BIP-42: Increase protocol fee on yield capture of IB (interest bearing) tokens on Fantom

Intro

This proposal does not include any changes to protocol fee distribution, which is currently set: 70% to treasury allocation 30% to gauge incentive bounties

This is a ranked choice voting proposal. Read more on this type of proposal in the Snapshot documentation: Ranked Choice Voting Documentation

Motivation

On any IB token deposited into a Liquidity Pool on the DEX, Beethoven X takes a fee on the yield generated. We have called pools that include IB tokens Boosted pools. Boosted pools provide a sustainable source of protocol revenue that is purely a function of TVL and thus the protocol is no longer dependent on swap volume to ensure longevity.

One of the most important metrics when considering longevity of a protocol is comparing the amount of emissions the protocol is using to incentivize their users (BEETS rewards) to the revenue the protocol receives from its services (swap fees and yield capture from IB tokens). BeethovenX has continuously been trying to progress towards a revenue positive model and IB fees are a unique method to BeethovenX (and Balancer) to do so. We believe BeethovenX should take the next step towards a revenue positive model by increasing the protocol fee on yield capture of IB tokens on Fantom.

Based on the discussion, we would propose four different options for a ranked choice voting type governance vote on Snapshot:

• Option 1: Increase protocol fee on yield capture of IB tokens on Fantom for uncapped gauge vote pools from current 25% to 50%. Others pools are not altered.
• Option 2: Increase protocol fee on yield capture of IB tokens on Fantom for all gauge vote pools from current 25% to 50%. Non-gauge-vote pools are not altered.
• Option 3: Increase protocol fee on yield capture of IB tokens on Fantom for all pools to 35%.
• Option 4: Reject proposal and keep things in the current state.

Impacts

We would like to bring out the following aspects:

1. BeethovenX incentivizes gauge vote pools that have a >2% contribution to total protocol fees with extra bounties. Increasing protocol fee on IB yield capture would increase contribution % of boosted pools in comparison to non-boosted pools and would possibly make it easier for them to reach uncapped status.
2. It would increase the amount of capital used to purchase BEETS from the market to be used as gauge vote bounties.
3. Increased protocol fees translates to more aggressive treasury and POL growth, which has been an important focus for BeethovenX.
4. Protocol fee on IB tokens is currently set to 50% on Optimism, where IB yield capture has shown to be a considerable part of total protocol fees.

There is no anticipated negative impact for the team, contractors, treasury, tokenomics, Music Directors, the Guide Tones, or other committee recognized by the DAO.

Risk Assessment

Depends on the chose option. In any case LPs would earn less through IB yield capture, but it is possible the total rewards for liquidity providers could increase through increased BEETS incentives and/or indirect positive impacts on the protocol and BEETS valuation.

Specification

Protocol fee adjustments would be done during the first gauge vote based emissions change following the vote.

## Execution Plan

Following successful vote, pools would have their protocol fee on yield capture of IB tokens adjusted based on the chosen option ~at the same time gauge vote based emission adjustments go live. Any adjustments required in the future (again, based on the chosen option) would also take place ~at the same time the gauge-vote based pool emissions adjustments go live.

Discord Discussion Channel

https://discord.com/channels/885764705526882335/1105959409529671801