Allocating trading fees to Alex

Currently trading fees goes to the respective pools which gets redeemed when the LPs are withdrawn. However, the absolute LP returns that were generated is little confusing because the value of LPs would have gone up or down at the time of LP withdrawl and there is no where it clearly indicates what portion of the withdrawn LPs is the fees that we have been earned, there by there is no real appreciation of the trading fees by the LP holders. Most LPs holders only value LP staking yields not the trading fees yield.

Instead if we allocate all or a portion of the 0.3% trading fees on all LPs to Alex then Alex would have a solid return to talk about. This will be one such utility of Alex that is monitory, which will always be there whether it’s bear market or bull market and will be one of the main incentives to HODL Alex and stake.

First year cumulative supply of Alex is 259 Million. Assuming Alex price stays at current market price of $0.185 and the first year volume of all trading pairs is say 200 Million USD then, at 50% of all fees allocated to Alex, that would give a yield of 0.62%; at 500 Million volume, it would be 1.56% yield and at 1 Billion USD volume, it gives a 3.1% yield.

As more and more products gets introduced in Alex such as futures and options, it’s not too difficult to achieve 5 billion or 10+ billion USD volume with in couple of years and so, this yield could even go up to 10%. Obviously, BTC, Alex, Stacks and other token prices will influence this yield but I imagine it wouldn’t go less than 0.5% on the lower end and can go beyond 10% yield on the higher end.

Request to share your thoughts on this proposal?

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Copying the below discord conversation to keep it in one place -

@Canux.btc

Good to see someone break the ice on the proposals! My 2 sats… Redirecting 100% of fee revenue away from LPs would be shortsighted cuz once ALEX emissions dry up, LPs will have no incentive to provide liquidity. Alternatively, as a way to give back to LPs, the protocol could allocate fee revenue as follows: -25% to Protocol treasury (as STX) -25% to buy ALEX in open market -50% to LPs (as STX) PROS 1) LPs receive both STX (fees) & ALEX (emissions) 2) Constant buy pressure on ALEX 3) Protocol Treasury value continues to increase. CONS 1) Protocol treasury will grow slower as only 25% of fees will be saved, however the token price will be supported through buybacks which will make other rewards more valuable (attracting more LPs).

SriSri78 — Today at 11:35 PM

@Canux.btc These are excellent points and meets the other two needs i.e LP holders always incentivized and also takes care of other’s suggestion about buyback of Alex. However, I personally like to buyback and keep them in the treasury which limits circulating supply rather than burn them permanently.

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@SriSri78 @Canux

Great ideas.

Regarding the 25% to Protocol Treasury, I think some of this should be kept for limiting the circulating supply and other purposes, and some should be burned. Perhaps, the burning should continue until a pre-determined ALEX token supply total (circulating and non-circulating) is reached (e.g. 100 million).