Summary:
This is a proposal to deploy an adapted curve pool factory to generate Curve Cryptoswap liquidity pools that automatically and permanently compound 50% earned of Admin Fees.
Abstract:
Currently, all curve pool admin fees are withdrawn regularily from each pool.
This is a proposal to deploy a new Curve Pool Factory that allows for the deployment of Cryptoswap Curve pools that automatically and permanently compound 50% of admin fees into Curve treasury owned liquidity.
Motivation:
This proposal has three motivations.
- Growing the Curve DAO Treasury/Increasing Curve Protocol Revenue over time.
Liquidity pool tokens from compounded Admin Fees would belong to the Curve Treasury. 100% of LP swap revenue from compounded admin fee generated liquidity would belong to the Curve Treasury/be distributed to CRV stakers (as opposed to 50% of fees from user deposited liquidity).
Over time, compounding admin fee pools would generate more revenue for the Curve Treasury/DAO/CRV Stakers then current, non compounding curve pools.
- Increase Curve Protocol TVL, Volume, and Fees Generated.
Currently, 50% of the total fee revenue generated by Curve is extracted from the Curve Protocol and distributed to CRV stakers.
By compounding a portion of admin fees into permanent Curve liquidity, Curve’s TVL, volume and total fees generated will grow more quickly over time.
- Drastically increase the appeal for Protocols to deposit Protocol-Owned-Liquidity into high fee rate, high revenue generating Curve Cryptoswap Pools.
Curve’s current procedures regularily collect 50% of all pool swap fees, then sells all claimed tokens on the open DEX market for CRV. For Protocols with Protocol-Owned-Liquidity on Curve, this translates to significant selling pressure on each depositing Protocol’s native token, in addition to 50% less POL revenue.
By comparison, UNIV2 LPs claim 16.66% of POL swap fees, with 100% UNIV2 admin fees are retained in LPs until the owning DAO chooses to collect.
As a result of Curve charging a 50% admin fee combined with regularily liquidating admin fee collected tokens, high fee/high revenue generating POL on Curve generates significant amounts of ongoing selling pressure on the Protocol tokens deployed in POL Curve liquidity.
Due to the selling pressure curve pools create for curve pool deployed Protocol tokens, Protocols are highly decentivized to deposit POL into high fee, high revenue generating curve Cryptoswap Pools.
As a result, protocols that deploy POL into Curve Cryptoswap pools typically use a low fee rate range.
Due to this, Curve is missing out on revenue from potential high fee rate POL liquidity that generates significantly more revenue then low fee rate pools.
By implimenting Curve Cryptoswap pools that compound 50% of admin fees into permanent liquidity, Curve creates an option for Protocols to grow permanent liquidity for their Protocol token and incentives the deployment of high revenue generating POL by decreasing the amount of Admin Fees sold on the open market from 50% of net revenue to 25% of net revenue.
Specification:
Deploy a form of the Curve Cryptoswap Factory that automatically compounds 50% of admin fees into permanent liquidity.
Option A: Disable Gauges for compounding Cryptoswap pools.
Since this pool type provides less immediate revenue for veCRV stakers, it is worth considering to disable gauges for compounding pool, which are intended to generate ample swap fee based revenue and thus should not require additional CRV incentives anyway.
Option B: Additionally compound 20-33% of liquidity pool swap fees from Admin Fee generated liquidity.
Rather then claiming 100% of revenue from admin fee generated liquidity, by compounding 20-33% of admin liquidity into additional admin liquidity, the curve DAO can further increase Curve TVL and revenue over time, while simultaneously providing further incentive for Protocols to deploy high revenue generating POL on Curve.