Vetoken model has become a trend in 2022, and community has been asking for more utility for OMM, so thought it was a good time to have discussions about veOMM (name TBD). This has been previously discussed on the forum (Protocol Fee for Protocol Owned Liquidity - #18 by Rook5677), so early contributors have taken a look at the scope of work for the past few weeks. Based on the current estimates, it is expected to require a fair amount of work and take a few months to implement the token economics enhancement.
Let’s understand what the ve token model is about. It originated from https://curve.fi/ initially as they tried to align long term stake holders of CRV with additional incentives from the protocol (such as getting up to 2.5x emission of CRV and more governance power). Since the launch of Curve 1+ year ago, it has proven out to be a great token economics model, and many protocols are following the path as seen by the latest Maker’s governance proposal.
In simple words, users can lock up their OMM tokens up to 4 years, and users will have more governance power and qualify for additional OMM distribution from the protocol ( up to 2.5x) as they lock up more OMM tokens for a longer period of time. They will also have more meta governance influence on ICON P-reps and may receive more relevant airdrops (eg: GG, IAM). Those who are locking OMM tokens for a shorter period of time or not locking any tokens will be diluted in terms of how many OMM tokens they receive. As a result, this token economics enhancement will lead more OMM to be in the hands of those who are long term aligned with the protocol.
Locked up OMM tokens will not be transferrable, so they are committing to a long term alignment with the protocol while being rewarded for it. Weight of locked OMM tokens will decay linearly to 0 based on the amount of time one has staked. Below is an example:
I am all for this. I believe Balanced is working on this as well. This seems like a very logical step forward. Getting people to commit long term would be great for the platform
I’d love to see this priotized. It’d certainly bring a lot more utility to OMM.
I look forward to seeing it with bBALN too. Not sure how much has been done on it for Balanced and if the team can get any pointers/advice based on what they’ve done to date for getting bBALN set up
To mimic the current CRV tokenomics, have you also considered the stake aspect in the stake, boost, vote approach taken by Curve?
Currently if you convert your CRV tokens to veCRV, you get a share of the protocol fees, boosted CRV in the respective pool you’re in and voting rights.
If we were to mimic this for veOMM, it could look something like this:
sharing a portion of the Omm borrow fees to those who stake veOMM. Currently Omm charges a 0.1% fee when you borrow an asset.
sharing a portion of the OMM trading fees for those who stake veOMM. Currently Omm has 3 LP positions on Balanced (OMM/USDS, OMM/IUSDC and OMM/sICX), which generate 50% of the trading fees.
So in summary veOMM token holders would get the following in exchange for locking up their OMM:
A share of the borrow fees
A share of the LP trading fees
Boosted share of the current OMM rewards that go towards “markets”, “staking” and “liquidity”
Boosted vote weight towards P-Reps
Ability to vote on Omm proposals
I believe a combination of all of these rewards would greatly enhance the OMM tokenomics.
Thoughts on what portion of the borrow fee should be shared with those who staked veOMM? Is it better for the fee to accrue to the protocol instead so that it can be used to grow the POL and thus benefit the overall protocol? If implementing this takes additional time, does it make sense to break token economics enhancement to few parts and enable veOMM first before this?
This probably works a little differently from Curve as Curve is essentially a dex, so it can reroute percentage of the trading fee back to LP token holders. Balanced is equivalent here and those who are providing LP through Balanced is already getting a portion of trading fee through Balanced. If you are thinking of changing how much of the trading fee one receives based on veOMM holdings, then this needs to be discussed with Balanced, and may become longer discussion.
I actually think maybe this can be be done through Karma, where a portion of trading fee earned through POL on Karma can be distributed back to veOMM holders.
Agreed, by extracting revenue from the business we are indirectly limiting its growth. Also sharing fees would risk being labeled as security (at least that was once discussed here). In top of this there is the developing time + complexity.
I like this.
Also this is a good angle, if you are committing to hold Omm for x years you might hold more voting power on OIPs
veCRV currently captures 50% of trading fees on Curve Finance. veOMM could follow a similar percentage for the borrow fees i.e. 50% of the 0.1% fee would go to veOMM holders, proportional to the length of their lockup period.
This is where Karma Bond comes in. Karma Bond service would allow Omm to acquire the majority of the LP tokens via bonding which would be far more efficient than the 0.1% borrow fee. Additionally, the borrow fee is mainly comprised of stable coins, not OMM tokens. With bonding, Omm protocol would acquire far more OMM and far more stable coins per bond than any loan.
I may not have been clear in my previous post. What I meant was that the Omm treasury currently holds LP positions on Balanced and therefore is receiving trading fees. veOMM token holders could capture a share of the trading fees that the Omm treasury is currently capturing.
Karma Bond is only the vehicle by which a protocol acquires liquidity. If Omm were to use the Karma Bond service, Omm would have a custom treasury under Karma Bond and would transfer the acquired LP tokens back to the Omm treasury. Omm treasury could then deposit those LP tokens back onto Balanced, increasing its LP position, and capturing a majority of the trading fees. A portion of these trading fees could then be distributed to veOMM token holders, say 50%.
So in conclusion:
veOMM token holders could receive 50% of the borrow fees
veOMM token holders could receive 50% of the LP fees captured by Omm treasury
Omm treasury could use Karma Bond to acquire POL and allocate a portion of that back to its LP positions on balanced, driving more revenue for the protocol and for veOMM holders
As the community seems to support this direction, I just started a poll on Twitter to help us settle on a name for the non-transferrable token. While it hasn’t yet gone to a vote, we’ve been working on some concepts, and the name will allow me to develop the language so we can finalise the design.
Make sure to vote for your favourite. If there’s another alternative you think the community should consider, please feel free to mention it below.
EDIT: Looks like we’re running with Boosted OMM (bOMM).
bOMM token holders receiving 50% of the borrow origination fees. This is likely feasible, but needs to be looked into how it can be achieved on the ICON chain.
2 & 3 In my opinion, both are similar in a sense that POL through Karma will be controlled by the Omm protocol. As mentioned above though, if you are familiar with how Balanced works, additional fees generated through trading is included in existing LP tokens, thus increasing the value of LP tokens. For example, let’s assume 1 LP token consists of 1 OMM and 1 ICX. Due to a lot of trading volume, if this 1 LP token deserves 1 OMM and 1 ICX as part of the LP fee, 1 LP token does not become 2 LP token, but 1 LP token’s value is basically doubled. As a result, this is likely going to require a significant amount of development.
In general, thoughts on launching bOMM first as a phase 1 and adding these fee components in the second phase?