Original post: Re-post: PERP Buyback Proposal to Support Affected v1 Users
Updated: 2022-09-21
TLDR
In the previous vote, full compensation for the affected v1 users has won, however it didn’t get executed due to it not reaching the quorum. We re-posted it here via LeeKB’s suggestion to get some feedback and understanding on why the largest stake holders don’t vote.
Linked to the original post: PERP Buyback to Support Affected v1 Users and Boost User Confidence to prepare for the BULL run of PERP!
UPDATE: Below is the updated proposal based on Shao and LeeKB’s feedback:
Background and Problem statements:
During the market downturn in the past few months, the entire crypto industry has been facing a liquidity crisis. Users confidence collapsed, leading to massive sell-offs.
Despite best efforts from the PERP team to keep v1 running, it couldn’t escape shutdown as funds were being withdrawn at a high rate. The team responded by shutting down the v1 exchange and put the decision of how to distribute the remaining funds to a vote: Sunsetting Perp V1
The stake holders voted to make whole 99% of wallets (option2), which resulted in the remaining 1% wallets taking massive losses from hundreds of thousands to millions of dollars. Among the affected wallets, a group of mid-size low leverage users were especially outraged and felt that their funds are being taken away in an unjustified manner: Use PERP to provide max(op2, op4) to Perp v1 users ) They have been actively spreading the injustice and their negative experience as well as filing for law suits that could further damage the credibility and the user confidence of PERP.
In the v1 documentation, it’s mentioned that PERP will be sold to compensate affected users during exchange shortfall.
However, the PERP price is already too low at around $1/share at the time of this writing, and selling PERP to compensate at such a low price would result in a significant dilution. But if Perp doesn’t compensate the affected users, it will be perceived as they are not honoring their own documentation, and thus risk losing even more credibility and user confidence. This puts PERP holders in a very difficult spot. As Hana recently stated “The lifeblood of a DeFi project is its users and community.” Proposal: Community DAO Without users confidence, there will be no future for PERP.
Proposed Solution:
Herein, we propose a solution to this dilemma via a long-term PERP Buyback Plan that benefits both the PERP holders and the affected v1 users (credit to LeeKB):
The plan will use a portion (17.5%~25%) of the monthly treasury fee income to buy back PERP tokens (with a minimum locking period of 6 months) regularly over many years to fulfill its promise in the documentation to compensate the affected users with PERP.
The PERP price will receive a monthly price boost as a result of the buy back. The affected users who care enough to stake any amount of PERP in the new vePERP staking system will receive vePERP from the buyback each month with a locking period of at least 6 months as the compensation. Users who do not bother to lock any PERP to claim the compensation is basically taking PERP off the market and giving free money to the PERP holders. The locking period for the affected users can be longer than 6 months if the affected users choose to, so that they can earn more rewards from the staking system…
The source of the fund used to buy back PERP is coming from the treasury fee income, which is the portion of the trading fee income that got overflown into the treasury, and it’s only a tiny fraction (<2.5%) of the total trading fee income under the current fee structure. Thus this will NOT affect the LPs/insurance fund/stake rewards. Please refer to Proposal: Fee Distribution for the detail fee structure.
Benefits:
- Regular monthly price boost to PERP.
- Unclaimed PERP could be burnt to further boost PERP price
- This tells the rest of the crypto community that Perpetual Protocol is indeed honoring its documentation to compensate affected users with PERP.
- Adding tremendous credibility to the Perpetual Protocol platform.
- Align interest of the affected users with PERP holders, so they can spread positive news rather than negatives.
- Reinvigorate user confidence to both the Perpetual Protocol as well as the Crypto community as a whole.
- The return of users confidence will likely result in further price increase of PERP.
- The PERP price increase will likely prompt prospective investors on the side line to put more money to buy PERP (i.e. BULL run!)
Proposals:
Option A: Use 17.5% monthly treasury fee income to buy back PERP over the years to cover all op4>op2 users, for their op4-op2 amount.($3.59M), pro rata to compensation amount.
Option B: Use 25% monthly treasury fee income to buy back PERP over the years to cover all op4>op2 users, for their op4-op2 amount.($3.59M) , pro rata to compensation amount.
Option C: Do not compensate.
The amount of buybacks/compensations are calculated below in this csv:
IPFS version
Detailed Distribution Plan:
The implementation will be done via the vePERP reward system/interface similar to referral reward .
If Option A~B passes, the following plan will be executed step-by-step:
Step 1. In the beginning of each month, 17.5%~25 % (determined by the winning option) of the USDC from the monthly treasury fee income will be used to buy back PERP token at market price at the time. This is done manually by DAO Treasury Multisig. The Buyback will only start after DAO Treasury start to receive fee revenue from Perpetual Protocol V2 ( fee distribution is still WIP but will come from the surplus of the InsuranceFund (Dune)
Step 2. To distribute the bought-back PERP token to the affected users, contract admin calls vePERPRewardDistributor.seedAllocation() to store which user can get how much of the bought-back PERP according to the IPFS version of the payout csv (pro-rata by compensation amount). The required amount of PERP will be transferred from the caller into the vePERPRewardDistributor. The amount owe to the users will be reduced by that amount. The remainder of what’s owed to users will be logged in a new IPFS version of the csv each month.
Step 3. Once the affected users decide to claim the accumulated vePERP, they will need to first lock any non-zero amount of PERP for at least 26 weeks to be eligible to claim. Once they have a lock duration of 26 weeks or more, they can then simply click the “Claim” button on the interface or call vePERPRewardDistributor contract claimWeek or claimWeeks to claim their accumulated vePERP.
Step 4. Repeat step 1-3 until the USDC amount owed to the users reduces to 0 or less. If certain affected users were paid off earlier, they will be taken off the compensation list so the next round of pay off will be focused on the remaining affected users.
Note: If a particular user becomes inactive and did not claim any compensation for more than 1 year, or it becomes clear that the user doesn’t want to claim, then the DAO treasury multisig has the full right to decide whether to withdraw that PERP and redistribute to the other users to speed up their pay offs, or simply leave it as it. The determination is up to the DAO treasury multisig.
Summary:
All in all, this is a win-win solution to both PERP holders and the affected v1 users, and it could have a far reaching implication for the entire Crypto community on its path to regain user confidence and reignite the excitement of DeFi!
