New gauge to distribute the daily new CRV tokens to veCRV.
The proposal is to add a new gauge that has to be voted by veCRV holders. This gauge will accumulate the daily new CRV minted and can be claim by the veCRV holders.
Most of the Liquidity Providers are only interested in farming CRV and selling the tokens on the market daily. They do not have the same motivation as veCRV holders. The constant daily dumping of new CRV has caused CRV price to continue make new lows.
Add a new gauge for new CRV to be accumulated and claimable by veCRV holders.
Limit the max gauage weight to 30%/50%? Debatable if it is a good idea to have a cap/limit.
Most of the LPs do not have the same skin-in-game as veCRV holders. They are selling the new CRV tokens everyday on the market (See Binance Defi Staking, yEARN vault). By allocating some of the daily new CRV tokens to veCRV holders, this rewards people who locks up CRV tokens and creates a token sink to reduce selling pressure. This will better align the incentive structure.
This proposal also creates an additional incentive (on top of admin fees) for people to lock up their CRV tokens.
The distribution of the CRV tokens is also better because the first principle of the token distribution is to distribute tokens to people who are interested in the project long-term (veCRV holders).
Possible scenario is that veCRV would vote to give 100% of the daily CRV to themselves and leave none for the LPs. veCRV holders are already taking 50% of the trading fees and taking the daily CRV would affect the LPs significantly.
One of the concern of this proposal is that LPs would suffer a lot. But if such proposal is positive to the CRV token price, it could net-net increase the yield for LPs. The yield for LPs not only depends on the amount of CRV they receive, but also depends on the price of CRV. Higher price = higher yield.
Let’s say 30% of the daily new CRV is voted to go to the veCRV holders. Now because the daily sell of new CRV is cut down, the price of CRV tokens manages to double, LPs are actually better off even though the amount of CRV they receives is cut by 30%.
Non binding free to vote signal: https://signal.curve.fi/#/curve/proposal/QmNo3PVnpjr1djApgBDv28jZfFvWeh4RsLhnxSnhtVS7HM