[OLD] DIP-2 Buyback and burning and Trading Fee Reallocation

Summary

DODO Improvement Proposal No. 2 (DIP-2) is proposing a deflationary mechanism for the DODO token, which consists of burning a percentage of future vDODO exit fees and allocating a percentage of future trading fees from liquidity pools on DODO to create a community treasury. The funds in the community treasury will then be used for the buyback and burning of DODO tokens from the secondary market.

Motivation

As the user base of the DODO platform and the amount of DODO tokens in circulation continue to increase, it is necessary to tie platform growth together with token value capture. The goal of DIP-2 is to increase the number of DODO and vDODO token holders and to generate more benefits for them.

Specifications

1.The Burning of vDODO Exit Fee

Currently, vDODO holders need to pay an exit fee to exit the DODO membership system, and the exit fee rate varies with the ratio of the total staked DODO tokens to the total DODO tokens in circulation. The exit fees are then immediately distributed to all remaining vDODO holders who have not exited.

DIP-2 is proposing that 50% of future vDODO membership exit fee tokens be burned.

As of May 12, 2021, the total volume of staked vDODO is 21.66 million DODO, and the cumulative exit fee is 7,253 vDODO (the equivalent of 725,300 DODO). If 50% of the exit fees were burned since Day 1, a total of 362,650 DODO tokens would have been burned, which would be worth approximately $1.2 million as of May 12, 2021.

If approved and implemented, DIP-2 could introduce an effective deflationary mechanism for the DODO token economic model. Specifically, more DODO tokens are burned over time as the number of vDODO members choosing to exit DODO membership increases, causing the total number of DODO tokens to decrease, and thus reducing selling pressure in the secondary market. However, vDODO holders would have to accept lower yields (i.e. exit fee payouts) if 50% of future vDODO exit fees were burned.

2.Allocating a Portion of the Trading Fees from the Liquidity Mining Pools on DODO to Create a Community Treasury

Currently, all trading fees accrued on the DODO platform are distributed to market makers/liquidity providers (LPs). Although each liquidity pool’s trading fees on DODO are set and configured by its creator and may vary from one another, the default trading fee for a pair on DODO is 0.3%.

DIP-2 is proposing to set up and fund a community treasury by allocating to it a portion of the trading fees from the liquidity pools on DODO. The funds in the community treasury will be used for the buyback and burning of DODO tokens, which will increase the platform’s growth and bring DODO’s token holders more benefits in the long run. On the other hand, this measure means a reduction in LP revenue.

DIP-2 proposes to allocate 100% of all future trading fees accrued from DODO liquidity pools into the community treasury. The funds in the community treasury will then be used for the buyback and burning of DODO tokens from the secondary market.

Available Options

There are four (4) options for the DODO community on DIP-2.

Note: the options and the parameters used are subject to change based on community response.

Option 1: Burn 50% of future vDODO member exit fees, and collect 100% of future liquidity pool trading fees into the community treasury.

  • Burn 50% of the vDODO member exit fee and distribute the remaining 50% to vDODO holders.
  • 100% of the liquidity pool’s trading fees are collected and put into the community treasury for DODO token’s buyback and burning from the secondary market.

Option 2: Burn 50% of future vDODO member exit fees and no trading fees reallocation.

  • Burn 50% of vDODO member exit fees and distribute the remaining 50% to vDODO holders.
  • No trading fees are collected for the community treasury, hence no reduction in LP revenue.

Option 3: 100% of future vDODO member exit fees are distributed to vDODO holders, and 100% of future liquidity pool trading fees are collected and put into the community treasury.

  • 100% of vDODO member exit fees are distributed to vDODO holders.
  • 100% of the liquidity pool’s trading fees are collected and put into the community treasury for DODO token’s buyback and burning from the secondary market.

Option 4: Maintain the status quo.

  • No reduction in LP revenue.

This concludes DIP-2. Suggestions and comments from community members are always welcome and encouraged. A governance vote on the proposal with the aforementioned options will be created on Snapshot.

Governance Vote

Voting Period: May 18, 2021 at 15:00PM to May 21, 2021 15:00PM UTC+8 (Singapore time)

Voting Method: Users with both DODO tokens and vDODO tokens can vote via Snapshot (Snapshot). 1 DODO represents 1 vote and 1 vDODO represents 100 votes. Casting votes will not incur any gas fee.

Vote for the proposal by clicking on the option that you agree with the most. If you disapprove of the proposal, click on the option “Maintain the status quo”. Feel free to post your thoughts and alternative proposals to DODO’s community forum.

If the total number of votes reaches at least 2 million, The DODO Team will implement the proposal using the option that receives the most votes.

Note: If you have DODO tokens, make sure that they are in wallets on Ethereum mainnet (wallets on centralized exchanges or Binance Smart Chain will not give you votes).

6 Likes

The market is too volatile, DODO is constantly minting new coins to dilute the value. I think this is essential for a long-term development of the DODO project. Need an early start.

When discussing options 1 and 3, what does “100% of the liquidity pool’s trading fees are collected and put into the community treasury for DODO token’s buyback and burning from the secondary market.” actually mean? Do we mean that none of the fees go to the LP providers? That doesn’t seem right/viable. Is there actually a percentage of the LP trading fees in view here that would be redirected to the community treasury, rather than 100% of the fees?

The current wording doesn’t seem to allow for that but also does not seem like the intention of the proposal writer as this would certainly stop LP providers from wanting to participate in providing liquidity. Can we get some clarification?

Thank you!

1 Like

I agree with Diane and the core team on this DIP

  1. I believe that a slight deflationary token structure could provide stronger token value capture in the middle term. This initiative is a good start/experiment for DODO. To start, a 360k token burn “since day 1” would result in only 0.03% of total supply burned. Thus contextually, the token burn will not have an immediate price impact although we can use this to springboard a new framework toward DODO tokenomics design.

  2. The creation of a community treasury gives extra usecases to the Dodo DAO. On first look, this helps to abstract ownership and decision making away from the DODO core team.

  3. The treasury can also be used to fund other project areas, such as marketing, incubation or other blind spots that the team missed. By that extension, the treasury could provide funding for community members to step up and build on Dodo. Successful protocols like SUSHI have adopted similar strategies.

DODO - is there an option to allocate a portion of the fees to treasury ( instead of 100% in the options provided)? I believe that there could be a need to incentivize LPs.

Eugin
DeFiance Capital

2 Likes