CLIP-02: veCLEV Revenue Trust

CLever Improvement Proposals
1

Posted on behalf of the Aladdin team.

Summary

CLever enabled its full fee collection recently. We are approaching the time when we will start revenue sharing distributions, and want to explore some options with the community.

We have devised a unique revenue distribution system for CLever, for consideration by the community. It is called a “revenue trust”, and it would form a symbiotic addition to the CLever system, maximally rewarding veCLEV holders with the longest time horizons while still allowing users the ability to exit any time, within limits. By making veCLEV more rewarding to users with longer time horizons, we can attract users who will govern with protocol quality and longevity in mind.

The revenue trust works by automatically and permanently locking all CVX revenue in a “trust” (which is in turn deposited in CLever for bribe yields). Shares in the trust, representing a claim on trust yields, are tokenized; for each CVX earned by a veCLEV holder and auto-locked in the trust, they receive one cveCVX.

As the CVX in trust generates yields, they are distributed as clevCVX among the cveCVX stakers. If at any point a user wishes to exit their position in the trust completely, they can unstake and burn their cveCVX in exchange for clevCVX at 1:1. By doing this, future yields associated with those burned cveCVX would be shared among remaining stakers, effectively amplifying the yields of all remaining cveCVX stakers.

Detailed Implementation

At a high level it would work like this:

  1. When CVX revenue is harvested, it is deposited in CLever so that it begins earning bribe yields. This CVX is owned by the trust.

  2. veCVX is minted 1:1 against new CVX in the harvest and distributed to veCLEV holders. cveCVX represents a claim on yields from the trust.

  3. veCLEV holders claim their cveCVX and stake it for a share of yields from the trust

  4. Yields earned by CVX in the trust, denominated in clevCVX, are distributed among cveCVX stakers

  5. Any user who wishes to exit the trust may choose to burn their cveCVX in exchange for clevCVX 1:1. Burned cveCVX amplifies yields for remaining stakers.

Limits

Each time a user chooses to exit the system, the clevCVX required to pay them out is borrowed against the trust principal. The system would allow exiting into clevCVX as long as the overall trust LTV remains below 50%.

If the trust LTV were to reach 50%, withdrawals would be temporarily disabled until further revenue harvests open up more withdrawal space. It should be noted that if the LTV ever did reach this limit, it would imply all remaining cveCVX stakers yield would be amplified by 2x.

Implications

  • veCLEV holders’ share of CVX revenue is made automatically productive
  • veCLEV holders who wish to claim and exit with their revenue immediately would have to do so via clevCVX
  • Yields earned by the trust would be distributed in clevCVX
  • Exiters benefit long-term remainers by forfeiting all future yields of their share
  • All revenue is locked in CLever, which supports the platform (and ultimately token price, etc.) via increasing TVL

The system is designed to favour longer term participants, while still allowing users the flexibility to exit (though it must be through clevCVX).

Design Goals and Principles

As always, the name of the game is to make sure that the governance power of the platform rests with those who have the longest term stake in its success. CLever stands the best chance of thriving in the long run if its decisions are all made with that timescale in mind. This system helps to make veCLEV more attractive for users with the longest time horizon by creating a snowball effect that reinforces their long-term rewards.

The second benefit of this system is in feeding CVX revenue permanently back into CLever to create “forever TVL”. This type of deposit creates a sort of baseline non-withdrawable TVL, the ultimate in stickiness, which is a strong narrative and may help with CLEV price support and overall platform trust and longevity.

Note that this system has not begun development since it is not clear yet that the community would choose to implement it. The team will await the green light from the community before starting work. Details may change during development based on technical challenges or new information.

We’re looking for feedback, comments, and a general sense of the community’s level of interest in this type of mechanism. If there is good support here in the forum we will move the issue on to Snapshot voting for veCLEV tokenholders. Note that if this system is implemented, it would apply to all CVX revenue distributed, there would be no possibility for veCLEV users to opt out.

  • FOR: I support the revenue trust concept and would vote to implement it
  • AGAINST: I do not support this idea and would rather see revenue distributed in vanilla CVX
  • AGAINST: I think we should explore other, different ideas for revenue distribution (see my comment below)

0 voters

1 Like
2

I voted against this proposal, HOWEVER, I am actually in favor of the concept. Let me explain my reasoning:
I think this is a good idea, and I’m all for creating sticky TVL and supporting CLever long term, but I think this proposal needs to be be modified in two different ways:

  1. I think the timing of this proposal is inopportune. I think everyone is currently emotionally exhausted from the bear market, from FTX and various other scams, from government crackdown, a great deal of uncertainty in macro markets, and that’s not to mention the current social stigma of being involved in crypto and defi at the moment. I think for many of us, our expectation for quite some time has been that veCLEV would offer vanilla CVX, and so we are ready for the fees to finally kick in and deliver what we have been waiting for. It’s finally a “win” for all of us who have been in defi and wanting to enjoy the rewards we have been expecting. To change that mechanism now feels a bit abrupt and unfair, despite the fact that long-term it certainly does have it’s benefits. I think everyone should get their rewards as expected, and then perhaps 6-12 months from now, when the market has turned around (hopefully), the community will be more receptive to locking their rewards for a longer time.

  2. I am fairly apprehensive about engaging into this trust and then there is a constant pressure to exit. Perhaps my rewards may double to say 70% APR, but if I can only ever withdraw 5-10% of it at a time before hitting the withdrawal ceiling, then I am only ever able to realize a small percentage of the gains. I am concerned about this not only from the lack of ability to control when I can access my rewards and how much, but I am also unsure how this would affect me from a taxation perspective…am I getting taxed on the rewards I receive, even though I can’t ever access them fully? Obviously a question for a tax expert, but my assumption would be that I get taxed on all the gains, and I’d have to pay on those, even though they are essentially unaccessible. Doesn’t feel like much of a win if that’s the case. As such, I think this trust idea would be better from an opt-in perspective. I take some percentage of my rewards up-front in CVX and then reinvest the rest into a trust is a much more palatable concept for me to get behind and it still let’s me feel like I am in control of the process.

Those are my thoughts. Like I said, I like the idea, but I just feel the timing and the lack of optionality prevent me from supporting it in its current format.

4 Likes
3

The distribution for veCLEV has been so long in coming. For us, it doesn’t make sense to complicate what should be an “easy win” for the protocol.

The mechanism is simply too complex. The market will never price this fairly. So you may be able to juice yields this way, but you will pay for it by suppressing liquid CLEV price. It just seems much more attractive to K.I.S.S. and distribute an easy-to-understand and direct APY based on CVX (or clevCVX if you must, people can just throw it in the furnace to monetize) distribution. People will be more likely to lock up CLEV if they go to the locking page and see a straightforward 15-20% APY than if they see some complex locking/re-locking mechanism. Also think about the gas fees required for this complication! :face_vomiting:

Moreover, we think implementing this mechanism ignores the potential growth of clevUSD. Shouldn’t veCLEV lockers also eventually be getting rewards in FRAX and/or clevUSD? What then? Do we need to make another complex flywheel-on-flywheel-on-flywheel thing for that, too? What if Clever chooses to start locking up CNC? Better to just keep it simple. That way the protocol can more easily scale.

We would suggest the community to vote Hard Against, with the caveat, as Kmets stated, of revisiting this in a year, or whenever the bull market returns, as defined by CRV hitting $2.50 :smiley:.

2 Likes
4

Huge, huge thanks to both @kmets and @Fomocraft for feedback here, as well as everyone who stopped by the Discord or spoke to use personally.

The preference from the community is clear, so we will proceed with revenue distribution as simple claimable CVX and FRAX

We’ve announced details on today’s community call and on Twitter:

1 Like