As there has been renewed interest for buy and burn and the original discussion didn’t allow for a choice between the two (governance participants had made a choice for distribution to veCRV holders), community members have asked us to resubmit those two options for a signalling vote.
Important to note, the outcome of this signalling tool vote does not change the implementation of the admin fee (and its current vote https://dao.curve.fi/vote/parameter/2 ) , only how it will be distributed.
In light of recent manipulation in two different discourse polls (gold + buy and burn vs veCRV distribution), it’s worth nothing those polls will not be considered anymore going forward.
Options:
Buy and burn - Buy and burn would currently destroy around 5% (1.75% of daily circulation inflow) of the daily CRV inflation.
veCRV holders Distribution - Current locked supply is around 10% which could result in APY of over 250% meaning rough calculations suggest distribution to veCRV holders will likely remove selling pressure more effectively as people vote lock for their boost and receive fees. Seeing the total vote locked double from 10% to 20% seems realistic which would remove over 10% of the daily inflation against 1.75% for the buy and burn option.
In my opinion, all of this option can be implemented for give more value to CRV and stimulate to hold it for veCRV also. If you make both then burn can be not every day but once at week or month.
IANAL, but there’s options to make CRV distro to veCRV less tax painful.
Perhaps a strong case that if the CRV distributed to veCRV holders was locked to them as more veCRV, it’s not a taxable event as there’s no liquidity.
Similarly, it could be rolled into a vest (already built I’m guessing)
Alternately, could be rolled into a burn if not claimed pool by a certain date or another similar “options on CRV” solution.
I think choosing the worse broad economics in favor of tax efficiency is silly; tax is inconsistent globally and while I think we should take steps to be efficient (else we’re destroying value to the ecosystems in favor of giving to the IRS or equivalent), we should start with getting the pie as big as possible.
Asking veCRV holders to bear all the costs of participating in governance while sharing the vast majority of the benefits of fees with everyone (free-riding) just doesn’t work. There’s a conflict there that’s unfortunate and may be suboptimal but under the current structure, it’s in the veCRV holders’ best interests to vote for distribution. To incentivize anything different would require a complete re-design of token economics imo.
Would the idea with distributions to veCRV be that they accumulate CRV over time, but must claim the tokens to receive them? In that case, would moment you claim be the taxable event, since that’s when you acknowledge ownership? If that’s the case, maybe the tax argument isn’t actually a big deal, as people can choose when they want to trigger the event
This is an interesting proposition and I would like to understand the first option a little bit more. If we buy the tokens from the open market, we are going to be reducing the circulating supply and potentially this might lead to a price increase. What I don’t understand is why we would burn the CRV?
I think that at the current prices, CRV is undervalued and if we work on growing the eco system (which we are) then we will attract more users down the road. This means that in the future we might have an opportunity to reissue these tokens to reinvest into the CRV eco system again. What I am suggesting is to perhaps buy the tokens back and lock them up for some X amount of years. This suggestion is not much different than what actual corporations in the real world do with their share repurchase programs (they sell them back to the market when conditions are favorable).
I’m in favor of the distribution to veCRV holders but this could be interesting to build in a parameter to set aside some percentage of the distribution for insurance or development/grant funding. The DAO can then vote on a sliding scale how much it wants to set aside for this purpose
Yes, I had a similar thought as well with the idea of locking CRV as opposed to burning it. With the second option, If we distribute to veCRV holders then we won’t have to burn any tokens and I think it is a better approach (unless we modify the first option). I oppose burning tokens because it will most likely lead to a temporary appreciation in price in the short term and will benefit traders that are speculating on CRV (they aren’t in it for the long term of the ecosystem).
As you suggest, if the second option does get past then we should consider setting aside a percentage for the sustainability of curve (perhaps in a separate CIP). This is no different than what other cryptocurrencies (e.g. DASH or Cardano which set aside a cost of the fees for transacting on their networks) are doing with their treasury DAO. I think that in the long term if we want this project to thrive and survive then this will be a requirement (it is wrong to expect people to invest their time/effort into a project without getting compensated for their work).
The funds that are set aside can be allocated by CRV holders (via means of a vote) to fund projects (anyone can submit a proposal). The projects proposed should have the goal of developing and promoting curve to drive adoption. There is some good research that has been done in this area (see: https://www.youtube.com/watch?v=QdiciXRnVkQ).
I think KyberDAO style of allocating part of fund to burn, distribute and in case of Kyber, rebate to market maker is best of both world. We already have gauge voting for pool, so why not.