SIP-314: V3 fee sharing
cyberduck, ivan, chatGPT
|Network||Ethereum & Optimism|
This SIP outlines how fees are shared to protocol participants in Synthetix V3.
Fees captured by the protocol are split between collateral liquidity providers (LPs) and SNX stakers. Staked SNX receives a percentage of the fees captured by the protocol rent-free across all V3 pools. This fee is to be defined separately for each individual pool through governance. The ratio at which fees are split is to be decided by the Spartan Council and can be changed via SCCP.
Each V3 pool has a variable specifying the ratio of fees that goes to SNX stakers regardless of being a collateral or not. There is a global variable that enforces a minimum value for all pools.
Additionally, SNX may be used as a collateral token if designated by the pool manager. This would allow SNX LPs to capture additional fees.
Protocol fees are to be split between collateral liquidity providers and SNX stakers according to a configurable
protocol_fee expressed in decimal for each individual pool, where the value set represents the fees shared with SNX stakers.
Additionally, a global configurable
min_protocol_fee governs the minimum value for any pool's protocol_fee.
With the implementation of this proposal, the initial fee percentages are to be set as follows:
This design aims to reward providers of any collateral type while also rewarding SNX stakers regardless of them providing collateral.
Pools in Synthetix V3 can be backed by ETH and other types of collateral as voted by the Spartan Council. To incentivise liquidity some kind of rewards must be provided to LPs - inflationary or protocol fees, which affects the value of SNX and tokenomics in status quo. While inflation towards other token types dilutes existing SNX holders, fees captured by other token types are fees not captured by SNX. This could lead to a decrease in the demand for SNX and a potential reduction in its value and inherently in the value of SNX used for any incentives within the protocol or externally in AMMs or bribes.
One potential solution to incentivize liquidity providers and not devalue holding SNX in Synthetix v3 is to introduce a ratio of how fees are shared. Instead of 100% of fees being shared with liquidity providers, a portion of the fees is to be shared with SNX stakers without the need for them to provide SNX as collateral, allowing SNX stakers to earn fees passively without taking on debt risks. This would help to maintain the demand for SNX and its value, while also providing sufficient rewards to liquidity providers.
Configurable Values (Via SCCP)
protocol_fee for each individual pool
min_protocol_fee as a global variable
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