AIP #7 - Expecto Patronum: A shield for all frogs

Governance Proposals Voted Proposals
82

First of all, I would like to thank the team for working on solutions how the future of the protocol can be successful. However, I feel like the current “Expecto Patronum” proposal is not the best option possible and would therefore like to propose the following option how Abracadabra could accumulate CRV without the mixup with other projects and potential problems of arbitrage and supply shocks. I look forward to comments.

As of now, protocol rewards are used to purchase SPELL on the open market to then distribute them to sSPELL holders. I propose to:

  • Not buy SPELL on the open market but from Abracadabra’s treasury.

  • This way, Abracadabra can use protocol proceeds to purchase CRV on the open market.

  • sSPELL holders still receive their share in the protocol’s revenue.

  • Once “enough” CRV has been acquired or the treasury assets are all distributed, this process stops and protocol proceeds are again used to buy back SPELL on the open market.

Obviously, this would need to be structured in detail (e.g. using TWAP prices to calculate fictive buyback amounts, share of SPELL allocated to buybacks and share allocated to bribes etc.), but I have full confidence in the team’s ability to do so.

  • This option would be less complex compared to purchasing other DAO’s - potentially illiquid (e.g. BSGG) assets.

  • The option would not be an arbitration game where either SPELL holders or DAO token holders must loose out.

  • The option would be less risky compared the the other proposal: How many DAO holders will actually sell, for what price etc. Abracadabra is profitable and has clearly predictable cash flow.

  • It would also not result in a potential positive supply shock, which usually results in sell-offs.

  • Newly distributed SPELL would actually be allocated to the very stakeho(d)lers with the biggest skin-in-the-game, thus potentially making the process largely market neutral.

Obviously, it would be very important that such a procedure only runs for a limited amount of time, so that actual market buybacks commence after a while.

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