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.
In other protocols, such as Lido, there have been discussions similar to your comment.
At Sky (Maker), a change to the Smart Burn Engine has recently been approved. By default, it will switch from accumulating liquidity to the SBE SKY/USDS UniV2 LP to doing a “pure burn” of only accumulating SKY.
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.