New gauge to distribute the daily new CRV tokens to veCRV.
Abstract:
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.
Motivation:
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.
Specification:
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.
For:
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).
Against:
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%.
I’m against. This is effectively giving even more % to the team / early insiders without them needing to provide any liquidity to the protocol. They are already getting quite a bit in terms of their initial CRV stake plus fees for staking veCRV. CRV inflation should belong to people putting capital at risk to keep the protocol running.
And who will buy your CRV profit finally ? Only fools? After some months your APY in CRV will be 0, because nobody will buy your CRV. If CRV holders won’t get profit from invest - CRV will go to zero, we can see it now and it will be continue. It is short term win-lose game (if you don’t think that your CRV buying Santa Claus), if you want to play in long term everybody must win - LP and holders of CRV.
What would be wrong with that? The team built this great product. I am not part of the team, but I see this as a win! For both the team and people who choose to lock up curve.
There are already mechanisms to incentivize LPs to lock veCRV. They are the LP CRV boost and the pool fees to veCRV.
If those incentives aren’t strong enough, I’d rather address those existing mechanisms rather than add a new one.
If we can change the way the LP boost works so that LPs who don’t vote will get less CRV than they do now, and LPs who do can earn more than they do now, let’s focus on that.
veCRV giving themselves more CRV for free would be a bad look, and I can already see it becoming a point of ridicule on the social medias if we did this.
I prefer CIP#18 more. The CRV/ETH gauge. Diverting some inflation for incentivizing holding CRV and also providing liquidity. veCRV can also be used to boost rewards.
Also positive sum for veCRV users because they’ll also be earning transaction fees.
I agree with @WormholeOracle. There’s incentives for veCRV holders to boost rewards currently. We also have yet to see the effect of CIP#13, the distribution of admin fees to veCRV holders. (And the effect of CIP#18)
CRV is adding more pools, to drive more trading volume and more fees. They’re working on new types of pools.
Yes, this proposal is reflexive (CRV rewards for veCRV holders), but there’s no guarantee that it’s going to raise prices. veCRV holders can dump these CRV rewards too. It’s not positive sum by increasing fee generation.
Transaction fees won’t help, because it is about 15K USD now per day, and on another hand 750K CRV supply each day for LP, which sell it immediately on market… only if we want price of CRV 15/750 - 0,02 $ . And you said that veCRV holders will sell - of course some will, but most will be motivated to stake it to grow more, whereas now LP have only one motivation to sell it immediately, because tomorrow will be cheaper
“veCRV giving themselves more CRV for free would be a bad look” - look on SNX, NEO, EOS and much more, I didn’t hear that someone is laughing at them for staking and free coin for holders. But what happend with CRV price now - all social media laugh very much and call it shitcoin. Nobody say about a lot of CRV for staking, but around 10% it is normal on the market practice
There’s already incentive to hold veCRV. Boosts and profit sharing. This proposal is just excessive imo and favors large CRV holders / insiders over people looking to join the community via being an LP. Tip the balance towards the early folks too much and joining becomes unappealing as the game feels rigged.
For the record, my bags are heavy as I bought a decent chunk of CRV for the boost and profit sharing, and I feel everyone’s pain with the dropping price. However, I take a long term view that this is just fine so long as deposits and volumes stay healthy. Allocating CRV for LPs is the best way to do that as well as avoid resentment towards the early CRV whales. Equilibrium will be found I’m happy to get paid my fee sharing in greater CRV quantities at suppressed prices. The price will recover, all. Don’t panic.
Why it will recover? Who will buy, for what? 750K each day… You need so much for boost or for what? Equilibrium will be around 1 cent with the current model
It will recover because it’s a token with cash flow and utility via LP boosts and governance rights. As the protocol matures, it will be clear how you can do a DCF analysis on this token and without crazy assumptions the token is clearly worth much more than its current price.
If we talk about 1$ for example, nobody will spend 750K usd each day on futures which you listed, fair price much less for that. And after locking you will be always know that tomorrow price will be less, because platform not grow so fast, but sell presure never ended
How do you figure? Have you done any equity analysis before? Whether a security or not, the CRV token clearly has equity like properties. Do the analysis with the 2022 supply, or even the 3.03B fully diluted supply.
If you believe that Curve is / will be an important piece of DeFi infra, it’s really not hard to see it growing its valuation substantially as crypto continues to grow overall. It’s already doing $3.6MM in profit per year directly to veCRV holders as a continuous dividend and was recently doing 5x as much.
Project and token now - it is different world. Project is great and LP is \ will happy, but in nearest future nobody will buy your farmed CRV for more than 1 cent, because what for ? Tomorrow will be another free 750K CRV on market, for staking you will get some % of cents from 15K usd and thats all - are you ready to pay for that 5$?..
What for? For the cash flows. Same reason people buy AT&T stock.
Yes we’re going through an initial distribution, but do the enterprise analysis considering 3.03B tokens. When the tokens are actually distributed in time shouldn’t affect this analysis.
And they print 750k stocks each day? You can calculate what will happen with their price…
I have understood your future research, but we talk about today, not about what will be after 4 years. And today we have low motivation to buy 750K CRV supply each day for big price… Thats why tomorrow you will sell your farmed CRV around 1 cent and it is a problem