After strong support in the [Discussion] topic for this proposal, this topic formalises the proposal for review.
Proposal to introduce an admin fee. This would split the current 0.04% trading fee between veCRV holders and liquidity providers.
This ensures all Curve stakeholders benefit from an increase in volume on Curve and it brings an additional valuable feature to being an active member of governance and CRV holder.
The Curve token (CRV) has a growing range of attractive properties when it is locked for veCRV, ranging from gauge boosts to protocol governance. Through these governance levers, these token holders influence the direction of the Curve protocol, which is an important responsibility for Curve’s long term success. This work should be financially rewarded and we propose to use the Admin fee feature in Curve for that.
Curve has the option to introduce an admin fee of up to 50% of the trading fee. This proposal is therefore to introduce a an admin fee that will flow to veCRV holders from the 0.04% trading fee. With most of the returns to liquidity providers coming from CRV, we expect liquidity providers to be unaffected by this.
- Liquidity Providers: they provide capital for the pools and earn a yield on trading volume. They are currently earning additional incentives in the form of CRV distribution.
- veCRV holders are CRV holders who decided to lock CRV to participate in the governance process. They govern the Curve protocol which manages over a billion USD in liquidity. They may also be Liquidity Providers.
- To ensure there is no incentive misalignment, every participants should be incentivized to grow Curve. Practically speaking, this means maximising trading volume.
- Liquidity providers should be compensated for their capital; which is why they would still earn 50% of the trading fee as well as CRV rewards. These participants are free to do whatever they want with their CRV.
- veCRV holders, who have locked their CRV and are showing a long term commitment to the protocol, should be compensated for their good governance decisions to build Curve. By introducing an admin fee for veCRV holders, this ensures incentives are aligned and that these committed holders benefit from their governance.
- Introduce an admin fee.
- The admin fee would then be directed to veCRV holders, a discussion with two options on how to do so will be added in the coming hours which will then also be voted on the new signalling tool.
Based on last week’s volume, 0.02% would currently represent around $4.1m per year.
Which pools and the amount will need to be discussed further before implementation.
Please note this is a signalling soft vote as implementation will need to be submitted with a fee for each pool on the actual DAO.
The steps will be:
- Signalling vote on implementation of a new admin fee <== We are here
- Signalling vote on how those fees should be distributed
- Signalling vote on which pools will receive the admin fee
- On-chain vote: Admin fee implementation on DAO
Aligns interest across Curve stakeholders and adds additional incentive to own and lock CRV.
Signal your preference here: