P3 Proposal: Premia Meta-Economics Revamp

dk3
Tue, 11 Jul 2023 02:55:43 +0000
Drafts

Hello Premians! This is the current working draft to be published as snapshot vote this week. Please let us know any thoughts or concerns!

MetaContent:

---
p3 (mod): 4
network: all
title: Premia Meta-Economics Revamp
status: P3
mod status (mod): Accepted
author: DK (@dk3)
mod: DK (@dk3)
sponsor: DK (@dk3)
created: 2023-03-13T00:00:00.000Z
proposal (mod): "https://gov.premia.blue/#/proposal/0x04b0ad986eed6eaf2451487af4e23f6ed7b815efa5586eabd9a404e9f2b26869"
type: Concept
group (mod): NA
---
Document: https://blog.premia.blue/p/premia-meta-economics-revamp

Summary:

Premia proposes a comprehensive revamp of its token economics design to align with the evolving Web3 landscape and better serve the community. The key components of the proposed changes are the revised token allocation re-categorizations, protocol fee structure, Insurance Fund, vxPremia, and voting influence, Hydraulic Solutions Framework & Options Liquidity Mining, and the AirDrip Initiative.

Abstract:

As the Web3 universe evolves, the Premia ecosystem must adapt and mature. The proposed revamp of token economics aims to empower and reward stakeholders while maintaining decentralization. This P3 proposal outlines the revised token allocation, the structure of protocol fees, the introduction of the Insurance Fund, the mechanism of vxPremia and voting influence, the adoption of the Hydraulic Solutions Framework & Options Liquidity Mining, and the implementation of the AirDrip Initiative.

Motivation:

The maturity and adoption of the DeFi ecosystem necessitates secure, responsive, and responsible protocols. Premia recognizes the need to reassess and reinvent its token meta-economic design to meet these requirements. The proposed changes aim to align with the evolving interests of the community, empower stakeholders, and ensure the long-term success of the Premia protocol.

Specification:

1. Token Allocation Re-Categorizations:

Allocation percentages for different stakeholder groups change.

Original : What is Premia? | Premia V3

Proactive Re-Vesting of Tokens for 4 years began Jan 15, 2023 (Founders & Premian Republic)

High Level

Drill Down

2. Protocol Fees:

Three layers of fees: Base, Margin, and Vault.

Base Layer amasses commissions from the greater of either 3% of premiums paid or 0.3% of the notional value transacted. On Settlement, a fee of 0.3% is collected, not to exceed 12.5% of the option’s value. (Rates subject to change by vote)

Margin Layer is a two-part equation. Firstly, it subtracts 0.4% from the Prime Rate (variable driven by supply and demand dynamics) charged to providers of margin lending liquidity. Secondly, it levies a dynamic liquidation fee that is specific to the wallet positions (see Premia v3 white paper risk model).

Vault Layer includes a 2% per annum management fee and a 20% fee on all positive returns for all native vaults (built in-house). (Rates subject to change by vote)

For Vaults developed by third parties, fees will be negotiated ad-hoc on a case-by-case basis.

Distribution of fees to Staking Users (vxPremia), Premian Republic, and the Insurance Fund.

Staking Users are allotted 80% of Base Layer fees.

The Operator Group receives 20% of Base Layer fees.

The Insurance Fund collects 100% of the fees from the Vault and Margin Layers.

Parliament will reconvene every January to re-access the allocations and amend, any changes will be submitted for a vote before any action is taken. The first meeting will be January 2024.

3. The Insurance Fund:

The primary purpose of the Stability Non-Appropriation Assurance Reservoir Fund (the “Insurance Fund”) is to be made available to the Lending Pools in the event bad debt is accrued due to liquidated positions once margin is enabled. The amount available for margin directly correlates to the size of the Insurance Funds held assets.

In the event that the Insurance Fund has assets in excess of the calculated amount needed to be earmarked for bad-debt payoff properly, the Operator may rehypothecate for other protocol purposes. Once established, the Insurance Fund address will be published publicly.

4. vxPremia and Voting Influence:

Wallets can stake their PREMIA Tokens to participate in a pro-rata share of fees derived from the protocol.

Staked Tokens become vxPREMIA when locked for a chosen period and cannot be unlocked or withdrawn until that period concludes.

The minimum lock-in period is ten days, a consequence of the 10-day minimum withdrawal period initiated upon unstaking vxPREMIA. Any lock-in duration beyond this is optional but incentivized — the longer the lock, the more pro-rata fee share, and voting influence wallets accrue per staked PREMIA.

Locked vxPREMIA allows for Fee Discounts of up to 60% for EOA’s and 30% for Smart Contracts.

As vxPremia was a natural upgrade to xPremia and there was no contention, this was previously implemented and discussed.

5. Hydraulic Solutions Framework & Options Liquidity Mining:

Expansion of the Hydraulic Solutions Framework as a new collection to other protocols

Replacement of traditional token liquidity mining with Premia Call Options

The proposed change allows liquidity providers to receive PREMIA Call options at a 45% discount to the underlying asset’s current market price, replacing the current liquidity mining scheme.

The proceeds, if exercised, will circulate ~90% to vxPREMIA staking users and direct the remaining 10% to Blue Descent DAO. If not exercised, 20% of the option’s intrinsic value will be locked for 1 year and then provided to the liquidity provider’s wallet.

Protocol Fees will be collected on exercise, and taker fees will be collected if this option is traded on the secondary market. This is built modularly so that any market can be deployed as a physically settled option.

6. AirDrip Initiative:

Initially, 30mm Premia Tokens were reserved for Liquidity Mining over 10 years. The new initiative proposes to set aside 16mm for Liquidity Mining and 10mm for the AirDrip Initiative (4mm have already been allocated)

16mm Liquidity Mining to be split into two buckets of 8mm, one bucket to be allocated over 4 years (2mm per year). The other bucket will be used for future ecosystem products outside the Options Exchange.

The AirDrip Initiative of 10mm Tokens will be split over multiple years. The first allocation proposed is to utilize 2mm Tokens and allocate pro-rata to all staking users based on their influence across all chains.

A snapshot will be communicated (date to be announced shortly ~ETA July 24th), and all influence will be recorded on that date. Over the coming weeks, a new smart contract will be deployed, locking the 2mm Tokens for one year, allocated to individuals based on their Influence amount.

If, for any reason, a wallet withdraws before its regular staking lockup period and concedes to pay the early withdrawal penalty, the wallet will forfeit any AirDrip allocation, and that will be redistributed to the remaining staked users. If the wallet’s natural lockup period expires before Snapshot Date + 1 year, then the allocation shall remain; however, it won’t begin to vest until the Snapshot +1 year date as defined below.

This is to penalize any user trying to game the influence metric during the snapshot date.

1 year following the Snapshot Date, the Tokens will begin to be dripped out to all eligible wallets monthly (linearly) over the next year. The entire allocation of 2mm Tokens will then be fully vested and available for claim by Snapshot Date + 2 years.

For the remaining 8mm Tokens, the Parliament will reconvene in January of 2024 with a long-term proposal for allocation.

Rationale:

The proposed token economics revamp aligns Premia with the evolving Web3 landscape, ensures community-oriented growth, and empowers stakeholders. The changes aim to foster transparency, accountability, and long-term commitment to the Premia ecosystem.

Test Cases:

To be added during the implementation phase.

Copyright Waiver:

All P3 content must be in the public domain.

Open Questions:

Further discussions and decisions by the Parliament regarding fee and commission splits and AirDrip allocations are to be confirmed in January 2024.

This includes confirmation and voting on the details of the tournament-style mechanism for the remaining AirDrip Tokens.

Next Steps:

Review and discussion by the Parliament. Amendments and finalization of the P3 proposal based on community feedback. Snapshot date to coincide with Premia Blue’s release and be announced well in advance.