This second proposal aims to increase value for CRV and veCRV by updating the fee structure across all curve pools
(1) Increase the trading fee from 0.04% to 0.06%
(2) Direct 100% of trading fees to veCRV (set 100% admin fee)
CRV is currently facing strong selling pressure due to high inflation. This results in suboptimal governance participation because governance participants must lock their CRV and price decreases. Introducing a revenue stream for governance participants would increase the desire to stake CRV, reward veCRV stakers, and reduce selling pressure.
Redirecting rewards from Curve pool LPs will not have a significant effect on liquidity and network utility for two reasons:
(1) Curve generates roughly $50M volume/day on $1B deposits. This equates to $7.3M/year, or a 0.73% annualized yield for LPs
(2) Curve LPs are currently generating 35-90% APY through CRV liquidity mining, so the transaction fees are marginal
Increasing the trading fee from 0.04% to 0.06% will likely have minimal effect since Curve is by far the most liquid stablecoin trading venue both on and offchain already - example. Benchmarks against other liquidity sources usually have Curve quoting more than 0.02% tighter.
On the other hand, the $7.3M/year in trading fees would be very meaningful for CRV holders. Circulating market cap of CRV is ~$50M, that’s 14.5% yield for CRV supply if all CRV is staked, but since only $4.5M CRV is staked, that would be 162% yield for current CRV stakers (veCRV).
Distribute trading fees proportionally to veCRV
The implementation of this proposal will require a pool migration since current fees have a hardcoded limit of 50% admin fee. The community can decide on the best migration strategy, but my recommendation would be to:
(1) First relaunch every pool with the hardcoded admin fee limit removed and new fee parameters in place
(2) Redirect all CRV gauges to the new pools mirroring the gauge weights of each respective pool
(3) Allow for liquidity to naturally migrate to the new pools due to higher yield
- No change
- Only 100% admin Fee, no fee increase
- Both 100% admin fee & Fee Increase