Governance Proposal 29: Leveraging ApeSwap POL to Improve Operational Efficiency

Introduction & Context

Since the very beginning of the ApeSwap protocol, ApeSwap has emitted a fixed amount of its native token, BANANA, on a per-block basis. In total, approximately 5.2 BANANA per block are emitted into circulation, and as of Governance Proposal 23, an additional fixed 1 BANANA per block is earmarked to cover expenses, going into the ApeSwap Treasury.

When ApeSwap started, every operational expense was paid in BANANA (either directly or by swapping for another token), including core contributor compensation, external vendor agreements, marketing costs, and all other expenses required to keep the protocol running and growing. At a certain point (noted below), the ApeSwap DAO stopped spending BANANA and instead held it in the Treasury on the assumption that BANANA would be worth more in the future, allowing the DAO to grow in value and (in the future) pay for more expenses with the same amount of BANANA.

ApeSwap DAO stopped spending BANANA to cover operational expenses on May 9th, 2022. Except for a few giveaways, ApeSwap as an organization has been bearing the burden of the decrease in BANANA price alongside the community of BANANA holders. ApeSwap could have avoided this by selling BANANA as it was emitted, drastically increasing the circulating supply and negatively impacting price, but instead the organization lost a significant amount of operational runway in the process in the interest of protecting BANANA holders by holding emitted BANANA in the Treasury.

Inflation is the largest factor contributing to the decline of the price of BANANA. ApeSwap has tried to be very careful with emissions of the BANANA token, constantly looking for ways to reduce the rate of inflation of BANANA instead of leveraging emitted BANANA to create extra revenue at the expense of the long term health of the token.

The impact on price of selling .7 BANANA/block since May 9th, 2022 and 1 BANANA/block since the Prop 23 passed on Nov 18th would be:

Disclaimer: this analysis is based on a fixed sales pressure coefficient of 100%, assuming all other factors equal. For illustrative purposes only.

In December 2022, ApeSwap DAO passed Governance Proposal 25, which enabled the organization to tap into a portion of the protocol-owned liquidity (POL) that was created through the sale of BANANA-based ApeSwap Bonds (then called BANANA Bills). Specifically, this proposal allows the organization to use 10% of the POL created from the sale of Bonds that gave BANANA as the discounted vesting token, excluding any POL made up of LP tokens that included BANANA as an input token.

Summary

To ensure the continuity and growth of the DAO, ApeSwap core contributors propose that this flexibility to leverage POL for operational expenses be extended to all POL created through the sale of ApeSwap Bonds. This means all ApeSwap POL would be eligible for use towards ApeSwap DAO’s operational expenses.

Motivation

This is a strategy that aligns closely with ApeSwap DAO’s commitment for the last year to avoid selling or distributing BANANA on the open market to cover operational expenses. If this proposal passes, it has no direct effect on any BANANA or GNANA holders - the ApeSwap DAO would simply be leveraging assets it created for itself in order to fund the continuity and growth of the organization.

Frequently Asked Questions

Why can’t ApeSwap reduce expenses? In fact, ApeSwap DAO has reduced its operational expenses, quite drastically. ApeSwap DAO reduced its operating budget by 50% and parted ways with multiple core contributors over a year ago when the bear market began.

What is ApeSwap’s current operating budget? While ApeSwap DAO plans to release financial reports in the future, releasing detailed financial information at this point in time would materially affect in-progress and future opportunities for ApeSwap and BANANA holders.

What if this proposal fails? ApeSwap will have to explore ways to fund essential operations that are fundamental to the growth of ApeSwap, including using BANANA for expenses and/or increasing emissions via governance to generate more revenue. Similar to other organizations, once operating funds are all used, the DAO would transition to voluntary service.

How long would POL sustain the DAO? Due to fluctuating revenue, the nature of tokens and other opportunities being worked on, the core contributors are unsure on the length it would provide; however, core contributors intend to use as little POL needed to fund ongoing operations.

Options

PASS - If this proposal passes, ApeSwap DAO will be able to access ApeSwap’s protocol-owned liquidity in order to pay for operational expenses.

REJECT - If this proposal is rejected, no changes will be made to how ApeSwap DAO uses protocol-owned liquidity.

Disclaimer

ApeSwap products and services are no longer available to “U.S. Persons”. ApeSwap DAO has advised users that are U.S. Persons to divest their tokens on ApeSwap and to cease using or accessing the products and services of DAO. As a result, no U.S. Person may vote on this Governance Proposal 29. A “U.S. Person” is a person (as defined in the U.S. Code of Regulations at 22 C.F.R. § 120.14 (2023)) who is a lawful permanent resident as defined by 8 U.S.C. § 1101(a)(20) (2023), or who is a protected individual as defined by 8 U.S.C. § 1324b(a)(3) (2023). It also means any corporation, business association, partnership, society, trust, or any other entity, organization or group that is incorporated to do business in the United States. It also includes any governmental (federal, state or local) entity. It does not include any foreign person as defined in 22 C.F.R. § 120.16 (2023).