This document presents two significant functionalities: Automatic Income Allocation and Token Converter. Both of these features are intricately linked, serving as pivotal steps in the decentralized automation of protocol revenue distribution.
- Automatic Income Allocation: This functionality ensures the seamless distribution of incomes generated by Venus Protocol, channeling them to different destinations according to specific rules and percentages.
- Token Converter: Building upon the allocation, the Token Converter takes care of the conversion process, transforming underlying tokens into specific tokens in an automated and efficient manner.
Together, these functionalities represent a coherent and streamlined approach to managing incomes and conversions within the protocol.
This innovation is designed to distribute the incomes generated by Venus Protocol seamlessly, channeling them to different destinations according to specific rules and percentages. This functionality will incorporate incomes generated through various sources, including the spread between borrowing and supplying rates and liquidation incentives, for both the Core pools and Isolated pools. The goal is to distribute these incomes in underlying tokens and not in vTokens, based on the latest protocol tokenomics.
Near-Streaming Distribution: The income will be distributed in a near-streaming fashion, from the different pools to the ProtocolShareReserve contract.
Flexible Distribution Rules: The incomes generated by Venus Protocol will be distributed according to two schemas:
Schema (spread_prime_core): Applied specifically to income generated by the spread between borrowing and supplying rates in markets supported by Venus Prime.
- 40% to the Risk Fund.
- 40% to Treasury.
- 10% to XVS Vault rewards.
- 10% to Venus Prime, supporting a specific program within the protocol aimed at enhancing user benefits.
Schema (default): Applied when conditions for Schema spread_prime_core are not satisfied.
- 50% to the Risk Fund, which supports the overall stability of the protocol.
- 40% to Governance, enabling community-driven decision-making and future development.
- 10% to XVS Vault rewards, incentivizing user participation and loyalty.
Integration with Existing Architecture: The Automatic Income Allocation will seamlessly integrate with the existing ProtocolShareReserve contract, ensuring that the incomes are sent to their designated reserves.
- Efficiency: Automating the income distribution process allows for quicker and more accurate allocation.
- Transparency: All distributions are recorded on the blockchain, reinforcing Venus Protocol’s commitment to clear and open practices.
- Flexibility: The ability to define specific rules and percentages for different destinations ensures that the distribution aligns with the community’s needs and goals.
Building on the first step of the entire revenue sequence started with automatic allocation, Venus Protocol introduces a transformative innovation: the Token Converter. Once the underlying tokens are transferred from the spread between supply and borrow, and liquidations, they are sent to the ProtocolShareReserve. Here, the Token Converter takes over, transforming the received income into specific tokens, automating and optimizing this conversion process.
The Token Converter works on four key principles:
- Distributed and Autonomous: No centralized management or human interactions needed, ensuring a secure and seamless conversion process.
- Efficient: The system is designed to maximize the amount of specific tokens we receive while protecting against potential risks like sandwich attacks.
- Streaming: The conversions occur continually, without waiting for scheduled intervals.
- Transparent: All conversions are publicly recorded in the blockchain, reinforcing our commitment to transparency.
Venus Protocol will offer discounts to incentivize these conversions. This incentive will create arbitrage opportunities in the market, and external agents can potentially gain from these opportunities.
Before the Token Converter, token conversions were not as seamless and efficient. Venus Protocol needed a system that could constantly convert the received income into specific tokens, with no room for errors or delays.
The Token Converter streamlines the conversion process by allowing key elements in the Venus Protocol, such as the XVSVaultConverter and RiskFundConverter, to autonomously offer token conversions. This is an intelligent solution that follows the rules of distributed and autonomous systems, thus removing the need for human intervention.
Moreover, the introduction of incentives through discounts encourages external agents to take part in the conversion process, thus creating a win-win situation for all. This is in line with the vision of decentralization, where processes are not only transparent but also rewarding for participants.
Below is a diagram that visually represents the integrated workflow, showing how the two functionalities work together in a coherent sequence:
The dashed lines represent transactions initiated by external agents (VIP’s, scripts, arbitrage bots, etc.), and the solid lines represent transfers of funds.
The introduction of Automatic Income Allocation and Token Converter marks a pivotal advancement in Venus Protocol, offering a decentralized, efficient, and transparent solution for income distribution and conversion. By seamlessly integrating these functionalities, Venus Protocol enhances its responsiveness to community needs and sets a benchmark for innovation in decentralized finance.
If there is enough interest in this proposal, more technical details will be shared.