sCIP#9 - Create a CRV Buyback Machine

Summary:

Use some amount of CRV from the community fund and some percentage of the admin fee to create a Balancer pool that automatically buys back CRV

Abstract:

I basically am stealing the idea here: https://www.placeholder.vc/blog/2020/9/17/stop-burning-tokens-buyback-and-make-instead. Please have a read if you have time, I think it poses some ideas that are useful for us to think about.

Motivation:

Some people are really in favor of reducing the supply of CRV. Others are in favor of focusing on utility that drives real demand for CRV. I believe we can achieve both with a buyback machine that purchases CRV with fee earnings. The CRV bought back can be used at the discretion of the DAO to fund development, insurance, pay grants, or any number of things that benefit the whole ecosystem.

Specification:

There’s quite a bit of flexibility we get from a Balancer pool. We can make a pool that is owned and controllable only by the DAO smart contract. We can specify the proportion of CRV and 3CRV (or USDT/USDC/DAI) that the pool targets. We can set and adjust the trade fee to encourage/discourage trading. We can deposit and withdraw liquidity whenever the DAO votes to do so. See a list of configurable rights our smart pool could have here.

For example, say we set the proportions to 90% CRV, 10% 3CRV. We source the CRV from the community fund, and the 3CRV from a percentage of the admin fees earned. Over time, the 3CRV accumulates in the pool, and automatically sells 3CRV whenever it exceeds the 10% target.

For:

This buyback method will reduce the outstanding supply of CRV, which benefits CRV holders by helping to create a price floor for CRV (the pool will keep buying CRV if the price continues falling). It also benefits veCRV because the CRV bought back cannot be eligible to earn fees. Therefore, it mitigates dilution of future fee earnings for existing veCRV holders. Additionally, the CRV earned through the buyback can be applied for any purpose at the discretion of the DAO. It helps build our community fund, which we can funnel back into ecosystem growth.

Against:

Doing this likely means veCRV holders must be willing to give up a portion of their personal fee earnings in favor of benefiting the entire community, and people are generally selfish and shortsighted. Also, balancer pool smart contract risk.

Poll:

This signal vote is not asking about the specific balancer pool implementation. I describe it above to share the idea of how a buyback machine might work. This vote only asks if you are open to applying some portion of your veCRV fee earnings and some portion of the community fund CRV toward a buyback machine (likely starting quite small if there is indeed support for this). If there is support, I’ll follow up with a poll on numbers that would be agreeable to the community.

https://signal.curve.fi/#/curve/proposal/QmZ1CRRXq5zYPqh5LzyDgXUstnrcjSsHmjv1PLgyD5gMFj

6 Likes

I don’t understand why anyone would choose to burn CRV vs claiming fees for themselves?

4 Likes

I agree that burning is not a good long term plan. It doesnt create new value- it simply redistributes around to the existing holders. What would be great is a mechanism for protecting the value of existing holders, and in the same instance working toward creating new value that benefits both current and future holders. That is what buybacks are trying to achieve, and I hope that distinction is clear between a burn and a buyback.

Shares we buy back become a part of our treasury (acquired at advantageous prices) that can be used to fund growth in any number of ways. Pay for development, for insurance, for legal, for executives, for grants, for investments etc. Things Curve needs in order to become the DeFi protocol for the history books, that individual community members cant really be expected to foot the bill for.

I don’t know if people would choose to see a bigger picture of supporting long term ecosystem growth, or if they just want a fat check this month, and probably next month, and maybe the month after, maybe getting a little less fat, boy starting to regret locking my veCRV for 4 years… down the drain. I dont know, but I think the tokenomics encourage token holders to be thinking on a long term time horizon, so I hope people are thinking a bit about how a reduction to their fat check today may mean stronger growth potential in the long run.

2 Likes

I generally like the idea, and I agree that creating mechanisms to support the price of CRV is a good idea.

To me, the issue comes down to who pays for it. It’s easy to get on board with the community fund ponying up the initial capital for the pool. It’s hard to support taking it from the hide of the veCRV holders, without having a sense of scale and impact.

1 Like

Would you be more likely to support a different way of producing cash flow with the community fund? Another option would be to vote lock some amount of CRV in the community fund so that it earns fees. If you have another idea to produce cashflow that could be used toward a buyback program, please share

I agree with this point of view. Although I am still locked in my CRV, for me, the main reason is that the value of the CRV I hold is getting lower and lower, and my belief in Curve is gradually decreasing. Anyway, if the value of CRV has a support, then I think more and more people will join the community and lock their CRV.

1 Like

I’ve been wondering if Curve should have its own stablecoin.
Or if, perhaps, the 3Pool token could emerge as Curve’s stablecoin.

To promote that, I wonder if there should be a CRV/3Pool pool, perhaps on Balancer, or even on Curve, or both. It could serve as a mechanism for the buybacks you’re suggesting or as a method for funding some of Curve’s overhead. Would that make any sense?

1 Like

See also: Aave governance proposal for building a treasury