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’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Despite best efforts from the PERP team to keep v1 running, it couldn’t escape shutdown as funds were being withdrawn at a high rate.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.
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.
- 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!)
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 remaining users who did not benefit from op2, for the amount of (MAX(all options) - op2). ($5.2M) , pro rata to compensation amount.
Option C: Do not compensate.
The amount of buybacks/compensations are calculated below in this google sheet:
Detailed Distribution Plan:
If Option A~B passes, the following plan will be executed step-by-step:
Step 1. The affected users will have to first stake any non-zero amount of PERP in the new vePERP system and choose a lock period of at least 6 months ((unlock date - create_lock date) >= 26 weeks).) in order to be eligible to receive vePERP compensation.
Step 2. In the beginning of each month, certain % (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 )
Step 3. Distribute the PERP to the eligible affected users’ accounts using the _deposit_for function. If deposit_for() is reverted due to the user’s lock has expired and no new lock was created, it automatically disqualifies that user for that month’s payout. The amount owed to them in USDC will still get lowered anyway because it’s not the team’s fault that the deposit_for() got reverted; the users are responsible for making sure _lock.end > block.timestamp (Source code). Users who are not eligible to receive compensation at the time of the distribution will be considered forfeiting that month’s PERP payout. The amount owed to them in USDC will still get lowered for that month regardless whether they are eligible to receive the PERP or not at the time. The eligibility can be verified by the unix timestamp from the wallet’s public on-chain record ((unlock date - create_lock date) >= 26 weeks).
Step 4. The unclaimed PERP will be either burned to a dead wallet with no private key or being redistribute to the eligible affected users to speed up their pay offs. The determination is up to the DAO treasury multisig.
Step 5. Repeat step 2-4 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: At the end of the locking period, the affected users will have to re-lock any amount of PERP into vePERP for at least another 6 months ((unlock date - create_lock date) >= 26 weeks) in order to be eligible to continue receive the monthly distribution. The affected users are responsible in picking the right locking periods with some buffer to avoid the locking period ends on the same week as the vePERP distribution to avoid not being able to receive the compensation
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!