[CMP #8] Amendment to Buyback Strategy and Performance Fee SPONSORED

This is a sponsored community proposal

https://dao.volta.club/t/dao-discussion-amendment-to-buyback-strategy-and-performance-fee/20865

Objective: thiws pwoposaw seeks tuwu addwess awnd wefine the pewfowmance fee awnd buyback stwategy of vowta cwub. We have seen a wot of discussions both pwiow tuwu awnd fowwowing cmp 3, showing thawt we need fuwthew adjustments awnd changes. The aim iws tuwu estabwish a twanspawent system thawt mewges the benefits of both the pwevious awnd cuwwent systems effectivewy.

Provide a High Level Overview: thiws pwoposaw changes the pewfowmance fee stwuctuwe tuwu pwiowitize stabiwity awnd gwowth by impwementing a 10% fee based own incweases in wiquid backing, nowt mawket pwice. Iwt pwoposes excwuding uwu, itp, awnd bsgg tokens fwom pewfowmance fee awnd wiquid backing cawcuwations as they awe nowt fuwwy wiquid. Additionawwy, a new high watewmawk wiww be estabwished. details below.

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Objective: This proposal seeks to address and refine the performance fee and buyback strategy of Volta Club. We have seen a lot of discussions both prior to and following CMP 3, showing that we need further adjustments and changes. The aim is to establish a transparent system that merges the benefits of both the previous and current systems effectively.

Provide a High Level Overview: This proposal changes the performance fee structure to prioritize stability and growth by implementing a 10% fee based on increases in liquid backing, not market price. It proposes excluding UwU, ITP, and BSGG tokens from performance fee and liquid backing calculations as they are not fully liquid. Additionally, a new high watermark will be established.

Provide Low Level Details: Many discussions in discord show that the old system worked better for holders. This proposal introduces a 10% performance fee calculated on the liquid backing increase instead of market price.

Holders care about stability and growth. Our old system had both. The buyback target price was increasing over time, and we had a working system. Of course, we were trading far below the calculated liquid backing price and that had consequences.

Discussions about the uwu price in the reports and as base for performance fee were the main sticking point over the months. Reading all related discussions over time I came to the conclusion that we can either set a static price for uwu or just leave it out. Creating an artificial price, a % of price at quarter end or even an average seems not only overly complicated but as well meaningless. If nobody gets paid on the value, there is little friction and long-term holders will profit when the treasury profits. As it should be. Therefore this proposal excludes uwu tokens held in our wallets from the performance fee and liquid backing calculations. The same will apply for ITP and remaining BSGG tokens.

To sum it up, the liquid backing price will include only tokens that can easily be liquidated without damaging the ecosystem. This has the disadvantage that holders will not profit from any uwu tokens unless profits are taken. But keeps us from dumping our tokens for buyback liquidity and preserves the long-term focus on the ecosystem and growth. The liquid assets in the uwu treasury will count towards liquid backing as belonging to Volta. The buyback multisig (0xd24AA7c29b00E3E39e76676e24b77EB4aF6B8347) will be excluded as well as illiquid assets held by the UwU Treasury.

This proposal supports the performance fee being paid in Volta tokens at liquid backing price. This price will be the same as the performance fee price of the quarter calculations. With the removal of UwU, ITP and BSGG tokens in our wallets from the liquid backing a new high watermark needs to be set. Going back and forth over watermarks was already a topic when CMP 3 was proposed and discussed. A complete reset of the system including the high watermark makes the most sense at this point. I therefore propose to take the liquid backing price, calculated as set in this proposal on the day this proposal passes as the basis watermark for the first quarter this proposal applies to. The proposed changes will be implemented immediately for the current and following quarters.

The management fee will be changed to 2% per year based on full total backing, distributed quarterly. Buybacks are the hot topic for any holder and a big part of the system the team setup by establishing the v3 lp. With this lp liquidity providers can set ranges. A system that supports the price and always worked well for us. Same as before there will be no protocol owned liquidity.

As a long-term holder, a stable price that gives me room to take advantage of UwU Lend to access funds and invest otherwise while holding my Volta tokens is vital. With CMP3 this changed, and buybacks stopped. I propose to reestablish the old buyback system. The team will handle buybacks that close the gap between market price and liquid backing while being profitable for holders. Setting strict rules about liquidity, buyback patterns or otherwise was proposed within the community but ultimately no consensus was reached. While good arguments exist on both sides, short term and long-term investors have different points of view. Not exhausting liquid assets and managing the system is best done by the people we voted for, so this proposal supports the original buyback system the team introduced.

To make this proposal as simple as possible and avoid often named voter confusion the points this proposal addresses and changes are listed:

The liquid backing price is going to be calculated excluding UwU tokens as well as ITP and BSGG tokens in our wallets. These will be considered as illiquid and excluded from performance fees. It will include the liquid part of UwU Lend treasury. 10% performance fee will be paid in Volta tokens. At liquid backing value. The performance fee is to be taken on the increase of liquid backing from quarter to quarter with a high watermark. This means that in the event of a negative quarter there would be no performance fee paid until the team surpasses the last high watermark performance fee was paid on. A new high watermark will be established. The liquid backing price on the day of passing of this proposal will be calculated and serve as the first high watermark for the first quarter. This proposal applies immediately from the date voted as the new fee structure for running and following quarters. The management fee will be 2% of the full total backing per year. To be distributed in stables on a quarterly basis. The team will reintroduce the previous buyback system and narrow the gap between market price and liquid backing without damaging the long-term potential of the treasury to make investments. Buybacks will be handled at the team’s discretion as done before CMP 3 and not concentrated on a specific time window but rather be done in a strategic way. This will lead back to a more stable price for holders that increases naturally with liquid backing. My reasoning for these changes is simple: CMP 3 was voted in and led to a buyback concentration of 10 days only. Holders saw a huge price decline, borrowers on UwU Lend couldn’t rely on price stability anymore and the entire system changed to short sighted price pumps in a redemption like style. While this may be good for shorter term speculators, holders like me that utilize UwU Lend to make investments with borrowed assets while holding on to my Volta investment are clearly worse off without the previous price stability. Nevertheless, just going back to the old system without changes would not accomplish nor solve the discussions that led to the writing of CMP 3. This is why I introduce several changes from the original system like excluding UwU, ITP and BSGG in our wallets from backing calculations to have a more realistic and fair structure.