Summary
The Venus Protocol has achieved a significant milestone in successfully eliminating 99.99% of its historical shortfall, reducing bad debt to less than $10,000.
This proposal aims to optimize the allocation of protocol reserves and liquidation fees to better align with the current needs of the ecosystem.
The key highlights of the proposed changes are as follows:
Protocol Reserves:
- Risk Fund: 0% (-40%)
- Venus Prime: 20% (+10%)
- XVS Buybacks (Vault Rewards): 20% (+10%)
- Treasury: 60% (+20%)
Liquidation Fees:
- Risk Fund: 0% (-50%)
- XVS Vault Rewards: 20% (+10%)
- Treasury: 80% (+40%)
XVS Vault Base Rewards:
- 630 XVS per day (-40%)
Motivation and Rationale
Given the significant decrease in the protocol’s shortfall, this proposal suggests a revision to the existing tokenomics structure. The graph below outlines the reduction in shortfall.
Additionally, the table below estimates the current total amounts per allocation on BNB Chain, as of June 7, 2024.
| Allocation | Amount |
|---|---|
| Risk Fund | $12,845,723 |
| Venus Prime | $1,163,266 |
| Treasury | $16,526,204 |
The reduction of the shortfall presents an opportunity to re-evaluate the allocation of protocol resources. Specifically, it is recommended to decrease the allocation to the risk fund, as the need for repayment has been eliminated. Instead, these resources could be redirected to community-driven allocations, such as XVS Vault buybacks, Venus Prime, and the Treasury, which funds community proposals and maintains the protocol’s operations.
By increasing the allocation to Venus Prime, XVS Vault Rewards, and the Treasury, the proposal aims to:
- Incentivize Participation: Higher rewards through Venus Prime and the XVS Vault will encourage users to engage with the protocol, driving further adoption and liquidity.
- Reward Stakers: Increased XVS Vault rewards will directly benefit those who stake XVS, aligning their interests with the long-term success of the protocol.
- Empower the Community: A larger Treasury allocation will provide the community with the resources to fund projects, initiatives, and development efforts that enhance the Venus Protocol ecosystem.
In parallel with the increased allocation towards XVS Vault Rewards, we propose a 40% reduction in XVS Vault base rewards on BNB Chain to 630 XVS per day. This adjustment, combined with the increased allocation, is expected to increase overall rewards for the XVS Vault while simultaneously reducing XVS emissions. This change will be particularly beneficial for managing the budget required for liquidity mining initiatives as part of the Venus multichain expansion.
This revised allocation aims to strike a balance between maintaining prudent risk management practices and rewarding the community that has been instrumental in the protocol’s success. It is a step towards a more sustainable and community-driven future for the Venus Protocol.
After successfully adjusting the Tokenomics, an XVS emissions adjustment will also be proposed for all Core pool markets.
