Token migration and tokenomics upgrade
Tl;dr: The proposal suggests migrating from $APW to $SPECTRA and deploying the core governance infrastructure to Base. It describes the path to a full ve(3,3) veSPECTRA and migrating the token’s liquidity to Aerodrome.
“We” refers to Perspective SAS, the development company behind the Spectra protocol.
Abstract:
Previously called APWine, Spectra brought yield stripping to DeFi through yield tokenization in the second half of 2020. The project grew rapidly as it hit the mainnet in early 2021.
The protocol then operated through a permissioned model, where the $APW governance token was used to rule the creation of new pools, the emission of incentives, and, more generally, all DAO decisions and its treasury.
The second version of the protocol, Spectra, released in June of this year, enabled permissionless pool creation and yield tokenization. While the $APW kept its central place in the Spectra governance, it holds the technological debt and immutability from the APWine era.
Spectra positions itself as a decentralized and permissionless primitive. It needs to evolve its tokenomics parallel to the protocol to suit better its pool liquidity bootstrapping mechanisms through bribes and revenue sharing.
Now that Spectra has been up and running for several months, the time has come to migrate to the new tokenomics and ticker ($SPECTRA).
We are proposing several technical and economic improvements and updates, aiming to fit the new protocol better, increase the token’s value proposition, and execute this in a non-dilutive manner for the current stakeholders.
A new Base:
While Spectra is currently deployed on four networks and is looking to continue its expansion, focusing extra attention on one particular ecosystem would be highly beneficial for the protocol and its growth.
As the year’s fastest-growing EVM, Base leverages its rapidly expanding user base driven by the Coinbase ecosystem and its central role within the Optimism Superchain. Deploying SPECTRA on the Base Network strategically places the Spectra ecosystem at the forefront of DeFi’s ongoing expansion.
Deploying the core governance mechanisms on Base would be strategic for the protocol, as it represents a key entry point for retail and institutional actors. It would allow Spectra to strengthen its ties with Base ecosystem projects (cf. token liquidity section) while lowering the entry cost to Spectra governance, its bribe, and voting mechanisms.
The SPECTRA token:
We propose a migration with a fixed ratio of 1:20 between $APW and $SPECTRA, where the Spectra protocol mints the incentives progressively while bounding its emission curve to the one of $APW
This design keeps the theoretical maximum SPECTRA supply proportionally inferior to the $APW total supply, effectively increasing protocol governance share value for current $APW holders.
We propose that the DAO keeps 2.5m $APW to be migrated to $SPECTRA, as an ecosystem reserve pocket for future needs. The remaining APW will be burned and minted progressively as SPECTRA incentives to pools.
The bridge will be open for 52 weeks. The lockers (veAPW locked for more than 53 weeks after the bridge is open) will be able to be migrated over to veSPECTRA. Lockers with a lock duration inferior to 52 weeks will have to extend the lock or to wait until it is unlocked to migrate the APWs.
Spectra governance voting power:
Since its early days, APWine, then Spectra, relied on the ve-model (and was one of the first projects to follow Curves Finances’ implementation). While it has served its purpose for the past years, we believe a new upgraded model, leveraging Velodrome/Aerodrome, makes the most sense for the prevailing market dynamics.
We propose migrating the locker to a 4-year ve(3,3) model, following veAERO/veVELO implementation.
Additionally, we note the possibility of adding additional lockers accounted for in one user’s total voting power. This would, for example, allow combining a native (SPECTRA) staking with another “aligned” token to be locked (e.g., the SPECTRA LP token).
Liquidity of the token:
The new token’s liquidity strategy is essential to this migration and central to the protocol’s growth and sustainability.
Migrating the APW/ETH Balancer (mainnet) pool to a SPECTRA/eth-denominate-connector (Base) pool is a first step forward, strengthening Spectra’s ties with Aerodrome & Base.
This comes with a succession of proposals aiming to increase the liquidity pool’s attractiveness from an economic and governance perspective.
In the coming days, we will share different proposals focusing on this liquidity pair:
Proposal 0: Aerodrome bribes budget to bootstrap the liquidity of the pair
Proposal 1: As the Aerodrome pool will essential for the growth of Spectra, we will additionally propose to add the LP token as a locker alongside veSPECTRA, with an initial weight of 5 (each SPECTRA in the LP token will be worth 5 times each SPECTRA in the veSPECTRA). It’s important to note that the locker of this LP token will be able to collect rewards from both the ve-locker and Aerodrome.
Tokenomics & revenues:
We believe that aligning voters/lockers to the protocol’s growth is key to its success and economics. We aim to follow the ve(3,3) model of revenue redistribution, where the voter collects part of the fees generated by the pool to which they are redirecting incentives.
As we are still in the early stages of the protocol, some pools might collect votes while not generating enough fees for the continuous redistribution to make sense from an operational point of view.
We are therefore proposing the following timeline:
Phase 0: Bootstrapping the liquidity of Spectra and its governance token
- 80% of the protocol revenues of the pools (currently representing 3% of the yield generated through the platform) will be distributed to the lockers in a uniform manner
- 100% of the protocol revenues generated until now will be distributed to the lockers over the first month (uniformly every week, depending on the voting power), incentivizing $APW stakeholders to migrate to $SPECTRA
Phase 1: Aligning voters to revenue generation of the pools
- 80% of the protocol revenues generated by each pool will be distributed to the voter of this pool for the past period
EDIT: Due to aerodrome freshly released new connector guidelines, we propose to settle on the eth-denominated-connector in another proposal
- Yes, migrate APW to SPECTRA
- No, do nothing