We are looking at ways to reward governance veCRV holders.
Abstract:
There are a few different ways that withdrawal admin fees (a small fee taken when a liquidity provider withdraws from a gauge) could be used to reward CRV holders.
The most common one across defi tokens is the buy and burn but a different approach could be to distribute it to veCRV holders.
We are looking for feedback on what CRV vote lockers think of this before possibly going to an official proposal.
The new Compound pool if approved would start with a small withdrawal fee that would be used as decided with this upcoming proposal.
I think both of these re-distribution mechanics have merit, although it depends where the CRV to be burnt are sourced from.
If they are sourced from anywhere, like Uniswap or others, then all CRV holders stand to benefit, which is good, but it is not the intended objective here.
It sounds like a distribution of fees to veCRV holders, similar to the distribution of SNX or YFI we have seen, i.e. one that accrues in real time and is claimable anytime, is the most elegant and efficient way to do this.
Unfortunately it is less efficient for smaller investors so I’d love to hear other opinions here.
Also on the opinion that distribution to veCRV holders is the right approach to encourage DAO participation and vote locking and further incentivise those who do.
Even though the buy and burn is a more tax efficient approach, I think distributions will be more attractive for many people. Especially given the inflation rate in these first few years, people won’t ‘feel’ a buy and burn much for quite some time.
burning only helps traders and people not participating etc. it actually hurts veCrv holders because even if price goes up, vecrv is locked so cant do anything about it.
distributing fees is really the only way forward that i can see.
I see your point, but I believe this is somewhat near sighted in terms of long term growth. The idea behind buy and burn is to create a deeper mechanism of value accrual across the protocol.
Current farming distributions across the market mostly incentivize users in a way that motivates selling to the open market, which is fine, but the sample size of these users actually picking up CRV to participate in governance is rather slim.
Instead, buy and burn is a more direct route of incentivizing users that are participating in the protocol with long term development and continued growth in mind.
Cut the garbage.
All those buy and burn token models have sucked to date (KNC, MKR), and people expect price to go up anyways, so it doesn’t affect psychology as much as getting additional tokens - SNX has been an incredible example of this.
I voted for fee distribution because it encourages actively locking CRV for veCRV and while you already have veCRV, you may as well want to participate in the governance to protect your holdings. You get to work some to earn those sweet fees!
I think you underestimate how much fees is generated. Buy and burn could really drive price up at least when there are not so many token around (yet). I believe it will help entire ecosystem and especially small LP and CRV holders.
Another variant - distributing fees - is not really as great as you would think. For example APY for Y pool is like 1%, admin fees could give 0.5% more (to veCRV). It is actually not so much.
APY for Y pool is low because it has more liquidity than needed. If part of those fees were to be split between veCRV holders it would be very significant (current fees are split between $780m of liquidity and this would split them between $5m currently in voting escrow).
Personally I agree that with the inflation, impact of buy and burn is minimal, especially initially.
I’d actually love more context on why we’re charging admin fees to liquidity providers. We want to incentivize people to provide liquidity, and i’m concerned that the more fees we add to the process (even if its on cash-out), the more it will stop people from providing liquidity.
With regards to the fee distribution - what kind of benefit are we talking about here? If we have the total # of people withdrawing on a daily basis, the total # of veCRVs outstanding, and the fee we would charge, we could try and estimate the benefit and understand the magnitude of this redistribution and if its even worth anything. If its less than, i don’t know, 3-5% additional APY for the veCRV holders, i wonder if its even worth doing.
Just launch your own yVault version that auto compounds, restakes crv to have max boost etc. You can charge for that service easily and give those rewards to veCRV holders.
imo CurveDAO should build up a warchest of funds before any admin fees are paid out to token holders (regardless of buyback or dividend model). being able to fund grants, community direct r&d, etc will be more valuable than a little bit of current yield.
yfi’s current setup of a $500,000 treasury threshold seems pretty reasonable.
Distributing fees to veCRV holders just makes so much more sense. Especially for a time-locking governance system. veCRV holders are making the decisions, and distributing fees is so much more capital efficient for veCRV holders.
The main concern to most people around seems very much about where values resides in crv.
We get rewarded in crv
We get boosted crv rewards by locking crv.
And all this is a primary concern to lp’s and governance/token holders who deal with protocol and their investments in protocol.
Now distributing admin fee directly to lps/vecrv would impact two of already deviced mechanisms -
it becomes a cost set off to vecrv holders not wanting to lock anymore crv, as they receive benefits either ways.
it would fail to develop an overall value for the utility token as discussed, by only keeping in circulation vecrv/crv/offset costs of fees amongst lp’s/vecrv holders who may at some date again sell it back, so necessary there’s only a delay in devaluation.
defining with clear boundaries on who may get benefited how, as the pro rata allotment with probably go by vecrv weights - and will not have a fair even distribution to all participants. (incentives will prove less beneficial)
To avoid these and to create a real value - it would be best to buy back tokens from open market and burn them,
In turn keep creating regular value for Token - which inturn creates value for Token locks - which means rewards for those already locking as well and also an increased valuation of rewards all lp’s are to receive for times to come
