Summary:
This proposal aims to adjust the PAR & paUSD protocol revenues distribution on Ethereum & Polygon PoS.
Context:
The Parallel protocol currently generates approximately $46k in revenue per year (more details available here). However, the current distribution of these revenues doesn’t align protocol users, token holders and the protocol interests. With the aim of gradually realigning the interests of the different players in the Parallel protocol, we propose an adjustment of the protocol’s revenue distribution.
Rationale:
The protocol currently distributes revenues to 3 different poles:
-
Safety Reserve:
The safety reserve acts as insurance for the protocol, covering losses in the event of bad debt or protocol failure. The reserve currently holds 390,000 PAR. The safety reserve currently receives 20% of protocol revenues. -
PAR Staking:
PAR staking is a contract that allows the deposit of PAR in exchange for a yield received in PAR (and previously in MIMO tokens as well). The yield received in PAR comes from protocol revenues. The initial aim of this contract was to encourage the mint of PAR tokens. The PAR staking contract currently receives 40% of protocol revenues. -
MIMO Buybacks:
The MIMO buyback contract is periodically receiving PAR from revenues to buy MIMO tokens at the market, in the initial objective of supporting the MIMO price. Tokens bought back by the contract are locked for 4 years. The MIMO buyback contract currently receives 40% of protocol revenues.
We proposes to adjust protocol revenues distribution in this way:
-
Safety Reserve:
As the safety reserve acts as an insurance for the protocol and increases user confidence, we propose to continue distributing 20% of the protocol’s revenues. -
PAR Staking:
Although the objective of PAR staking may at first sight be interesting for the protocol by increasing both supply and revenues, in reality the protocol makes a net loss of around 16,000 PAR per year (more details here). We therefore propose to reduce the distribution of revenues allocated to the PAR Staking Module to 0%. However, it’s important to note that a PAR Staking Module would make sense if part of the collateral that back PAR were held directly by the protocol and generated a direct return for the protocol. In this case, there would be no possible “net loss”. However, the current version of the protocol does not include a module enabling the protocol itself to hold collateral. -
Buybacks:
Buybacks, which might seem like a good idea at first, are in reality totally misaligned with the interests of the protocol, its users and MIMO token holders.
The protocol doesn’t see the supply and/or revenue of PAR and paUSD increase, the opposite effect is produced. What’s more, the aim of the protocol is not to support the token price.
users don’t benefit in any way.
vMIMO and MIMO holders receive no benefits. It has been demonstrated many times that buybacks do not support the token price.
We therefore propose to reduce the distribution of revenues allocated to the Buybacks Module to 0%.
- Treasury:
We propose to distribute 80% of protocol revenues to the protocol treasury. This allocation will support a sustainable PAR, paUSD and MIMO liquidity on Ethereum & Polygon PoS, which will incentivize PAR and paUSD supply growth too, while enabling increased protocol influence in other protocols (Aura, Balancer, Spectra, Liquis, etc…). In conjunction with this, we have just published MGP-15, proposing to update the protocol’s treasury strategy.
Means:
- Human Resources: Multisig signers will need to sign and execute transactions to adjust PAR & paUSD revenues distribution on the Ethereum and Polygon PoS Multisig.
- Treasury Resources: There is no cost for the treasury to adjust PAR & paUSD revenues distribution on Ethereum and Polygon PoS.
Technical implementation:
- Ethereum:
- PAR Fee Distributor Contract: Update Fees Distribution repartition by using the ‘changePayees’ function with the voted distribution update.
- paUSD Fee Distributor Contract: Update Fees Distribution repartition by using the ‘changePayees’ function with the voted distribution update.
- Polygon PoS:
- PAR Fee Distributor Contract: Update Fees Distribution repartition by using the ‘changePayees’ function in accordance with the voted distribution update.
- paUSD Fee Distributor Contract: Update Fees Distribution repartition by using the ‘changePayees’ function with the voted distribution update.
Voting options:
- For the adjustment
- Against the adjustment
- Abstain
Authors: @starny & @JeanBrasse from Mimo Labs
Community poll:
- For the adjustment
- Against the adjustment
- Abstain
