AIP 3: Fee Rebates

We propose channelling a portion of protocol fee revenue to increase stAAA utility. This will act as a catalyst to align long-term AAA holders with Arcadia’s accelerating momentum and TVL growth. Three options below:

Option 1: Fee Rebates

Users receive fee rebates based on their stAAA (staked AAA) holdings, paid in stAAA tokens.

This aligns all participants of the ecosystem:

• Direct user incentivisation to join the AAA ecosystem by holding stAAA
• A percentage of fees earned will be used to buy back AAA on a daily/weekly basis
• Arcadia users get a reduction in fees paid in stAAA

The fee rebate will be calculated as a percentage of the fees paid by the user, capped at 20%.

• The USD value of the amount of fees paid, V_{Fees}.
• The USD value of the amount of AAA staked, V_{AAA},
• The net USD value of all the users accounts, V_{Accounts}.

Rebate = V_{Fees} * MIN(20%, 0.4 * V_{AAA} / V_{Account})

In practice, a user would need his stAAA holdings to meet a percentage of his account value to be eligible. This scales together with the account value. For example, a user with a $1,000 account would need $250 stAAA to receive a 10% rebate. A user with a $1,000,000 account would need $250,000 stAAA for that same 10% rebate.

The system is designed to be easy and flexible. Every two weeks, Arcadia takes your average account value & stAAA holding and looks at their ratio. Whatever your ratio is, that is what will define your rebate. There are no ‘steps’ or ‘levels’ you could miss out on.

The rebates will be claimable every two weeks.

Option 2: Build PoL

Part of the fees are used to build protocol-owned liquidity positions, particularly in staked Aerodrome Slipstream pools. We propose using 10% of fee revenue.

By using staked Aerodrome Slipstream, an amount of AERO will be earned as staking rewards, which can be accumulated and used to vote on additional emissions for the AAA/USDC pool. Down the line, this voting power might replace the current weekly AAA incentives towards the Slipstream AAA/USDC pool, reducing the spend of AAA from the treasury.

This option provides a good balance between community value creation and protocol sustainability. The protocol-owned liquidity will serve both as a revenue source and a strategic asset.

Option 3: Keep fees to reinvest in the protocol

This option would be most valuable to strengthen the protocol for future developments. Although no exact details are provided in this proposal, such additional revenue could be very well used for additional audits, a war chest, marketing budget, team expansion, etc.

Summary:

Option 1: Fee Rebates

• Pro’s:
  • Direct incentivisation to hold stAAA
  • Reduced fees throughout the platform for Arcadia users
  • Alignment between protocol and users
  • Clear and transparent for users
  • Direct engagement and “fun” activity to claim rebate
• Cons:
  • Direct outflow of assets from the Arcadia protocol to users
  • Some development work for rebate claiming infrastructure

Option 2: Build PoL

• Pro’s
  • Maintains value within the protocol
  • Sustainable alternative for protocol revenue through trading fees
  • Long term stability of trading pools
  • Minimal development overhead
• Cons
  • No immediate incentivisation to hold stAAA
  • Less engagement and noticeability by the community
  • Requires a long-term perspective mindset

Option 3: Keep Revenue

• Pro’s:
  • Maximum extension of operational budgets
  • Flexibility addresses immediate needs
  • Direct investment in protocol and growth
  • No development overhead
• Cons:
  • Provides no immediate additional utility for (st)AAA
  • Least community engagement

We invite the community to discuss the options above, and are welcoming other viable options or strategies.

Protocol revenue in DeFi is often misunderstood. At Arcadia, we define revenue strictly as funds flowing directly to the protocol treasury through user fees. Because the team runs an intentionally lean cost base, each new dollar of revenue pushes us rapidly towards profitability. But we’re not there yet.

Our current fee structure can be found here. Do note that the core team prioritises Arcadia’s long-term success over short-term price swings.