Draft CIP-01: Discussing options what-to-do with the protocol profit

Summary

What to do with the protocol profit/earning/fees generated (0x859eefc267671595d987d0f6589d7771d4877113) to:

  • Increase the governing power of COVER tokens
  • Secure fund for future development?

Background

COVER is a valueless-but-powerful governance token of a protocol that completing the open-finance puzzle: Unstoppable coverage, protecting participants against unexpected incidents. While waiting for further core releases (v1.1 by Andre Cronje in audit, v2 expected by Q1 2021 with audit cost estimated >40k $), COVER holders can align the supply-demand of the governance token, incentivising positive constructing ideas and accumulating fund for sustainable development. The result of this proposal can be revisited whenever major changes affect the protocol or its governance holders. Please further understand the COVER protocol by reading official documents or important summary such as https://medium.com/iearn/understanding-cover-protocol-8b12745137b1

Motivation

With the current inflation rate from Shield Mining (please refer to https://docs.coverprotocol.com/product/tokenomics), true supporters and magic-making people of the protocol may have their governing power diluted by yield farmers, speculative traders etc. To mitigate this and incentivise active improvement contributions, profit earned from the protocol fees can be used for tweaking the market supply-demand.

Specification

Current ideas and options are (feel free to propose better ones or modifications):

  1. BUY BACK AND LOCK
    Use profit to unexpectedly buy back COVER from the open market, take them out of the circulating supply and lock in a community-multisig wallet, community decides what to do in the future when necessary

  2. BUY BACK AND REDUCE-POWER-GAP
    Use profit to unexpectedly buy back COVER, INVERSELY reward them to holders who lock their COVER for a specific time (the LESS you own & the LONGER time you lock, the MORE token you get; and vice versa)

  3. BUY BACK AND BURN
    Use profit to unexpectedly buy back COVER, burn them, permanently reduce the total supply, but sparing no capital for future needs

  4. BUY BACK AND LEND OUT
    Use profit to unexpectedly buyback COVER token, deposit bought-back token as collateral & earn interest by lending on C.R.E.A.M. or BentoBox (Sushi)

  5. BUY OTHER ASSET(S) AND REWARD HOLDERS (DIVIDEND-LIKE)
    Use profit to buy another asset (ETH, BTC DAI etc.) and reward it to active COVER holders

If you don’t have anything to add/modify to the above options, just like the post. In a few days the finalized proposal will be out and official vote is on snapshot page using your Cover-holding wallet signature.

Welcome to discuss here or on Discord governance channel

10 Likes

I approve! Powerful proposal.

1 Like

The fifth sentence is most attractive to me :vulcan_salute:

1 Like

Great proposals when do we vote?

After it got enough traction and approval from u guys

1 Like

I think third would be great. We will be like yfi than. Very less coin means less manipulation…

1 Like

How and when can we vote on these proposals?

if u dont have anything to add/modify to the above options, just like the post. In a few days the final proposal will be out and voting is on snapshot page using your Cover-holding wallet signature

最後一點應該改為所有cover持有人都有收益的分紅

I think fees can be allocated as following

  1. buybacks:
    % of the profits for buybacks 30%
    strategy: to decrease volatility, we may set the buyback to be triggered when the price falls by 10% from the 7-day moving average, this would give the protocol price stability and enforce price floor.

  2. 20% Fund to incentivize developing strategies to further invest the bought back COVER

  3. 25% to the treasury

  4. 25% to be distributed to the COVER vault: creating a COVER vault that uses an elastic multiplier (like the Geyser) that rewards holders depending on the period they have been staking for (snapshot of the wallet address), this way you are rewarding average people and not whales who pump and dump

2 Likes

I woud prefer an allocation like mmass99 designed! With the same %!

Nice proposal :+1:. We need more use cases of $cover as given above. Also funds can be used for marketing purposes. Cover is valueless by precious for the protocol governance. Cover’s attractive tokenomics and distribution can attract more protocols to use the protocol.

1 Like

I think a combination these proposals would be ideal example all this could work would be to stake your cover

50%Stake cover in buyback given to stakers
10% for the development
20% in BTC / Eth given to stackers rewards
20% investing in other defi projects like yfi badger boring aave etc given to stakers rewards

And able still lend out dividend bearing asset for more Utility

2 Likes

as other ppl replied to this on Discord, i’ll say it’s a good opinion but may put more work for them at the moment, also it may be harder for us to track

1 Like

我认为“主动”在这里可以指参与治理的人,因为这是代币的主要目的

最后有一点提到了rewards to active holders就是这个意思。 持币者可以有奖励

Proposal 1 sounds a bit like swissborg and that works quite well. It triggers when market conditions are bearish to protect the price - they also burn the bought back tokens which may not apply here.

1 Like

agree w/ @mmass99
but I will start first to build the treasury with xx amount and then move to:

  1. buybacks
  2. incentivize new development in the protocol
  • I think yfi has a similar approach where they first built they treasury

probably at this stage I will go with 2) first and then the buy backs.
in traditional finance, you buy back your equity when:
a) you think the prices of the stock is too low
b) you don’t have other uses of funds (no more projects. new developments where to invest the cash coming from business) so you start paying a dividend and buying back your stock

not sure about a), but I am sure that at this stage the Team can do much more development

1 Like

Noob question - how will the vote work exactly? Will it be similar to Proposed Future Shield Mining Weights?
For example we will have 5 or more proposals and we vote percentages for each? Then money from treasury are used for each vote according to percentage it got? Or we will pick just one best option and this will be the only option that will be implemented?

1 Like

Option #3 will increase scarcity. I approve that option