Proposal Summary
This proposal advocates for allocating 40-60% of the fees generated by Drift Protocol to DRIFT token stakers. The aim of this change is to enhance decentralization within the platform and increase the intrinsic value of the DRIFT token, ultimately benefiting the community and ensuring the long-term sustainability of the protocol. Background Presently, fees accumulated on Drift Protocol are retained by liquidity providers and the Drift team. While this model has been beneficial in supporting the platform’s initial development and maintenance, it is vital to transition towards a more decentralized approach. By distributing a significant portion of these fees to DRIFT token stakers, we can incentivize wider participation in the ecosystem and better align the interests of the community with the platform’s success.
Proposal Details
Fee Distribution Percentage:
Between 40% and 60% of all fees generated on Drift Protocol will be allocated to DRIFT token stakers.
Implementation Mechanism:
A smart contract will be developed to automatically distribute the allocated fees to stakers.
Fees will be distributed proportionally based on the amount of DRIFT tokens staked by each participant.
Frequency of Distribution:
Fee distributions will occur on a daily basis to ensure timely and regular rewards for stakers.
Rationale Increased Decentralization:*
Allocating a substantial portion of the fees to stakers will decentralize the revenue flow, reducing financial power concentration within the Drift team and distributing it across the community.
Enhanced Token Value:
By providing financial rewards through a cut of the fees, the demand and utility of the DRIFT token are likely to increase, driving up its value.
Sustainability:
A more decentralized fee distribution model can contribute to the long-term sustainability and resilience of the Drift Protocol, aligning the community’s incentives with the platform’s success. Conclusion This proposal to allocate 40-60% of Drift Protocol fees to DRIFT token stakers represents a significant move toward a more decentralized, community-driven ecosystem. By aligning the interests of the Drift team with those of the token holders, we can create a more equitable, sustainable, and prosperous platform for all participants. We encourage the community to support this proposal and help drive the future success of the Drift Protocol.
I am all for this proposal. The only thing that I have been pushing for as a large token holder and drift staker on the platform is a small burn mechanism. Let me explain…
Allow Drift token to be used as a means of paying trade fees, then burn a very small percentage of that fee to create a slightly deflationary asset/ Drift token. This is what BNB does with their BNB token and it causes the value to climb with their token and creates a want to hold the token to pay trading fees.
I am all for a burn mechanism if it makes sense but in time. I think the focus at hand now is how do we bring utility to a drift coin, make it worth an investment? Distributing fees to drift coin stackers is a step in the right direction. Once we have more investors locked in, active, participating, then the dynamics of a burn mechanism can be explored.
Good idea, i like it
A decentralized fee distribution model can enhance the long-term sustainability and resilience of the Drift Protocol by aligning the community’s incentives with the platform’s success.
why is distributing fees to token stakers better than growing the protocol’s treasury (either through lending, insurance staking, or developer funding)
Currently all fees are programmatically reinvested into various parts of the protocol e.g. lending, insurance, market making, etc. Lending and insurance earn >10%. This both improves protocol functionality and passively grows the dao treasury.
It’s not clear that using fees to pay drift stakers is actually better for the dao then reinvesting the fees in the protocol as it does now.
I think coming up with usecases for DRIFT inside of the protocol is more appealing, such as the ability to pay for fees with it.
I’d also hold off on changing tokenomics until after fuel is launched (next week) since that will also provides new mechanism to incentivize drift stakers.
I do not believe there is any sort of “protocol treasury” beyond the money that the team behind the project gets. Therefore saying that the fees should go to the “treasury” seems the same as saying that they should stay the way they are now.
Drift currently lacks any sort of value accrual for the token, so I expect it’s OP’s intent to provide something that might encourage people to acquire and hold the token (assuming the fees are enticing enough).
If the tokens are staked on the insurance fund, then they would take the same risk of bad debt that every other staker takes.
The question then becomes if they get an extra share - otherwise why not just stake USDC? Potentially there could be a separate DRFT vault with longer lock requirements, or that gets slashed first so it gets a higher percentage of earnings.
There’s so much fud and misinformation on here. I think a good town hall soon on what fees are being spent on would be nice will be to clear the air.
Just in general on how we should push forward proposals to vote would be nice.
A protocol treasury are funds that protocol owners (let’s say token holders) control, and arguably own. They could assign them any arbitrary use through a vote: hire developers, start a grant program, lend to market-makers, run a buy-back program if they so desire, or even disburse as incentive to Drift holders.
None of that is true of the funds currently in the system. They are owned not by the protocol, but by individuals or organizations.
We can call it TVL.
Depositors own the funds for lending and insurance. Market-makers own the funds they deposit for market-making. Protocol fees get split between market-makers, those depositing on insurance, and whatever the company behind the Drift team is.
The protocol doesn’t own them, and token holders do not get to decide what happens with them.
Therefore, as far as I know there is no pot of funds that currently qualifies as a protocol treasury.
You really need to revise this proposal to add a small burn mechanism into this as the Drift token is used to pay for drift trading fees. It will create a deflationary asset out of the Drift token and not only will traders and stakers get paid but every drift token holder will gain value in their DRIFT token as an asset to hold as well. See below.
