[CMP #8] Amendment to Buyback Strategy and Performance Fee


[CMP #8] Amendment to Buyback Strategy and Performance Fee



Objective:

thiws pwoposaw seeks tuwu addwess awnd wefine the pewfowmance fee awnd buyback stwategy of vowta cwub. We have seen a wot of discussions both pwiow tuwu awnd fowwowing cmp 3, showing thawt we need fuwthew adjustments awnd changes. The aim iws tuwu estabwish a twanspawent system thawt mewges the benefits of both the pwevious awnd cuwwent systems effectivewy.

Snapshuwt:

[CMP #8] Amendment to Buyback Strategy and Performance Fee

Provide a High Level Overview:

thiws pwoposaw changes the pewfowmance fee stwuctuwe tuwu pwiowitize stabiwity awnd gwowth by impwementing a 10% fee based own incweases in wiquid backing, nowt mawket pwice. Iwt pwoposes excwuding uwu, itp, awnd bsgg tokens fwom pewfowmance fee awnd wiquid backing cawcuwations as they awe nowt fuwwy wiquid. Additionawwy, a new high watewmawk wiww be estabwished.

Provide Low Level Details:

many discussions in discowd show thawt the owd system wowked bettew fow howdews. Thiws pwoposaw intwoduces a 10% pewfowmance fee cawcuwated own the wiquid backing incwease instead of mawket pwice.

howdews cawe abouwt stabiwity awnd gwowth. Ouw owd system had both. The buyback tawget pwice was incweasing ovew time awnd we had a wowking system. Of couwse we wewe twading faw bewow the cawcuwated wiquid backing pwice awnd thawt had consequences.

discussions abouwt the uwu pwice in the wepowts awnd as base fow pewfowmance fee wewe the main sticking point ovew the months. Weading aww wewated discussions ovew time i came tuwu the concwusion thawt we cawn eithew set a static pwice fow uwu ow juwst weave iwt out. Cweating an awtificiaw pwice, a % of pwice at quawtew end ow even an avewage seems nowt onwy ovewwy compwicated but as weww meaningwess. If nobody gets paid own the vawue thewe iws wittwe fwiction awnd wong tewm howdews wiww pwofit whewn the tweasuwy pwofits. As iwt shouwd be. Thewefowe thiws pwoposaw excwudes uwu tokens hewd in ouw wawwets fwom the pewfowmance fee awnd wiquid backing cawcuwations. The same wiww appwy fow itp awnd wemaining bsgg tokens.

tuwu sum iwt up, the wiquid backing pwice wiww incwude onwy tokens thawt cawn easiwy be wiquidated without damaging the ecosystem. Thiws has the disadvantage thawt howdews wiww nowt pwofit fwom any uwu tokens unwess pwofits awe taken. But keeps us fwom dumping ouw tokens fow buyback wiquidity awnd pwesewves the wong tewm focus own the ecosystem awnd gwowth.
the wiquid assets in the uwu tweasuwy wiww count towawds wiquid backing as bewonging tuwu vowta. The buyback muwtisig (0xd24aa7c29b00e3e39e76676e24b77eb4af6b8347) wiww be excwuded as weww as iwwiquid assets hewd by the uwu tweasuwy.

thiws pwoposaw suppowts the pewfowmance fee being paid in vowta tokens at wiquid backing pwice. Thiws pwice wiww be the same as the pewfowmance fee pwice of the quawtew cawcuwations. With the wemovaw of uwu, itp awnd bsgg tokens in ouw wawwets fwom the wiquid backing a new high watewmawk needs tuwu be set. Going bawck awnd fowth ovew watewmawks was awweady a topic whewn cmp 3 was pwoposed awnd discussed. A compwete weset of the system incwuding the high watewmawk makes the most sense at thiws point. I thewefowe pwopose tuwu take the wiquid backing pwice, cawcuwated as set in thiws pwoposaw own the day thiws pwoposaw passes as the basis watewmawk fow the fiwst quawtew thiws pwoposaw appwies tuwu. The pwoposed changes wiww be impwemented immediatewy fow cuwwent awnd fowwowing quawtews.

the management fee wiww be changed tuwu 2% pew yeaw based own fuww totaw backing, distwibuted quawtewwy.
buybacks awe the hot topic fow any howdew awnd a big pawt of the system the team setup with estabwishing the v3 wp. With thiws wp wiquidity pwovidews cawn set wanges. A system thawt suppowts the pwice awnd awways wowked weww fow us. Same as befowe thewe wiww be no pwotocow owned wiquidity.

as a wong tewm howdew, a stabwe pwice thawt gives me woom tuwu take advantage of uwu wend tuwu access funds awnd invest othewwise whiwe howding my vowta tokens iws vitaw.
with cmp3 thiws changed awnd buybacks stopped. I pwopose tuwu weestabwish the owd buyback system. The team wiww handwe buybacks thawt cwose the gap between mawket pwice awnd wiquid backing whiwe being pwofitabwe fow howdews. Setting stwict wuwes abouwt wiquidity, buyback pattewns ow othewwise was pwoposed within the community but uwtimatewy no consensus was found. Whiwe good awguments exist own both sides, showt tewm awnd wong tewm investows have diffewent points of views. Nowt exhausting wiquid assets awnd managing the system iws best done by the peopwe we voted fow, so thiws pwoposaw suppowts the owiginaw buyback system the team intwoduced.

tuwu make thiws pwoposaw as simpwe as possibwe awnd avoid often named votew confusion the points thiws pwoposaw addwesses awnd changes awe wisted:

the wiquid backing pwice iws going tuwu be cawcuwated excwuding uwu tokens as weww as itp awnd bsgg tokens in ouw wawwets. These wiww be considewed as iwwiquid awnd excwuded fwom pewfowmance fees. Iwt wiww incwude the wiquid pawt of uwu wend tweasuwy.

  • 10% pewfowmance fee wiww be paid in vowta tokens. At wiquid backing vawue.
  • pewfowmance fee iws tuwu be taken own the incwease of wiquid backing fwom quawtew tuwu quawtew with a high watewmawk. Thiws means thawt in the event of a negative quawtew thewe wouwd be no pewfowmance fee paid untiw the team suwpasses the wast high watewmawk pewfowmance fee was paid own.
  • a new high watewmawk wiww be estabwished. The wiquid backing pwice own the day of passing of thiws pwoposaw wiww be cawcuwated awnd sewve as the fiwst high watewmawk fow the fiwst quawtew. Thiws pwoposaw appwies immediatewy fwom the date voted as the new fee stwuctuwe fow wunning awnd fowwowing quawtews.
  • the management fee wiww be 2% of fuww totaw backing pew yeaw. Tuwu be distwibuted in stabwes own a quawtewwy basis.
  • the team wiww weintwoduce the pwevious buyback system awnd nawwow the gap between mawket pwice awnd wiquid backing without damaging the wong tewm potentiaw of the tweasuwy tuwu make investments. Buybacks wiww be handwed at the teams discwetion as done befowe cmp 3 awnd nowt concentwated own a specific time window but wathew be done in a stwategic way. Thiws wiww wead bawck tuwu a mowe stabwe pwice fow howdews thawt incweases natuwawwy with wiquid backing.

my weasoning fow these changes iws simpwe: cmp 3 was voted in awnd wed tuwu a buyback concentwation of 10 days onwy. Howdews saw a huge pwice decwine, bowwowews own uwu wend couwdn’t wewy own pwice stabiwity anymowe awnd the whowe system changed tuwu showt sighted pwice pumps in a wedemption wike stywe. Whiwe thiws may be good fow showtew tewm specuwatows, howdews wike mysewf thawt utiwize uwu wend tuwu make investments with bowwowed assets whiwe howding own tuwu my vowta investment awe cweawwy wowse off without the pwevious pwice stabiwity.
nevewthewess juwst going bawck tuwu the owd system without changes wouwd nowt accompwish now sowve the discussions thawt wed tuwu the wwiting of cmp 3. Thiws iws why i intwoduce sevewaw changes fwom the owiginaw system wike excwuding uwu, itp awnd bsgg in ouw wawwets fwom backing cawcuwations tuwu have a mowe weawistic awnd faiw stwuctuwe.



ฅ^•ﻌ•^ฅ ฅ^•ﻌ•^ฅ ฅ^•ﻌ•^ฅ ฅ^•ﻌ•^ฅ ฅ^•ﻌ•^ฅ



Objective:

This proposal seeks to address and refine the performance fee and buyback strategy of Volta Club. We have seen a lot of discussions both prior to and following CMP 3, showing that we need further adjustments and changes. The aim is to establish a transparent system that merges the benefits of both the previous and current systems effectively.

Snapshot:

[CMP #8] Amendment to Buyback Strategy and Performance Fee

Provide a High Level Overview:

This proposal changes the performance fee structure to prioritize stability and growth by implementing a 10% fee based on increases in liquid backing, not market price. It proposes excluding UwU, ITP, and BSGG tokens from performance fee and liquid backing calculations as they are not fully liquid. Additionally, a new high watermark will be established.

Provide Low Level Details:

Many discussions in discord show that the old system worked better for holders. This proposal introduces a 10% performance fee calculated on the liquid backing increase instead of market price.

Holders care about stability and growth. Our old system had both. The buyback target price was increasing over time, and we had a working system. Of course, we were trading far below the calculated liquid backing price and that had consequences.

Discussions about the uwu price in the reports and as base for performance fee were the main sticking point over the months. Reading all related discussions over time I came to the conclusion that we can either set a static price for uwu or just leave it out. Creating an artificial price, a % of price at quarter end or even an average seems not only overly complicated but as well meaningless. If nobody gets paid on the value, there is little friction and long-term holders will profit when the treasury profits. As it should be. Therefore this proposal excludes uwu tokens held in our wallets from the performance fee and liquid backing calculations. The same will apply for ITP and remaining BSGG tokens.

To sum it up, the liquid backing price will include only tokens that can easily be liquidated without damaging the ecosystem. This has the disadvantage that holders will not profit from any uwu tokens unless profits are taken. But keeps us from dumping our tokens for buyback liquidity and preserves the long-term focus on the ecosystem and growth.
The liquid assets in the uwu treasury will count towards liquid backing as belonging to Volta. The buyback multisig (0xd24AA7c29b00E3E39e76676e24b77EB4aF6B8347) will be excluded as well as illiquid assets held by the UwU Treasury.

This proposal supports the performance fee being paid in Volta tokens at liquid backing price. This price will be the same as the performance fee price of the quarter calculations. With the removal of UwU, ITP and BSGG tokens in our wallets from the liquid backing a new high watermark needs to be set. Going back and forth over watermarks was already a topic when CMP 3 was proposed and discussed. A complete reset of the system including the high watermark makes the most sense at this point. I therefore propose to take the liquid backing price, calculated as set in this proposal on the day this proposal passes as the basis watermark for the first quarter this proposal applies to. The proposed changes will be implemented immediately for the current and following quarters.

The management fee will be changed to 2% per year based on full total backing, distributed quarterly.
Buybacks are the hot topic for any holder and a big part of the system the team setup by establishing the v3 lp. With this lp liquidity providers can set ranges. A system that supports the price and always worked well for us. Same as before there will be no protocol owned liquidity.

As a long-term holder, a stable price that gives me room to take advantage of UwU Lend to access funds and invest otherwise while holding my Volta tokens is vital.
With CMP3 this changed, and buybacks stopped. I propose to reestablish the old buyback system. The team will handle buybacks that close the gap between market price and liquid backing while being profitable for holders. Setting strict rules about liquidity, buyback patterns or otherwise was proposed within the community but ultimately no consensus was reached. While good arguments exist on both sides, short term and long-term investors have different points of view. Not exhausting liquid assets and managing the system is best done by the people we voted for, so this proposal supports the original buyback system the team introduced.

To make this proposal as simple as possible and avoid often named voter confusion the points this proposal addresses and changes are listed:

  • The liquid backing price is going to be calculated excluding UwU tokens as well as ITP and BSGG tokens in our wallets. These will be considered as illiquid and excluded from performance fees. It will include the liquid part of UwU Lend treasury.
  • 10% performance fee will be paid in Volta tokens. At liquid backing value.
  • The performance fee is to be taken on the increase of liquid backing from quarter to quarter with a high watermark. This means that in the event of a negative quarter there would be no performance fee paid until the team surpasses the last high watermark performance fee was paid on.
  • A new high watermark will be established. The liquid backing price on the day of passing of this proposal will be calculated and serve as the first high watermark for the first quarter. This proposal applies immediately from the date voted as the new fee structure for running and following quarters.
  • The management fee will be 2% of the full total backing per year. To be distributed in stables on a quarterly basis.
  • The team will reintroduce the previous buyback system and narrow the gap between market price and liquid backing without damaging the long-term potential of the treasury to make investments. Buybacks will be handled at the team’s discretion as done before CMP 3 and not concentrated on a specific time window but rather be done in a strategic way. This will lead back to a more stable price for holders that increases naturally with liquid backing.

My reasoning for these changes is simple: CMP 3 was voted in and led to a buyback concentration of 10 days only. Holders saw a huge price decline, borrowers on UwU Lend couldn’t rely on price stability anymore and the entire system changed to short sighted price pumps in a redemption like style. While this may be good for shorter term speculators, holders like me that utilize UwU Lend to make investments with borrowed assets while holding on to my Volta investment are clearly worse off without the previous price stability.
Nevertheless, just going back to the old system without changes would not accomplish nor solve the discussions that led to the writing of CMP 3. This is why I introduce several changes from the original system like excluding UwU, ITP and BSGG in our wallets from backing calculations to have a more realistic and fair structure.


Hello!

Not much use for feedback as it is already up for vote, but I figured I’d point a few things out for people to consider or help in the future.

General statements not meant for broader applications

In the future, I would not recommend making general statements, like the one below, if they are not meant to be applied generally as they leave things up to interpretation.

While you list three tokens lower in the proposal, if one is to take that this is the intention of excluding the tokens, SIFU could also be counted in there. Being able to redeem once every quarter is not something I would consider being able to liquidate easily and the liquidity available can’t absorb our size.

I’m sure I don’t need to say why it would be awkward if this would accidently exclude SIFU tokens from the backing’s calculations.

It also becomes a tricky situation for future ecosystem tokens. AS this opens the door of them being excluded in the future, it could create additional friction when the time comes and interpretations are different. Indicating that other tokens will have to be asses in time would have helped closed that gap.

Overall, it is also unclear what “easily be liquidated” or “without damaging the ecosystem” would be as whoever is making the decisions may have a different risk/damage tolerance.

Undefined terms

Plenty of proposals have been guilty of this, and while this proposal aims to fix a problem, it also moves it around.

The proposal indicates that the price of UWU was a main sticking point. To solve that, it is excluded. However, the proposal adds more exclusion of “illiquid assets” as indicating above. Without indicating what those are or may be, this is opening the door for additional sticking points.

One would assume the UWU would be excluded, but it seems to indicate there are more ? If so, what are they ?

What about the VOLTA in the UWU treasury ? We normally exclude those for calculations of course. We don’t for SIFU’s value, but are we for UwU’s treasury ? If the same logic applies, maybe not ? However, since we own Uwu Lend and not Sifu Vision, maybe it would make more sense to exclude it ? Same for the SIFU. The token is not super liquid, would that be excluded ? Probably not ?

Options considered

While this part can be tedious and is often overlooked, it can be extremely helpful for DAO members to know why a certain part of the proposal is necessary. It was explained for the exclusion of UWU, but not so much for the new High Water Mark.

Ok ? Why ? What are the other options and why are they not viable ?

One of the conversations that also happened on Discord was that with the removal of UWU, the team would be “double dipping” with their performance fee as they were already paid for a backing price up to $402. Some would say it is fine to keep the same one, some would say it is not finer. Why is the change necessary ?

Now the proposal indicates the need for a new one. So we’ll assume keeping the old one was not fine. Have we considered using the last HWM, but excluding the UWU value ? If so, why is that not better ? Would a brand new HWM be lower or higher than the option above ? I don’t know. Maybe a HWM in between both numbers to compensate for this quarter ?

Extra details on the options considered would help DAO member understand the rationale being what was proposed and give them the ability to vote in a more informed manner.

Redundant additions / Using new wording

Referencing previous proposals or existing can be extremely useful. It can help with guiding users to something they may already be familiar with or provide the source information for existing decisions.

One thing that I like the most, is that it provides the information without having to write it again and accidently change the meaning of the information.

The statement above is an example that does that exact opposite of that and could provide unfortunate interpretation issue unless it is a voluntary change that is simply not explained.

The 2% management fee was introduced with WIP 32, and it was not changed after. CMP 3 introduced the quarterly payments based on the liquid treasury. I’m thinking the statement meant to change the payment not only to the liquid part as we are new excluding UWU.

However, this proposal is now introducing new terminology: “full total backing”. What is “full total backing” ? Unclear.

Normally full backing was used to refer to the backing price based on all assets. However, the management fee was based on the treasury value. Does this mean that if full backing increases, the team will be paid more even if the treasury total decreases ?

Is this proposal now implementing a new way to calculate the management fee ? Or is it still the same it was, but with a new terminology increasing the room for interpretation ?

Introducing new terminology without defining it when potential using existing rules increases the chances for confusion and misinterpretation.

Here, given that the “previous buyback system” has never been defined it does not provide any information for DAO members to assess/vote on. Obviously for those who have been around for a bit, it is understood that said system has not been revealed on purpose, but it is essentially voting to reintroduce something that does not exist.


Anyway, overall, it is a strategy like any other, the DAO shall decide if it is what they believe is the way forward. I would just have hoped for time to provide feedback and potentially close some of those gaps/ambiguity.

Thank you for writing all this :saluting_face:

P.S. no I won’t provide feedback on the UwU writing part of the proposal.

I’ll post a few of my thoughts here, but not much good it will do as we already our halfway through the snapshot as no time was given to discuss this beforehand. It seems that the main argument for reverting back was to provide “price stability for users of UWU Lend to make investments against borrowed assets”. While I understand this concern, you could easily argue that price stability was quickly achieved in the $100-$130 range, once the short term speculators were “flushed out”. Secondly, I’m not sure our main objective should be to provide an artificial price support for UWU users whom decide to overleverage or take on risky health ratios at UWU Lend. My main concern with this proposal, however, is the unforeseen and unintended consequences that will naturally arise. Suddenly valuing UWU at zero will cause some issues. First, holders may attempt to extract the value difference for profit. This will encourage redemption and wind down proposals in the future if buybacks target too low of a price based on the new “liquid backing” which will likely be in the $150-170 range. Secondly, it does not address what occurs if we decide to sell illiquid assets which creates liquid backing out of “thin air”. Thus, this CMP encourages the treasury to dump illiquid assets—while they may not likely do so—why are we encouraging it if we believe in the long-term thesis of these assets? Personally, I would have argued for some sort of cost-basis methodology to prevent some of these issues. However, that idea was discouraged from this proposal given the complexity/argumentative nature which I can understand. The last thing I want to address is the general vague nature and lack of specifics in this proposal which leave too much open to interpretation–most of which Nal X has addressed above.

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Voting has now closed for CMP #8.

[CMP #8] - Amendment to Buyback Strategy and Performance Fee has passed with 92.57% of votes in favor.