This text is a preliminary discussion to know what the community wants for the fee distribution of Spectra. Two points are discussed, the method of distributing the fees and the proportions received by recipients.
Context:
We recently published the SGP 4, whose goal is to enable the collection of fees by the Spectra Protocol. Two main points need to be discussed and decided upon by the community :
1. Distribution methods:
The team has considered three different methods of distribution:
Distribute the Collected Fees as received: This method would let the Spectra Protocol distribute the fees in the multitude of different tokens it collects from all assets listed.
Buy Back APW Token & Distribute: This method involves using the fees collected from the protocol to buy APW tokens, creating demand for the token that directly depends on the performance of the Spectra Protocol. The APW tokens will then be distributed as decided by the governance.
Distribute the Collected Fees in ETH: This method uses the fees collected from the protocol to buy and distribute ETH, the main asset of most chains where Spectra will be deployed.
Distribute the Collected Fees as received
Buy Back APW Token & Distribute
Distribute the Collected Fees in ETH
0voters
2. Distribution recipients:
The distribution of the fees should reward all participants in the Spectra Protocol. It is up to the DAO to decide what the distribution proportions should be:
Hello,
I agree that liquidity should be a priority.
I am rather for an evolutive solution.
For exemple:
at the beginning we allocate 100%, then as soon as the liquidity reach a certain maturity (as to be determinate) we decrease it for 75%, then 50% etc… The 25%, then 50% remaining can then be used for rewarded the ve APW lockers.
Or we can decide to decrease the allocation linearly. We start with 100% and each epoch we decrease it by 1% for the benefit of the veAPW.
Or we can decrease the allocation by epoch. 100% at the beginning, after 5 epoch 90%, 10 epoch 80% etc…
All numbers are taken as an example.
Thus the progressive allocation of fees for stakers encourages buying pressure.
First we allocated everything until we reach a predetermined “enough” liquidity target, then when target reached, we start the discussion again to redistribute à split % to veAPW stakers + DAO.
I understand that the main goal of those proposals are to reward long term veAPW stakers with more incentives in order to create demand but if you can’t buy the token because of ultra high slippage, creating demand is useless.
I agree with both comments:
→ Liquidity is a priority
→ We can always re-adjust when this changes
and I am in favour of converting the revenues to ETH (2 times a month or 1 time a month depending on the revenues collected), and join the balancer pool (Liquidity Pool (v2): 50APW-50WETH) with ETH.
On a practical level, because of the operational costs (and fees), redistributing revenues to veAPW holders would have been potentially inefficient at first. Better to activate this at a later stage/ with more substantials revenues, while collecting POL for now.
We agree with the other comments, the current priority is to increase the APW liquidity.
We performed a quick analysis of the potential revenues Spectra could generate (with the current TVL) if SGP-4 were approved, determining potential annual revenues of $45k.
We then simulated the two “Buyback & PoL” options:
Option 1: Use 50% of revenues to buyback APW, then pair them with the other 50% ETH from revenues. This would results in a buying pressure of “only” $22.5k per year for the APW token and an acquired PoL of 45k$ per year.
Option 2: Match 100% of protocol revenues (in ETH) with APW from the treasury. At current APW price and potential protocol revenues this would result in a “cost” of 169k APW per year (the treasury currently owns 18,628,392 APW). This would results in an acquired PoL of $90k per year.
We are in favor of option 2, which allows the APW liquidity to increase more quickly. Furthermore, option 1, which proposes to create buying pressure on the APW token via a buyback using revenues, seems negligible in view of the amounts involved.
In addition, it would be interesting to deposit & stake the PoL obtained on Aura Finance, then collect the BAL & AURA, sell the BAL for more AURA then lock them in vlAURA to vote on the 50APW-50ETH pool during Aura gauge weights, thus creating a flywheel to eventually reduce liquidity costs.
From a strategic point of view, we believe that Spectra should focus on increasing bribes to voters, thereby generating additional revenues for veAPW holders.
This would enable the distribution of APW to veAPW holders to cease altogether (in correlation with the increase of bribes received by veAPW holders), thus reducing APW inflation. Furthermore, we believe that no revenue sharing should be distributed to veAPW holders (as Aura has done via AIP-63), allowing the DAO to build up a long-term treasury.
veAPW holders would therefore continue to receive revenues from bribes, especially small holders seeking to generate income from their veAPW.
I agree that for the estimated fees collected (with the current TVL), we could consider matching the ETH with the APW from the treasury (in order to have more POL). The thing is the TVL/ fees in practice might be a bit unpredictable and taking APWs from the treasury to put it on the market might easily result in a notable increase in the APW emissions (which would be a bit counterproductive). I would therefore stay in favor of joining the pool with ETH only.
On the other hand, I agree that creating the flying wheel of bribes through AURA could be interesting!
