The Treasury value temporarily hit the 750,000 LPT ceiling and reverted the reward cut to 0% as per the mechanism design. The Treasury has stopped accruing.
The recommendation is to restart the cut on the same terms as LIP-101 had previously passed:
treasuryRewardCutRate: 10%
The mechanism and ceiling are unchanged from the previous LIP. I’d welcome further discussion into whether the 750,000 LPT ceiling is the right number, but given it took 6 months to hit that ceiling this feels less urgent than turning on the rate cut again.
Implementation: the Security Committee set treasuryRewardCutRate to the agreed value after the result of the vote. There would be no other parameter changes.
Please share your thoughts on this topic during the open discussion period
While I support turning the treasury reward cut back on to ensure we don’t leave public goods funding stranded, we should use this opportunity to refine the mechanism.
Instead of routing the full 10% strictly to accrua which we just saw hit its ceiling in a mere 6 months we could introduce a burn mechanic directly here. For example, keeping the 10% cut but allocating 9% to the Treasury and 1% to be permanently burned.
This would elegantly tie into the ongoing discussion opened by dob regarding token sinks. It keeps the funding runway clear for the SPEs, slows down how fast we hit the 750k LPT ceiling again, and sends a strong deflationary signal to the market without adding extra costs for node operators or users.
I would like to stop allocating LPT to the treasury.
As delegator, this reduces the amount of LPT that I receive, while is used to fund projects that do not create much value. In the end, it just only creates more selling pressure on LPT.
It is an obvious fact that the projects funded LPT have not led to an increase in the LPT price.
I think it would be better to allocate a portion of actual network fees to the treasury instead. Wouldn’t that make the Foundation and Livepeer Inc. more focused on increasing real network fees than they are now?
Thanks @nhis and @kilout for the thoughtful responses.
@nhis I agree with the instinct but the treasury cut doesn’t change how much LPT is minted. It is redistributing inflation that is happening regardless. Taken to the limit, if 100% of emissions went to the treasury the direct sell pressure would disappear because those tokens would sit locked in the treasury instead of landing with those who do automatic round-by-round selling of rewards. Routing more to the treasury takes emissions off the market and reduces sell pressure, rather than adding to it.
The real driver of token pressure is the gross emission rate, and that’s the unfinished work from last year. If you reduce emissions you reduce the amount of new tokens that can be sold. The treasury cut % doesn’t move that by a single token.
The treasury funds public goods which right now means protocol security and the teams building what the network needs before demand can land. LPT having any price is underwritten by the security of the token, which is even more critical in the current environment of mythos level models being (sometimes) available. I agree on the premise of increasing LPT price through the treasury and I’d argue that to do that the cut should be higher, not lower.. but that’s a conversation for another thread. And you’re right that fees are where maximum alignment lives, and why I strongly agree with the need for a protocol fee.
@kilout I am aligned with the need to increase value flowing back to LPT via the protocol fee. Burning 1% of the treasury cut reduces the net amount of LPT being emitted, so it slows the rate of emissions, but it doesn’t create any natural LPT value capture mechanism. The protocol fee not only makes a direct link between fee creation and capture, but it has the secondary benefit of making recycled fees costly and creating a disincentive to fake demand. If reducing emissions is the goal, the emission parameters are the direct lever, rather than a burn bolted onto the treasury cut.
All of these are critical components to work on, but I think they should be separate from the treasury cut. Dilution needs to be tackled via the emissions parameters, value accrual needs to be locked in via the protocol fee, and funding public goods and go to market demand effort needs to be supported by the shared treasury There is nothing to stop us doing all three.
When price is challenging we tend to bias towards a scarcity mindset. But what is really needed is to increase the velocity of delivery and our efforts in the market, not reduce them. I don’t think there is any way to “thrift" our way to a better market and price dynamic. We can and need to be cost conscious and thoughtful about how funds are used, but also resist falling into zero-sum thinking.
Just wanted to get back to this thread now that things are progressing with Livepeer 2.0. In line with the original recommendation of restarting the treasury reward cut at 10% here are a few more points I would make as to why this is important to address now:
The treasury is currently at 589,000 LPT or approx $695K USD equivalent. This is ok in the short term but there are real unknowns ahead and we should plan for the different scenarios. Optionality is a lot of what a treasury is for.
Livepeer 2.0 has moved from a concept into delivery. The litepaper is due soon (with strong engagement in recent roadmap sessions) and the Agent preview with creators unlocks a more to close beta with some early traction. Behind these lie a pipeline of possible proposals that could touch on network development, go-to-market and significant protocol work.
The costs of action vs inaction and/or getting it wrong here are really not symmetric. If we hold at a 0% treasury cut and 2.0 sees strong traction, new funding might not arrive until a quarter late at the moment when it is needed most. One nightmare scenario of mine would be strong traction but that not converting into LPT price action because BME has been stalled waiting for audits to be funded or for the necessary onchain liquidity to support the burn. Compare this with the cost of action, which is that the cap will kick back in again and naturally reset the cut to 0% if the ceiling is hit.
I’ll bring this for a name and topic at the watercooler this week and if there’s support I’ll run a roadmap session so we can dive into the detail properly. I’m also happy to facilitate further discussion on the target rate itself, as well as settings around the ceiling, and anything else regarding parameters or sequencing that people might want to discuss. See you at the watercooler!
I am in favor of restarting the reward cut for all the reasons given.
Separately, it might be worth considering doubling or even tripling the cap for a few reasons:
The current token price means the Treasury doesn’t go as far as it used to
The Treasury is still ~78% full so if we were to restart the reward cut today, it’d be full again in ~2.5 months, absent any other allocations.
We can build up the Treasury for longer and avoid going back as frequently to ask for a restart.
With a larger pool, we can be more comfortable giving larger allocations to well-established public goods for a longer time frame. Eg, SPEs such as Live Infra probably only need to be funded annually or every 6 months at most, instead of quarterly.
Raising the cap would be a separate proposal of course, but it seems worth considering alongside restarting the cut, given the relatively tight timeline between restarting the reward cut and hitting the cap, especially if 2.0 or other initiatives take a bit longer to get going.
