Protocol Fee for Protocol Owned Liquidity

OMM price has suffered a lot recently. As discussed here (Network Fee distribution - #30 by oDK), Omm has a protocol fee close to $400K at the moment (ICON Tracker), so protocol should actively try to use the protocol fee to either generate more revenue or cut down the cost, which will make the protocol more attractive.

To generate more revenue for Omm, the borrowing amount need to be increased. Right now, there are some interesting borrowing opportunities (borrow bnUSD and USDS or IUSDC on Omm and pair them on Balanced to earn 20%+). With the launch of more defi protocols and attractive opportunities on the ICON network, I think the revenue opportunities will eventually come for Omm. BTP will also likely accelerate these opportunities.

To cut down the cost, Omm needs to reduce emissions of OMM tokens. I have seen several people mention that they are selling their OMM tokens to make up for the impermanent loss on Omm. I understand that Karma project is being worked on, but it would be good to use the protocol fee so that Omm starts to own the liquidity instead of renting it from LP providers.

Right now, if the protocol uses $400K protocol fee and OMM tokens from the DAO fund, it can own up to $800K worth of liquidity. In total, there is $2.4M worth of liquidity being provided by liquidity providers. If the protocol adds $800K worth of liquidity and stake them, it would boost the liquidity by 33%. In tandem, I would recommend reducing OMM emission for LP pools by 33%, resulting in 40K OMM tokens to liquidity providers on a daily basis, instead of 60K OMM tokens as the protocol owned liquidity can cover 1/3 of the existing liquidity.


  1. Use $400K protocol fee (sICX, IUSDC, USDS) and pair them with OMM from the DAO fund to create $800k liquidity, and stake them
  2. Reduce OMM emission for LP providers from 60K to 40K

When the DAO adds about 1/3 into the LP pool part of the emmissions will go back into the DAO.
Is your intention to lower the rewards twice, once from expanding the pool with DAO funds and hence taking a portion of the emissions, and then again from directly reducing it.

To me there are 2 different questions.

  1. Using the DAO fund for POL. This naturally diverts some emmissions back into the DAO
  2. Forget entirely about the DAO fund or POL, is the emmissions for LPs too high? its possibly yes its possibly no. But lowering emmissions will reduce total liquidity, independant of POL.

I think your arguments are sound for POL and would totally support that, but I don’t see any particularly stand out points to reduce allocations towards LPs. IMO in the current enviroment allocating them to suppliers or borrowers both will result in more definite selling.

Regardless, I like the POL idea in general, but really hope this vote is split into 2 different choices

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As I mentioned in the first post, it would be good if Omm finds a way to cut down its cost (OMM emission) to reduce the selling pressure.

You are correct in that I am proposing to cut down the OMM emission twice by 1) using the DAO fund and protocol fee to diverts emission back to the DAO 2) reduce the total emission for LP providers.

I think Omm should try to slowly reduce the OMM emission for LP as it thickens its own POL with protocol fee and collaboration with Karma.

I would propose leftover 20K OMM/day to go to the DAO fund as the DAO fund won’t be selling those tokens to the market.

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Sorry I’m still a newbie + english is not my first language, does this proposal involve selling ICX to create this liquidity?

As I mentioned in the first post, it would be good if Omm finds a way to cut down its cost (OMM emission) to reduce the selling pressure.

My response to this…

There is minimal reason to hold OMM currently.

Why is everyone selling OMM, they have minimal incentive to hold it.

Yes you can earn a yield on your OMM but at what cost, the price of underlying asset is going down in value (a lot).

We need to address this issue of OMMs utility.

I agree with @arch, there is no need to reduce LP rewards if the DAO are taking in a lot of the OMM emissions with POL.

No this proposal involves using existing protocol fee (sICX for example) and matching it with OMM from the DAO fund to create liquidity. There won’t be sales of ICX to create a liquidity.

I am curious why you think it is not necessary to reduce LP rewards further? Wouldn’t reducing more LP rewards be better for OMM price stabilization?

The lower the yield gives investors less reason to hold OMM.

As stated previously OMM as minimal utility, minimal reason to hold it.

You will find a lot of the sell pressure is coming the borrowing and lending.

That may be to help pay off loans etc, however if the was a good reason to hold OMM. They may be willing to hold the OMM they earn from borrowing and lending.

I agree Omm needs more utility and hope they go in the direction of boosted Omm route so that OMM become the yield for long term believers.

However, I don’t think reducing OMM allocation for LP prevents such utility cases?

If the omm reward for lp-supply is reduced as suggested, wouldn’t it be a factor for lp providers to exit? Of course, the choice of whether to stop supplying lp due to impermanent loss will remain, but if the supply of lp decreases, liquidity will not be maintained as expected.

That is where additional 800K liquidity from the protocol comes in. Even if 1/3 of LP providers leave because the OMM rewards emission is reduced by 1/3, the protocol liquidity will make up for it and stay at the similar level of liquidity while significantly reducing OMM emission.

What might be the consequences of adding 800m for liquidity AND not reducing OMM emissions for LP providers?

I am thinking that what will happen is that individual LPs will still get less emissions on their hands because the protocol will be a mega LP. That will result in more OMM accumulation for the protocol (that it won’t be sold but accumulated) and the free market should take care of the rest?

Does that make sense?

At the moment I am inclined to only add the ~800m liquidity and not reduce LP emissions.

Should the method to reduce the omm reward for providing lp be accompanied? If the number of lp itself increases, won’t the rewards given to the current lp providers decrease by itself even if the omm reward does not decrease?

  • Oh, There was already an answer saying that it was a protocol that came up with that in mind. ,Sorry

I personally think adding 800K liquidity and reducing OMM emission for LP providers will decrease the sell pressure more than just adding 800K liquidity.

If adding 800K liquidity and reducing OMM emission can accomplish the goal of having a similar amount of liquidity while reducing the sell pressure furthermore, why not go for it?

Off course, but at the expense of potentially scaring away normal LPs. I would just add the 800k liquidity and see what happens, probably the market will sort it out?

By adding POL 800k, LP providers will be earning less, then removing extra emissions from LP.

Recipe for disaster!

LP providers will sell their OMM and move on.

LP rewards and staking rewards are the only utility, aside from governance.

The real issue that needs to be addressed is investors need a reason to continue to hold OMM and for new investors to buy OMM.

I actually disagree. I think with POL and less sell pressure, OMM is going to become more scarce to earn and people will start to sell less and less. I saw that OMM token price bounced back recently and think POL + OMM emission reduction will be a good start for OMM price to bounce back.

I agree that POL is a good move. Either in house or with Karma. The DAO funds should be doing some to generate revenue.

You are correct in saying there will be less sell pressure, but to get an increase in price. You need buyers.

Why would a new investor purchase OMM? Or why would a current investor purchase more OMM?

I think that OMM intrinsic value has to be discovered by the market, when you hold and stake OMM you are holding a peace of the protocol + voting rights + an ICX voting mega booster, in the near future you would also be holding a multichain money market, that’s a lot of value in my opinion.

The fact that OMM does not pay you to hold it it’s not that bad from a long time horizon stand point. It means the DAO is collecting a lot of money that does not end up on holder’s hands, hence it compounds back into the business. This is why Warren Buffet is not a huge fan of dividend paying stocks.

In fact BALN price is not doing great (I also hold it) and Balanced offers a nice return.

I don’t want to drive the conversation too much away, just want to share my thoughts on why OMM price should not be the main focus, although I do like the idea of bOMM to reward long term holders.

Having said that I think we all agree that POL makes sense, so why not starting there and then deciding if we also need to lower LP emissions (wich I don’t agree at the moment because we would “scare them away”).

TLDR: We shouldn’t make protocol decisions based on the token price. POL and bOMM are good ideas in my view.

To be honest, since the number of tokens issued by Omm itself is very large, I think the downward pressure is an expected result. Under these conditions, there is no doubt that pursuing two complex compensation limits will be effective as this proposal is proposed to slightly alleviate the downward pressure on the price.

Nevertheless, I would like to ask, how about re-voting for Result 2 after implementing Result 1 first and then seeing the progress rather than making these changes all at once?

Yes I agree. POL and bOMM are great implementations!

The big thing is that the DAO funds are mostly OMM, the lower the value of OMM, the lower the value of the DAO.