• AIP

  • [AIP-19] Desirability of a future revenue sharing model

Proposal
The core team has indicated that, as of now, a revenue sharing model for the DAO is not planned to be integrated unless ALCX holders show strong support in favour of such a model & it's led by the community. This proposal is not to outline an exact revenue sharing model (which would be difficult to do before v2 and the DAO are introduced), but to agree as a community that such a revenue sharing model is highly desired and should be discussed and implemented following the DAO launch.

Background
With the ongoing development of v2 and the DAO, it is difficult for the ALCX community to provide anything but a general direction for future implementations. However, it’s clear through discussions on the Discord server that there is a general expectation that treasury funds and ongoing DAO revenue streams should be shared – in one way or another – with ALCX stakers.

At the moment, the treasury earns 10% from every harvest as well as affiliate fees from Yearn. In the future with more users, more assets, and potentially other sources of income, we can expect the treasury funds to keep growing significantly. Meta yield farming has been the name of the game up to this point (which AIP-17 introduced), but unless there is a way to share this revenue and these benefits with ALCX stakers, the ALCX token will have value only for governance but not for utility and/or economic benefits.

To increase the current and especially the future value of ALCX tokens a clear community direction on the use of treasury funds is needed.

Examples
Again, this proposal is not to outline an exact revenue sharing model. To do this we need to have a clear idea of what v2 and the DAO will look like. But to illustrate the value that a revenue sharing model could bring, consider the following examples:

  • ALCX stakers could receive a direct distribution from the treasury in the form of DAI, ETH, or other assets.
  • ALCX stakers could use their share of the treasury assets to pay back their outstanding loans.
  • Assuming that the high rate of ALCX inflation is stopped, treasury assets could also be used to periodically buy back ALCX tokens from the market.
  • ALCX stakers could receive a distribution in the form of alTokens rather than the “real assets” which would allow the treasury to use the original assets for yield farming, and thus increase the treasury size while still sharing revenue.
  • …

The point is that there are many ways to bring real utility and economic value to ALCX tokens, and we need to signal that this a) is desired by the community, and b) needs to be developed following the DAO launch.

Vote
A vote for this proposal would signal support for a future revenue sharing model, while a vote against this proposal would signal not to share treasury revenue with ALCX stakers.

As a next step – and assuming this vote passes & DAO is launched – there needs to be a discussion in the DAO on the exact mechanisms of revenue sharing.

    I like the idea of having everything public and the way how e.x. Bankless DAO is doing this. I would be nice to get some revenue of course, any risks here? Probably it will attract more people to DAO and token.

    I agree that gov tokens have to have value beyond just giving you voting power, and thus am in favor of sharing revenue with ALCX holders.

    I would like to add this: if we want to (completely) stop the inflation of ALCX then part of the money the protocol makes should imo also go to the SLP and alAsset LP stakers (in the form of BTC, DAI, and/or ETH).

    I'm especially in favor of making ETH the go to fee token as it's also the most liquid.

    0xFelix
    so firstly i agree with you, long term these are nice have, i hold the stance of "i don't mind alcx damping a bit more whilst we keep the devs focused on V2 and the DAO and then it can pump after". So i agree with you on the idea of waiting until after the DAO and V2 for these things.

    • ALCX stakers could receive a direct distribution from the treasury in the form of DAI, ETH, or other assets.

    I dont like this idea and would rather the alAsset approach you mention later as this has the added effect of increasing TVL and adding insurance incase something goes wrong

    • ALCX stakers could use their share of the treasury assets to pay back their outstanding loans.

    this won't be possible until V2 comes out but i do like the idea, but i think it should be prioritised under the rev share

    • Assuming that the high rate of ALCX inflation is stopped, treasury assets could also be used to periodically buy back ALCX tokens from the market.

    The token supply is decreasing over time but it will take 3 years to get to its flat rate so that's a longer term consideration. i think that in a few years if we have the TVL and the volumes to keep an adequate amount of liquidity we may be able to phase out the inflation earlier i think that the rate of inflation should be revisited bi-annually, what do you think?

    • ALCX stakers could receive a distribution in the form of alTokens rather than the “real assets” which would allow the treasury to use the original assets for yield farming, and thus increase the treasury size while still sharing revenue.

    i like this one

    option from me

    • if we generate enough fees then we could sell them to buy alcx to send to the LPers instead and stop the inflation early

    over all good post and i think it echos a lot of what people are saying in the discord!

      Although Scoopy has mentioned revenue sharing on podcasts, I think it is premature to vote in favor of revenue sharing over other ways of increasing token value. There are other ways to enrich ALCX token holders and revenue sharing may not be the optimal model. Yearn, for instance, started off with a revenue share model and later changed it to YFI buybacks. Of course, this is just a signaling vote but I think the serious discussions on this can only happen after V2 and the DAO, as was indicated in the AIP.

      It will be interesting to see how successful Tokemak becomes. A successful ALCX reactor may impact this discussion as it relates to inflation.

        ImYourHodlberry yea i think that either the devs do the buybacks in inhouse or someone makes one and the community just votes to make it the official one so gets linked into the main site. its the same thing just different route and we then create the opportunity for the devs to focus on more complex and powerful things that not even scoopy has thought of.

          Thanks for starting the convo & putting out a proposal. 100% for a revenue sharing model. Would vote yes if this was on a snapshot vote.

          +Agree that the way that it is designed should be informed by the V2 and the DAO development. Ideally with a lot of input from the core team. Think this will happen over the course of weeks & feel we can use this time wisely.

          Assuming the core team will be busy buried on other aspects of development, might be beneficial to form a small team from the trusted members of the community to;

          • Work closely with the core team getting informed about V2 & DAO
          • Prepare an initial list of considerations + potential routes to take in alignment with the core team.
          • Share initial thoughts with the community once V2 launches & gather input.
          • Consolidate input & the work to set the scene for an informed convo together with the the dao launch.

          Not sure if we are in a rush or not 🤷‍♀️ just thought the research & prep for the convo does not need to wait for V2 to be launched & can be run side by side.

          Strong accept regarding revenue sharing model in general.

          • fla likes this.

          personally think all the value captured should be driven back to increase the SPOT ALCX token price. Why? I imagine ALCX growing into tens of billions of TVL.. i would rather that value be driven to the token than get some payout (revenue) for holding my ALCX. I want to hold ALCX cause i think the spot price will go up over time (value is being created for the token).. not get paid out in basically fiat during an early expansion/growth phase. Paying me some dividend/revenue at this stage of the development is bearish to me.

          It's clear we should be using that value creation to grow further and faster/wider and grow into our addressable market. Paying me out $ right now to me signals that the protocol/dao has no confidence in its ability to grow and believes the value created is best spent enriching stakers.. yikes? if i was amazon in 2003 i wouldnt want a dumb dividend.. roll it back and grow.. get more devs, add more revenue streams, grow the tvl, anything but pay me seriously. Youre paying me in a meta way anyhow by the future spot appreciation of the ALCX token -- much like Amazon did throughout the 2000s. Think longer term here.

          where am i wrong here? I have thought about this a lot and i do not see a real counterargument.. the only counterargument would be we're done growing + reached our addressable target market, so it makes more sense to pay out value v roll it back into growing network fx/protocol/dao growth.. free alpha here: if the marginal unit of $1 is true in that way (better served to pay out stakers v use for further growth) i am super bearish (because that would mean ALCX ceiling is much lower than I thought originally).. unironically would want to hold less/no ALCX then. Thoughtful comments appreciated

            Kazuya1987 (I will copy-paste my reply from the Discord server here) Let me start by saying that the current proposal is only to initiate this revenue sharing idea. How we do it in practice is an entirely different topic, and there are many ways we can think of. Dividends being just one of them, but buy backs being another (and I'm sure there's more examples).

            But to your point: I dont think the comparison to the likes of Amazon really applies. I mean DAOs have low capital requirements and generally high profitability. So it's not that a dollar paid out to stakers is a dollar misspent, as would be the case for Amazon (and I fully agree with this in the case of traditional companies).

            Currently the treasury is raking in 10% of every harvest, which is a very nice income stream that doesnt really serve a purpose except to pay current devs & do some yield farming. So of course if there is a good business opportunity I'm all for spending more on that, but I believe that the tradfi idea of "misusing" company assets through dividends is a false dichotomy when it comes to web3.

            One thing that supports this that is that we dont actually need to spent "real" money to pay out a revenue share to stakers. We could use the treasury funds to pay for ongoing developments/opportunities, continue yield farming, and simply mint alTokens to reward stakers. So in essence we can totally do both. (Of course there's a lot of work to be done on determining the exact parameters for this.)

            But I understand your reservations and I think this would be a very healthy discussion to have once we actually have a DAO and can start working on this revenue allocation/sharing model.

            • fla likes this.

              Kazuya1987 (copy/paste from Discord) DirectionalIy i agree with this. Though one thing to consider is that projects in DeFi can moon without warning, causing a huge influx of capital to a team/DAO that isn't experienced in managing that much capital, so in that sense it's like Masayoshi pumping a huge amount of money into an inexperienced startup -- the funds get misspent because they came all at once without sufficient structure/strategy for deployment. And often the company fails outright because the product outpaced the market and went in wild unproven direcections. I don't necessarily think the funds going to the token holders is the correct answer to this kind of "problem" but perhaps it'd be a mitigating measure?

              One other thing to point out is that it is very "trendy" to give value back to token holders so in that sense it will generate a huge amount of visibility and positive press for Alchemix, so it could be a way to rapidly bootstrap growth, and I imagine it could be done in a way where the lion's share is still reserved for re-investment into the product/team.

              I do think we also sometimes forget that tokens are not equivalent to common shares in a corporation and in particular tokens do not come with all the comfy shareholder rights and protections, so that's another reason why a comparison to an Amazon in this case is a bit apples to oranges. To me, this lack of true shareholder rights would make a stronger argument for delivering value to token holders early and consistently.

              • fla likes this.

                Kazuya1987 Understand what you mean but I am not sure Amazon is a model that applies well here. We'r simply not operating on same operating costs & we'r not aiming to grow in diverse set of consumer service verticals. (+ web3 space knows better ways of organising wealth than following the model that created the worlds wealthiest person.)

                I think you are right in thinking a good portion of the revenue should be used to keep innovating at a pace that beats the market. Which would fuel future price appreciacion. This is a legitimate concern. But not convinced this has to happen with 100% of the value generated. Think there could be a balance & we can strike that balance thru a healthy convo on parameters. Also think you are underestimating what an engaged community of equity holders (full of builders) could bring in form of innovation. + I'd be ok as an ALCX holder to recieve less from revenue sharing if we needed to fund more development&innovation.

                • fla likes this.

                  I'm a huge fan of this idea, but at the right time, so I think your approach of beginning to collect community feedback is the right course. We don't want to stifle the work that still needs to be done, however, I think a model, similar to AAVE, would be interesting where the stakers are securing the protocol and receive rewards for doing so.

                  The beauty is that we, as a community, can choose many number of ways to reward stakers. I do like the idea of alUSD or some other stable reward, but personally I'm open to all other options and would simply be happy stacking more ALCX. Perhaps it's xALCX that can be used in some way via LPing or as additional collateral?

                  Either way, I am strongly for rewarding stakers long term. I think it's partly how ALCX keeps a strong community and an even stronger moat, should strong competitors arrive as they are developing V2.

                  I

                  0xFelix

                  Love the examples provided. Just throwing some rough ideas out there. What if instead of paying direct dividends out al assets or even direct assets like Dai or Eth etc, the dividends provided boost the apy on the current loan the user has out.

                  For example: V2 is out and a user has a alBtc, alEth, and alUsd loan. Instead of directly paying dividends out, the dividends that would have been payed out actually gets allocated to the users using the actual program and said user can choose which vault gets the boosted apy to help pay down the debt quicker.
                  This example above promotes the actual use of the protocol and provides a healthy incentive to take more loans out to help generate more yield for treasury etc.

                  • fla likes this.

                    Hugely in favor of revenue sharing.

                    First, as has been mentioned above, Web3 DAOs and protocols tend to need far less of a revenue stream than traditional companies, so there should be a happy middle ground for for revenue sharing along with reinvestment into the protocol.

                    Second, everyone realizes that ALCX stakers being paid a revenue stream will in of itself help the price pump, correct? Who doesn't want a revenue bearing token from a protocol with proven worth, stability, and a unique product with high demand? Demand for ALCX would go way up. You'd get the effects of a buyback, essentially.

                    Third, lots of people are attracted to Alchemix because they see the financial value of the tool; namely being able to use your capital to purchase things without losing any of the capital, and thus being able to recoup your money from interest paid on your full capital amount, not what you have leftover after your purchases. Making ALCX essentially a dividend stock/token I think goes right in line with people who see economic upside opportunities that they want to take advantage of.

                    I like the idea however might be premature at this point and as this capital could be put to better use be it development, marketing, etc. Also, whats on the horizon is more gov. regulations and compliance thus must account for this unknown expense. I'm a wall street 25 year vet so know first hand the massive burdens regs/compliance places on firm and expect this same burden if not greater within the crypto space. Bottom line like the idea but would be best to consider its implementations say in the next 2-3 years.

                    A few quick things while I'm thinking about this now (will hopefully have time to pull and sort through data later to answer other questions) assuming revenue is paid in alAssets. Two strategies I see to make this happen:

                    1) Harvested yield is used to buy alAssets from the secondary market (good for maintaining/boosting peg) and passed along to stakers who then decide if/when to trade them for their actual useful counterparts since that will only be feasible after a certain threshold is reached (if paid 1 alUSD, 0.0001 alETH, per ALCX per week then it only makes sense to pay for gas to trade for DAI/ETH after X weeks). This does cost stakers more though so actual APY for stakers would always be lesser than what is displayed due to multiple gas costs.
                    pros
                    -boosts/maintains peg
                    -always possible (assuming there is always a secondary market)
                    cons
                    -staking APY is always lower than advertised
                    -stakers are paid in dust which may take time to amount to anything useful

                    2) Harvested yield is used to create rev-sharing vaults from which alAssets are borrowed to pay stakers. This does nothing in terms of peg, but could run into problems if there is nothing available to be borrowed. This could boost yield for rev-stakers as each time more and more would be able to be borrowed (your interest would be compounding) so it would really be a trade off of APY up front for greater APY later as well as more stability in staking APY since the compounded interest would dampen any periods of low usage.
                    pros
                    -constantly growing yield for stakers
                    -boosts Alchemix TVL
                    -signals confidence in protocol
                    -more consistent/less volatile APY
                    cons
                    -may not be able to withdraw alAssets to pay stakers (or would have to prioritize this over individual users of the protocol
                    -much lower upfront APY (even less dust that may take even longer to amount to anything)

                    I absolutely agree that ALCX holders should benefit from revenue sharing. A couple of thoughts, based on the discussion around this post so far:

                    I think that part—though probably not all—of this revenue sharing should take the form of direct payouts of DAI, ETH, or al-assets to holders. We should obviously take plenty of time to discuss the pros and cons of this approach, but I'd like to go ahead and register my disagreement with the argument that a "dividend" comes at the expense of growth. I think direct payouts have a place alongside buybacks, APY boosts for loans, and of course reinvestment (hiring, advertising, etc)—at all stages of growth.

                    One question: would these payouts need to be harvested, or would they be dropped in users' wallets? Is there a third option? If possible it would be nice to avoid users' having to pay the gas costs to claim shared revenue, although we'd have to take into account the expense that would represent to the treasury.

                    i like the idea very much. the proposal crystallizes what everyone is expecting and it will definitely add value to the ALCX token short and long term through which the protocol will attract more investors. thank you for postulating this porposal . Well done!

                    I said this on discord but it is worth repeating. I came for the project but i'm accumulating and hodling ALCX for the right to future revenue stream.

                    I believe wholeheartedly that this revenue stream should be in the form of Alassets/stablecoins. This allows the DAO to keep and provide more boosted yield which in turn flows to stakers.

                    I believe that stakers should be subject to slashing (up to a percentage established by the DAO).

                    I believe that the protocol should also use it's own product. I love the alpha Scoop leaked on Goodwill Yunting Podcast. Let the treasury deploy itself to the protocol. Max borrow. And pay out to stakers. As harvests are called rinse repeat. This also has the benefit of using the treasury to grow the treasury through yield.