Abstract Modify Fees Distribution from 100% ETH to 90%ETH / 10%PSP
Goals & review
Paraswap dev is great with v6 and Gasless transation , fees distribution are high but token price is too low (which is very disapointing for token holders)
The objective would be to put in place a buy /distribute or buy/burn mechanism in order to put a continuous buying pressure for PSP staker without significative dividend impact.
Distribution must be done in sePSP1 in order to prevent direct sale of PSP.
Aave has put in place a buy and distribute with positive price action.
Quickswap will put in place a buy and burn with positive price action.
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Means Modification of distribution contract in order to use 10% of fees collected to buyback and distribute or burn
Implementation Overview Modify distribution code and audit, put in production
I think normally we should first discuss about this on the discord channel. But now that it is posted here, i answer here:
Burn mechanism, we already see it, has no positive effect on the price of the token. Just remind you the 200M PSP we had to burn… I was a failure. I was already against it at the time, I remain so.
Distribute 10% (or more) in sePSP1 i find a good idea. I just don´t know how easy/difficult it is to set up.
A better idea - from my point of view - would be a strategic buy back. It offers greater flexibility overall. For exemple this 10% can be reinvested to purchase $PSP tokens from the market. This creates sustained demand and ensure that Paraswap can respond to growth opportunities as they arise.
Hey, I’m moving this to the PS-research section, as in its current state it’s missing the actionable details to be able to implement this, like changes in the fee mechanism or distribution system.
I’m curious, why did you set 10% as the initial number for the proposal? Looking at the other proposals, they seem to have up to 100% in it.
Also, since we’re exploring all ideas, how you would allocate these bought back tokens? I’m thinking for example that the ACI distributes the bought back aave to incentivise a safety vault, would we want to do something similar? Alternatively , their new tokenomics incentivise GHO usage, what if we could do something similar to incentivise Delta?
Loving the discussion, I really feel we could make something great here and I’m looking forward to hearing your ideas!
It is the level that I could accept that my ETH rewards reduced in order to pump the PSP price.
For Quickswap case, they were not distributing “real yield” paid in USDC/ETH but in Quick (which I assume was purchased on secondary market , not from protocol emission).
So 100% of token distrution from fees, you don’t care because you stake Quick to get dQUICK and you earn Quick. But if you stake Quick with 30% rewards in Quick and the price collapse, you earn nothing… (only more % of the token supply).
For PSP , it is different because stakers earn real yield in ETH and any action to realocate fees distribution in order to pump the price could be seen as no distribution of fees.
(For my case, I accumulate governance token from which I could get real yield/dividend, because I have the bills to pay and I don’t like to sell)
For Aave , a real yield would come from GHO (such as Curve with crvUSD distribution).
Anyway, We should find a way to raise the price PSP !!!
For token burn, it is depending of the market phase.
-If you burn in bear market, you only reduce the slope of decrease of the price. People with heavy bag from initial investor or from the team must sell anyway in order to cash out their hard work/investment (I am also a startup founder and I know that Founders must cash out ).
So there is still token sales with no buyer => price collapse
-If you burn at the beginning of the bull market, the burn might affect the price because people are already buying and some protocol fees are used to apply an extra buying pressure.
First, this is possible but not sure.
Second this is short term vision.
I am for a sustainable and middle-long term vision.
And in this case a reward in sePSP1 or a buy-back look for me much more interessant.
Yes, incentivise a safety vault could be a really good idea.
Plus I copy/paste here adiscussion i started on the Discord few weeks ago:
“Hello, given that this type of event has already happened in the past and that they could (no one wants) happen again in the future, I decided to launch here a discussion on the need for the investor to know the risks of staking PSP token. It is necessary that the risks are understood and accepted before submitting the token PSP on the platform. It is a way of establishing a contract of trust. Like what you can find on AAVE, we could write: PSP holder can stake their assets in the Safety Module to add more security to the protocol and earn Safety Incentives. In the case of a shortfall event, your stake can be slashed to cover the deficit, providing an additional layer of protection for the protocol. Does it make sense to you?”
True, liquidation problem is not the problem of paraswap, but other problem can occur. We had a good exemple few weeks ago… And it was a big mess in the community, also because we didn´t establish that the stakers are rewarded for the risk they take if something happens.
QUICK
Quickswap Buying pressure is huge !! (old Quick displayed)
around x 2 in a month (some people buy the rumor)
The buyback might be in a scale of:
_3 000 $ per day of revenues = Buyback 3000 $
_ Fully diluted Markecap 48 000 000 $
For PSP
The buyback might be in a scale of:
_around 3 000 $ per day of revenues (difficult to average the data)
_ Fully diluted Markecap 27 000 000 $
So BUYBACK Volume to produce the same effect 50% of Dividend for similar buying flow
I am not a dev, I would suggest to just modify the frontend contract
_don’t display current claim
_display a new claim contract, which claim ETH rewards, swap 10% of rewards to PSP then stake PSP to sePSP1
Gas is cheap on Optimism, but on Mainnet might be expensive ?
We agree. Despite the great performance the protocol is experiencing, the performance of $PSP is concerning, and we appreciate the fact that this discussion has been started in the forum to address this issue.
While we believe that the proposed mechanism of modifying fee distribution from 100% ETH to 90%ETH / 10%PSP is interesting, we think that it does not solve the underlying problem and, therefore, will not have a significant impact on the price of the token because:
Stakers can initiate the withdrawal for the subsequent sale of their received sePSP1 position as soon as they receive it, which in practice means there’s only a one-epoch delay until the PSP sale is realized in a 28-day staggered delay.
Of the fees destined to the DAO’s treasury, 10% would be in PSP, which would negatively impact the diversification of the DAO’s treasury, which is currently mostly in PSP. Thus, it would reduce the DAO’s genuine capacity to carry out growth actions and attract talent without the need to sell PSP, which, if realized, would negatively impact its price.
Regarding the idea of buying/burning 10% of the accumulated fees, we understand that we must be very careful and analyze very well before making a decision of this magnitude. Unlike other protocols, in ParaSwap, the fees are distributed to the stakes, burning the 10% will imply reducing the stakes rewards. This could discourage the staking of PSP and produce an exit and sale of the staked tokens, which could negatively impact the performance of the PSP price.
We are not saying that the proposed action should not be taken, but we do understand that while it may be very useful for other purposes related to reorganizing the Protocol’s reward system, it may not have the short-term impact on the price of the token that is being pursued in this debate. So, we encourage being very cautious and analyzing the possible consequences of the proposed decision in depth.
We would be interested in delving deeper into this topic and understanding the reasons why the approved proposal to burn a large amount of PSP tokens held by the DAO was a failure. It did not achieve the intended goals while decapitalizing the DAO. Understanding this can help us learn from this experience and avoid making similar mistakes again by making decisions without proper analysis.
This is the best path to explore, as we need to achieve better token performance in the long term. Is the ParaSwap Core Team investigating any mechanism to incentivize Delta, or are you exploring any ideas in this regard? If so, we would appreciate it if you could share any progress you can make.
In conclusion, we believe that although the proposal is interesting and we appreciate this discussion, we are not convinced that if applied it will produce the expected impact, much less in the long term, so the approach we should take is to conduct research on how to implement a series of mechanisms to improve the performance of the token with real impact and that this is sustainable over time, without recurring to sudden measures without proper analysis similar to past initiatives that did not produce the desired effect.
Hi,
For me it was a failure because, like we saw, it has no effect on the PSP token price. But above all because we could have use this 200M token in the future. For exemple for marketing, or partnership, etc… In the future we can hope that the price of the PSP token will be much higher than now. It would have been a big amount of money. This money we burnt it… And it had absolutely no effect. So yes for me it was definitely a big failure.
But anyway we have to look forward. And i agree with you that this time we should do better than in the past. Maybe it is better not to ask holder of the token. They are only interesting in the price of the token. Maybe work with an agency or some professional.
That’s right. Of the two ideas put forward, burning is the one we view with more caution, as ParaSwap’s own experience has shown that it did not impact the price in the way it was proposed, so we advise to analyze very deeply before taking a measure like this as it is irreversible in the future.
Revisiting the idea of distributing to the stakers the fees 90%ETH / 10%PSP instead of 100% in ETH as today, and to throw another point of view to the debate we have given in our previous comment and thinking about possible positive effects, it could be argued that what the staker does after receiving 10% of the distribution in PSP is a matter of the staker and that it cannot be assured that most of them will liquidate their entire position to return to ETH, we are talking about PSP stakers, i.e. users committed to the protocol. This proposed form of distribution at a certain point could link the price of PSP to the performance of the protocol, since as the spread between protocol performance and circulant increases, the impact on the purchase of PSP for distribution could theoretically generate an impact on the price, which in parallel further incentivizes the stake of 10% of PSP to be distributed.
What do you think about that?
But again, these are appreciations that should be analyzed in more depth before taking measures that may cause an undesired impact among stakers and ultimately in the PSP market.
We agree with this and it is consistent with our previous comments. The issues being discussed here are very important decisions that will impact the protocol, its participants, and potentially the price of the token. Therefore, the decision must be thoroughly analyzed to ensure that it will have the desired effect and not the opposite. It would not be a bad idea to consult a financial and risk management specialist before making a decision, and if the DAO decides to go in this direction, it should be very strict and detailed in developing a framework with the tasks that will be required, the KPIs and the payment method associated with their fulfillment in the case of a service provider that delivers more than a one-time advisory work.
Both of us agree about the fact that burning token is maybe not the best option.
I also agree with you that the distribution to the stakers of the fees 90% ETH / 10% PSP will probably bring most of the stakers to the selling of the PSP token. Not interest.
An other idea would be to cut 10% (or more?) from the normal distributing stakers fees and use them for some developpement: security vault, marketing, any improvement. And the best, in this case would be a flexible allocation. Something we could vote for - as PSP stakers - each 3 months or 6 months (time as to be determinate). For exemple, after an analyse provided by someone from the team (these are the people most aware of the needs of the protocol from my point of view), and after a discussion and a vote, we could choose where this allocation goes for the next 3 months or 6 months or whatever we would choose. Something useful for long-term protocol development.
This is an idea that awaits improvement from the PSP community.
Please let me know what you think about this idea.
Thank you
We think this is a very interesting idea. We would have to see how the stakers feel about lowering their staking rewards, as they are the ones who should vote on the proposal. But if it is properly justified that this would be done to benefit the DAO as a driver of the protocol’s growth, and therefore its own interests, and that this allocation would also be made by the stakers voting every period of time, then it could be accepted by them. We understand that this is a very good idea to explore.
- would be a strategic buy back. It offers greater flexibility overall. For exemple this 10% can be reinvested to purchase $PSP tokens from the market. This creates sustained demand and ensure that Paraswap can respond to growth opportunities as they arise.