Proposal Type: Protocol Fee Utilization
Proposer: Defrost Team
Proposal: This is a proposal to vote on how much protocol fees to be spent for accumulating ECD & VTX for future PTP incentives
Our protocol collects stability fees in H2O, which are similar to an interest rate when users are minting H2O using their collateral, and liquidation penalties when users get liquidated.
Right now, 50% of the stability fees collected are distributed to sMELT boosters in the DefrostH2O3CRV-f boosting pool, contributing to 14.86% APR in H2O based on the sMELT staked for boosting.
Background about Platypus Finance and their affiliate yield boosting projects, Echidna Finance and Vector Finance
The Platypus Finance protocol is a single-side AMM (decentralized exchange) designed for exchanging stable cryptocurrencies on Avalanche. It applies a unique algorithm for stablecoin trading and has even lower slippage than Curve, which is the best-known stable swap protocol on Ethereum. Platypus Finance is attracting over 770 Million TVL and is currently the 6th largest DeFi protocol on Avalanche, according to DeFillama.
PTP is Platypus Finance’s governance token, the incentive token for liquidity providers, and is used to decide the future PTP incentive allocations.
Platypus Finance applies a boosting liquidity mining model for liquidity contributors. Liquidity contributors who lock PTP to get an increasing amount of vePTP enjoy boosted mining rewards, a mechanism similar to Curve’s mining rewards.
Echidna Finance and Vector Finance
Echidna Finance and Vector Finance are both Yield Booster protocols affiliated with Platypus Finance. They both actively accumulate PTP tokens and lock them in the Platypus’s boosting contract for enhanced rewards. Their relationship with Platypus is similar to the one between Convex and Curve.
Currently, according to DeFillama, Echidna Finance and Vector Finance have over 100M and 200M in TVL respectively.
Echidna Finance and Vector Finance’s platform tokens are called ECD and VTX. These tokens will have voting power on the future PTP reward allocation, based on the accumulated vePTP balance.
H2O’s peg and liquidity will be the key to Defrosts’ future growth and development. Platypus is to Avalanche what Curve is to Ethereum. It is no longer efficient for a protocol to accumulate PTP directly, due to the existence of the Yield Booster protocols - holding the Yield Booster’s governance tokens will soon be a more effective way to get to decide the PTP allocation, through the vePTP accumulation. Interestingly, this is how the CRV war started on Ethereum, and now it is becoming the CVX war.
By constantly accumulating ECD and VTX, the PTP rewards can be guaranteed and a larger H2O liquidity pool can be incentivized. It will be beneficial for Defrost to have more TVL and a better peg to the USD value.
It is worth noting that if this is to be done at all, it is best to act as early as possible. The team will decide the exact ratio of the ECD and VTX purchases.
A: 60% of the stability fees will be allocated for the purchase of ECD and VTX tokens. The H2O distribution to sMELT boosters in the DefrostH2O3CRV-f pool will be stopped.
B: 50% of the stability fees, together with 10% of the protocol fees from our supervaults, will be allocated for the purchase of ECD and VTX tokens. The H2O distribution to sMELT boosters in the DefrostH2O3CRV-f pool will be stopped.