This is a collaborative proposal with community member Silver and I
Edited for clarity
I believe a perfect outcome for this project has 3 parts:
- a fully decentralized platform where any common user can place funds with full confidence in the best possible returns and security.
- a governance token that encourages participation and curbs the apathy of voters (which seems inherent in many governance tokens currently in the space), and
- a governance token with intrinsic value that can entice new crypto users that know nothing more about the project than its initials on CMC.
The first goal relies solely on the APY team and likely already has your full confidence if you’re here and reading this. So I think all proposals need to focus on goals two and three.
The proposals submitted so far have failed to truly connect with all parties involved and address the last two goals stated above. Many holders favored a performance fee allotment to stakeholders. Understandably, due to compliance issues, that was not ideal for the APY team, who would ultimately have to face the consequences if that proposal fell on the wrong side of the regulatory line. I don’t think any of us should expect the team to risk potential fines or jail time.
I also think there are a lot of holes in the boost proposal, especially since it fails to help us realize the second goal and comes up rather short on the third goal. The boost doesn’t give that appetizing of a reward and as more and more users add to the staking pool it’s rewards diminish. If the goal is to encourage participation in governance and entice people to want to stake, then having a boost with a reward that shrinks as more people add to the pool is counterproductive. Also, only giving the boost to users in both the platform and token seems to me a suboptimal way to gain new crypto users that are unaware of what the project even does.
The burn proposal addresses the third goal, but not the second. It’s true that burns are a very popular mechanism for increasing value at the moment, but they do nothing to incentivize participation in the true purpose of the token. However, with APY functioning solely as a governance token for the moment, I would agree that a 100 million supply may not be necessary, so I can see the reasoning behind a burn and do not wholly disagree with it. Unfortunately though, I think some users, especially older ones, get put off by the idea of a burn, considering it a cheap tactic and uninspired method of price manipulation.
So, to finally get to the meat of this novel I’ve written, I have two proposals that I believe hit all the goals and stay within regulatory boundaries. APY already has a percentage yield written into their litepaper that is likely to go treasury at first and then to stakeholders. To quote it, “The percentage of yield generated that will go to APY token holders for maintaining the protocol. This is initially set to 0.” I will call this yield that goes to holders maintaining the protocol a Stability Yield from here on out for brevity’s sake. The problem with paying a reward to stakers in the initial performance fee proposal was that the protocol is not yet fully decentralized (like a UNISWAP, for example) and if the project ever faced a compliance crackdown, the APY team members could take the fall. So how do we bridge this gap?
The first proposal is a Stability Treasury. I propose that we use the stability yield to buy back APY from the open market and direct it into a treasury made up of two wallets. The first wallet will be a marketing wallet used for all things marketing related. The second will be a stability wallet that will serve two purposes:
- to maintain stability as the protocol transitions to it’s ultimate goal of full decentralization, and
- after decentralization is realized, to be used as the wallet from which rewards will be distributed to stakeholders.
In order to receive these rewards, APY holders must stake to a governance pool. Since there will be no rewards until after fully realized decentralization, this pool will give 3-1 voting rights to all stakeholders. I believe this is how we can connect to both goals two and three as well as provide many other desired benefits.
- People will be incentivized to stake for extra voting rights because votes will directly determine the exact percentage of the platform yield that will be allocated to the stability yield. This will affect how they will be rewarded when decentralization is realized.
- If staking in this governance pool means they will have to wait to realize the full rewards, it ensures users are not selling early, thus creating stability for the token.
- Because tokens are locked in the stability wallet until decentralization, it essentially serves the same purpose as a burn by taking tokens off the market.
- Since the time between now and whenever the protocol will be fully decentralized is undefined, I think for the present the stability wallet could serve as insurance in the worst case scenario of a hack to help victims recoup some of their lost funds.
The second proposal is a Safety Router: Users will have the ability to stake APY tokens into an APY Insurance Pool. The Insurance Pool would be used if an adverse event in the APY Platform occurs. Users who stake into the insurance pool would be subjected to a max 25% loss of their staked APY within the Insurance Pool. This avoids regulatory concerns because users are risking part of their staked APY and thus are allowed to be compensated for that risk. It also serves to add an additional layer of security to the platform.
Once the APY platform fee is voted on, that fee would be used to buy APY off the market where the newly bought APY would be split for three purposes:
- The First purpose will be to increase the insurance pool by routing 45% of the platform fee into the insurance pool to be combined with the APY that is already staked.
- Second, 45% of the platform fee will be routed to APY stakers in return for taking the risk in the insurance pool.
- The remaining 10% would be routed to a bug bounty reward fund.
Now this plan does less to encourage participation in governance, but it does increase the utility of the APY token more than the first proposal. Also, with more potential for rewards I think there is greater incentive to partake in governance voting than there is right now. Down the road we could add something in voting where users would have to vote on at least one pool proposal before they could vote on any sort of platform fee.
Anyways, thanks for reading my book, I’m talking to publishers Friday to get it on shelves by Christmas.
. People staked in this proposed insurance pool would absolutely care about what farms get approved through governance as it would affect the additional risk they’re taking by staking there. This would be further incentivized by your proposed participation requirement (which some L1 chains implement to some degree).