program shouldn't be costing us more than the fees we are accruing. We think this would be unsustainable and negative for token holders.

It will be hard imo. to prevent collusion between affiliate vs. existing vault managers. I would recommend vetting new vault managers as well as the affiliate.

We did wonder about this too. Agreed that a light vetting process makes sense. We can build this in.

6 months would be quite short imo, considering that capital raise would slow down drastically in this climate- it will take some time before new managers would reach 7-8 digits AUM. Should this program be incentives for a) new vault managers outreach or b) new AUM? If former- it could be better to set up incentives similar to exchange's trade mining programs. If the latter, I suggest longer time horizon for average AUM or even scale rewards with the age of the vault.

**Thats an interesting question. We hadn't considered incentives for new vault manager outreach but like the idea. Perhaps we can launch a second program in parallel for that and think about what that would look like. Might be good to see which program brings about better results.

This program was intended to incentivise new AUM/AUA. I'm happy to extend the time horizon to 12 months but since this is just an experiment for now, we don't want it to go on for too long without being able to tweak/improve on the things that are not working.**

[oSaaT2]

TL;DR

Great to see this initial proposal for an affiliate program for the Enzyme protocol!
Quite thought through & well presented, it also contains most key items for affiliate programs.

But … one can also sense some tension in the description:

• objective: grow TVL vs “introduce Enzyme to new managers”
• payout: recurring fee (share of protocol fees) vs one-time payout (”success fee”)
• whitelisting/vetting vs free access
• etc.

A solution could be to do both - as separate programs
(also discussed above after exa256’s comments)

My approach for the analysis:

1. check a few examples in various industries (TradFi, fintech, CeFi, DeFi)
2. consolidate findings into rough set of guidelines for affiliate programs
3. looking at the initial draft for Enzyme program, identify gaps, ask questions & make suggestions
4. build an initial draft of a suggestion to do 2 programs

1. Examples of affiliates/referrals programs:

2. Findings & key learnings:

• clarify objective first:
  • different philosophy & design if you aim for new users (high product confidence) or AUM growth (incentivize scale) or …?
• clarify who can participate
• use payout parameters wisely:
  • affiliate/referrer & referred payout?
  • introduce tiers (cf. yearn)
  • consider cap?
• general presentation structure:
  • Eligibility / Restrictions (& limitations) / Payout
• facilitate onboarding of affiliate
  • show example use case with calculation (cf. yearn)
  • give confidence in tracking referrals
  • give guidelines (cf. eToro)
    • clarify use of marketing material (use existing + review new creations)
    • risk warnings
• set conditions with clear T&Cs in place (cf. [Lido’s]):
  • whitelist?
  • what happens when program updated
    • “We reserve the right to cancel, modify or terminate the Program at any time for any reasons.”

3. Check & comment Enzyme current program

See some comments & suggestions across 10 items

4. Suggestion to do both types: affiliate and referral programs

I did this quick exercise mostly to show the contrast and explore some interesting design options based on some examples found

Hopefully the above can serve as a basis for further comments.

Until a program is implemented, there are obviously a few more steps to go, hoops to jump through, with the need to sync with others.

In parallel, I’m making a request for a grant (via MFP) and propose to take ownership of this project, so that it frees up time for Mona and Luca, who initiated this.

[perhamgirl]

This has been voted on and completed successfully so I'll be closing the issue now.