This proposal aims to enhance the allocation of Spectra’s pool fees by directing them to veSPECTRA voters, discontinuing bribe fees, and allowing the DAO to collect YT fees in ETH.
Context
Following the approval of SGP4, the Spectra Protocol began accumulating yield token (YT) fees, while trading fees had been in place since the protocol’s launch. Currently, the DAO collects the 3% YT fee, while trading fees are distributed with 50% going to LPs and 50% to the Curve DAO due to Spectra’s reliance on Curve pools.
With the successful migration progression from APW to SPECTRA and the transition toward a ve(3,3) model, it is now the right time to refine the mechanics of fee distribution to better align with the protocol’s incentives and growth strategy.
Current Fee Structure and Proposed Changes
Pool Fees: Currently, 50% of pool fees are directed to LPs, with the remaining 50% allocated to the Curve DAO. Under the new model, 60% of fees will go to veSPECTRA voters (of the next voting cycle, or back to LPs if no gauge is created for that pool), 20% to LPs, and 20% to the Curve DAO. Fees will be converted to ETH before being redirected to voters and Curve DAO.This shift aligns with the ve(3,3) model by reinforcing governance participation while continuing to support liquidity providers and maintaining the Curve partnership. Importantly, Curve team approved the reduction in their share of pool fees, recognizing the need for Spectra to strengthen its ecosystem and accelerate growth.*
YT Fees: The current 3% YT fee is collected in various tokens and held by the DAO. This proposal keeps the 3% fee but swaps it to ETH before collecting it in the Spectra DAO treasury, reducing inefficiencies and improving sustainability.**
Bribe Fees: As all bribes already ultimately go to veSPECTRA holders, we believe that removing the bribe fee would be more beneficial overall, allowing for a more competitive bribe market, which should stimulate more active participation and higher voter engagement.
* Fee redirection and redistribution will occur once the collected fees are substantial enough to justify the operational costs, including network fees, gas costs for swapping, and bridging expenses, ensuring efficient distribution
**YT fees are not collected in real time but only when users claim their yield. Given their lower proportional revenue and misalignment with voting periods, these fees will be progressively accumulated by the DAO to avoid unnecessary recurring operations and excessive transaction costs.
Rationale
Strengthening Governance Incentives
Allocating a larger share of pool fees to veSPECTRA voters enhances governance participation and aligns incentives with long-term protocol sustainability.
LPs will still receive a share of pool fees while benefiting from improved capital efficiency in Spectra’s broader incentive structure.
Optimizing Fee Allocation for Growth
Adjusting the Curve DAO’s share of fees from 50% to 20% was made possible with their approval, acknowledging that this change supports Spectra’s expansion while maintaining the ongoing collaboration.
The updated allocation structure supports Spectra’s long-term expansion and incentivization strategy.
Enhancing Protocol Efficiency
Using ETH, the most liquid asset on most networks, to streamline YT fee collection reduces operational costs while maintaining consistent revenue flow.
Removing bribe fees fosters a more competitive and engaged governance process, benefiting overall voter participation.
Proposal
We propose to update the fee distribution as follows:
Pool Fees: 60% to veSPECTRA voters, 20% to LPs, 20% to Curve DAO. Only the fees for veSPECTRA voters and Curve DAO will be swapped to ETH for easier distribution.YT Fees: Maintain the 3% fee, swap to ETH, and collect it in the Spectra DAO treasury.
Bribe Fees: Remove entirely.
This proposal refines Spectra’s fee distribution to reinforce governance participation, optimize long-term incentives, and enhance integration with Curve while improving overall operational efficiency.
Voting Options
Yes: Update the fee distribution and parameters according to the proposal.
Positive-Sum Games
This will be a long-term positive development. I see many possibilities between Spectra and Curve that need to be explored. Reducing fees and increasing incentives on Spectra will, in my opinion, attract more capital + talent over time. This talent will then develop new combined mechanisms between Curve and Spectra, creating a win-win situation for both protocols.
Hi there,
Just to say that, as a veSPECTRA holder, I am, of course, in total agreement with most of the proposal.
However, I am afraid that the reduction of pool fees going to liquidity providers from 50% to 20% might hinder the future growth of the protocol. Indeed, one has to remember that Spectra is only able to operate because liquidity providers agree to forfeit part of their yield on some asset to allow for yield trading on that asset. They are the cornerstone of the protocol. Their incentivization currently comes from two sources: the first one is the pool fee share that they collect, and the second is all the incentivization from Spectra and other protocols distributing some tokens.
I am a bit afraid that in the future the LPs revenues will be mostly driven by external incentives rather than with sane organic growth and use of the liquidity pools.
I would be curious to have other people’s opinion on this topic.
LPs on Spectra do not forfeit their yield for it to be traded. The default option when you provide liquidity (LP) actually gives you YTs, which correspond to the PTs you deposit in the pool and generate their respective yield. The other part of the AMM pair, the IBT (interest-bearing token), also entitles you to its yield.
If you decide to LP without tokenizing (i.e., without splitting the IBT into PT/YT), it means you are directly acquiring PTs in the pool, thereby securing a fixed rate on them.
tl;dr: The PT/YT split mechanism is not a revenue split for LPs; on the contrary, it allows them to accumulate multiple sources of yield. The redirection of part of the fees to voters is simply an adjustment to better align incentives and reward pools that generate activity and revenue for the protocol. In the end, the more revenue for voters, the more incentives for LPs.
Great proposal!
one suggestion though: fees instead of rewarding past voters should probably reward future voters. This increases the UX for veSPECTRA holders who can more easily optimise their votes, and mainly, the future is always what matters.
Technically, this would mean that fees generated by pool X are directed towards a bribe for pool X.
This is a very nice next step in the evolution of Spectra!
Completely agreeing with most items, although I’d also want to bring up the valid remark of @Zedd . The reduction in LP fees from 50% to 20%, feels very steep. I’d be more comfortable with a lower reduction, e.g. from 50% to 40% or 30%.
That would create a more equal balance between LPs and veSPECTRA.
E.g. 30% fees to LPs, 30% to veSPECTRA and 20% to Curve
We need to attract both to grow and keep the flywheel spinning!
For context: I am both an LP and max-locked veSPECTRA participant.
Hi @Deepcryptodive
While I do get suggesting a 30/30/20 split, it’s worth noting that other successful ve(3,3) protocols like Aerodrome and Velodrome actually allocate 100% of trading fees to veToken holders. The proposed 20% to LPs in SGP 6 is already more generous than these models.
The higher veToken allocation (60%) is meant to ensure emissions are directed efficiently, as popular pairs naturally earn from volume, meaning that lp’ers for the high trade volume pairs could see way more in incentives as a result of their higher trading volume vs hoping for more bribes to reward voters to do so.
Combined with the removal of bribe fees, this should create a much more dynamic incentive system for both LPs and voters!
Thanks a lot for your reply.
It is true that my formulation was very much exaggerated about yield forfeiting. I guess it could be very interesting to get some simulated scenarios of what happens for an LP for a given trading volume, and given positive/negative/stable realized yield (wrt the implied yield when entering the position) compared to keeping your IBT position in your wallet.
I think that if the point can be clearly made that becoming LPs is very advantageous in many cases might be a good thing to advert to attract liquidity. And this might also motivate the choice of the fees share LPs should get.