This RFC would like to receive feedback on the overhauling of the current governance fees distribution of the mStable Protocol as well as propose the utilization strategy of these funds.
Currently, 100% of generated governance fees (10% of the total yield generated by the protocol, with the remaining 90% going straight to Save users) are used to market buy MTA and distribute them to stakers of both MTA and BPT.
Beyond this buyback distribution, MTA stakers receive additional rewards through the Emissions Controller (close to 20% of all weekly emissions based on historic distribution data). This is likely to remain the case for the remaining 6 years of distribution.
As of today, the TreasuryDAO (responsible for the annual management of burn rate and the long-run optimization of the project) receives 0% of the revenues generated by the protocol.
It’s essential for sustainable governance of the protocol and its contributors that mStable create organic revenue lines. We therefore propose to reroute some or all of these governance fees used to buyback MTA to the TreasuryDAO instead.
Primarily, this is being done to rely less on MTA Bonds (we raised 423k mUSD worth of bonds so far, with a continuous future demand for them via Olympus Pro or Solv Protocol in the future if we don’t create other income streams) and instead utilize natively generated assets from fees (mUSD & mBTC) for liquidity.
Since then, we rerouted these governance fees to purchase MTA directly off the market and distribute to stakers. This left the treasury and protocol with no organic way of capturing revenue and accruing value back to the treasury, and thus forms the basis of this RFC to remedy this.
Therefore, it is proposed to instead reroute a portion or the entire governance fee allocation to the TreasuryDAO and generate a basic income stream for the DAO to begin funding operational expenses, as well as accrue a stake for future asset management ventures in the ecosystem.
As MTA stakers already receive a considerable weekly MTA allocation every epoch and directly benefit from the revenue going to the Treasury, this should easily offset their slight dilution of rewards, as these extra rewards did not contribute to more users staking their MTA.
In order to streamline asset management and funding operations for the TreasuryDAO, it is also suggested to allow the DAO to utilize the generated revenue according to a specific strategy to be included in the actual future TDP, as well as be held accountable in the quarterly Treasury reports in a way that maximizes value retention and longevity of funds, as well as have as its primary goal the maximisation of perpetual funding of the mStable operations and protocol for the next 2 to 3 years.
As this move would sacrifice some aspects of decentralization, it is proposed to set an initial limit of 350,000 mUSD worth of generated fees initially, and then review this portion again according to how well the DAO has managed the funds over the period and decide then to either increase this buffer or revert all decision making back into the hands of Meta Governors.
At the current rate of roughly 6-10k mUSD worth of governance fee buybacks, this will allow the TreasuryDAO to utilize these funds for most of 2022, before needing to approach Meta Governors once again and re-visit this limitation.
mStable has grown significantly in 2021: The core contributor number doubled, we’ve earmarked the remaining MTA emissions for the ecosystem for the next 6 years, and have grown our Asset Management subDAO position significantly.
With this growth, so have the expenses that the protocol has to carry. Sustainable yield has always been a top priority, and so it comes as a logical step to do our best to recreate this sustainability on the operational level as well.
This means that we will need to very opportunistically allocate revenue generated in the ecosystem to be able to offset a lot of the MTA Bond fundraising that will otherwise need to take in the future, and be able to fund operations and runway for the protocol on it’s own in the near future.
In order to do so, this RFC marks the beginning of this endevaour, and should also mark the beginning of a more free-flowing usability of these funds that stops seeking approval for every mUSD spent, in order to be able to take advantage of the myriad opportunities in the system (see for instance the opportunity that Convex offered, but that the cumbersome governance model denied us to really take advantage off).
- The MTA token and the mStable protocol will start accruing value again
- The protocol will be able to generate revenue to fund its operational costs as well as engage utilization strategies
- It would set the protocol focus on sustainable long-term growth and put the mStable Treasury in the centre of it
- Save significant amounts of gas on the cumbersome process of exchanging native mAssets for MTA to distribute to stakers & avoid stakers double-dipping rewards
- MTA stakers will receive slightly less MTA than before
- We give up certain parts of decentralization for speedier utilization of funds in the ecosystem
It is suggested that the community comment on this RFC in the coming days, and bearing no significant opposition or change in ideation, we would move ahead with this RFC in the coming weeks and create a formal draft proposal on Github to be used for review.
Meta Governors are encouraged to provide as much feedback as possible until then, so we can create the best possible outcome for mStable and its users.