[Defrost #05] — MELT buyback & burn or not

https://snapshot.org/#/defrostfinance.eth/proposal/0xae13f68591f5ed6f2f3bcaaa00c325df978dd1874a662250da12a8bcea252df2

Proposal Type: Protocol Fee Utilization

Proposer: Defrost Team

Proposal: This is a proposal to vote on whether and how to initiate a MELT buyback using our protocol fees.

Background:
Currently, the protocol is collecting protocol fees in two ways:

  1. Stability fees - similar to an interest rate - when users are minting H2O using their collateral, and liquidation penalties when users get liquidated. These fees are collected in H2O.
  2. Protocol fees collected in the supervaults when the smart contracts compound the rewards from other integrated protocols. These fees are collected mostly in stable assets.
    Right now, 50% of the fees collected from 1) are distributed to SMELT boosters in the DefrostH2O3CRV-f boosting pool.

Details:
In our forum, there has been quite a debate on whether to use the protocol fees for a MELT buyback & burn mechanism to provide a constant and favorable market dynamic for the MELT price.
The other option would be to use the protocol fees to contribute to the MELT liquidity pool, and be locked. Please note that this option would apply half of the funds to buy back MELT, and pair the other half to add liquidity.

Possible options:

Option 1: Everything stays unchanged.

Option 2: 50% of the fees collected from both 1) and 2) to buy back MELT and burn. The current H2O distribution from 1) will be stopped.

Option 3: Use 50% of the fees collected from both 1) and 2) to permanently add to the MELT liquidity pool. The current H2O distribution from 1) will be stopped.

Option 4: Distribute 50% of the fees collected from 1) as it is now, and use 50% of the fees collected from 2) to buy back MELT and burn.

Option 5: Distribute 50% of the fees collected from 1) as it is now, and use 50% of the fees collected from 2) to permanently add to the MELT liquidity pool.