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.
