Spectrum Protocol’s Tokenomics Improvement

  1. Price should be continuously increasing from buyback.
  2. Stakers get more tokens and returns.
Stakers earn more profit from both increasing price and amount

Then, what is the problem with buyback?

  1. Since we do not burn, supply does not decrease and equilibrium price cannot go up from buyback.
  2. If the equilibrium price cannot go up, but buyback money keep going into LP pool, then who sell first get realized return.
  3. When the price goes down, buyback model will even creates sell spiral, since stakers will only have more cheaper tokens. Sell might be better option to realize profit or remediate loss.

But why sell spiral not happen in some other protocols?

Inflation is the main trigger for Spectrum. While other protocols reward around 25–40% of token supply for LP providers. Spectrum rewards 75%! More supply will only drive the price down despite Spectrum has a strong Gov income compared to other protocols.

SPEC Token Distribution

The Proposal

  1. SPEC stakers will receive realized return (UST) rather than more SPEC from buyback.
  2. Setup Burn Vault for buy back and burn.

Realized return as UST

The mechanism is simple, rather than using UST from protocol fees to buyback SPEC, the UST will be distributed directly to stakers. We will deposit protocol earnings to Anchor to accumulated interest while your UST is idle, and you can withdraw UST (or aUST) at any time from both locked or no-lock staking pools.

Gov income in bull market

Burn Vault

Out of 2.5 SPEC emission per block, 1.25 SPEC will go to burn vault. Basically, we will reduce emission by 50%. These SPEC will stay with burn vault only 1 month and get burned. Short-lived SPEC will be staked to 30-day locked staking pool to earn income and use that income for SPEC buy back and then burn. Effectively, we will burn more than 50%. The more gov income, the more SPEC will be burned.

Wen? And how do I push this change?

Now. Please stake your SPEC and vote at https://terra.spec.finance/gov/poll/23

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