EGP 22 - vbCLEAR Season 1

Executive Summary This proposal details the parameters for launching Everclear’s token system on December 6, 2024. Key elements include:

Season 1 duration: 3 months Total Incentives: 6.25M NEXT incentive 4.5M NEXT token incentive for solvers 1.75M NEXT token incentive for stakers or a similar amount in ETH/stables Note: all unused tokens will be returned to the DAO

Eligibility All NEXT stakers. All solvers, or users of Everclear who fill intents and contribute to the protocol’s volume growth.

vbNEXT and Governance: vbNEXT and vesting tokens can only participate in governance through delegation as outlined in Vending Machine’s RFC.

NEXT to CLEAR Migration: Token migration from NEXT to CLEAR, to complement the new Everclear protocol.

Rationale The initial Vending Machine RFC outlined Everclear’s high-level token system requirements, and the vote has now passed. As part of this, Vending Machine proposed the governance system module 3, which has since been discussed on the forum.

One key outstanding task is determining the precise system parameters necessary to begin implementation, as detailed in a previous forum post here. Since this is a new system, careful testing and piloting are crucial.

To that end, this proposal recommends launching a 3-month pilot program, dubbed Season 1, to closely monitor results and provide an opportunity to fine-tune the parameters at the season’s conclusion.

Specification There are two primary types of participants of the system:

1. NEXT holders
2. Solvers on chains and other users (eg. arbitrageurs, chains)

Solvers Rewards This proposal introduces dynamic emissions, calibrated to the protocol’s volume generated during each epoch:

750k NEXT per epoch (every 2 weeks) is the maximum incentive $250M volume per epoch is the volume’s cap beyond which the incentive pool per epoch won’t increase

The emissions total would be the equivalent of achieving 3+ bps in incentives for all user volume.

Minimum reward per epoch is to be determined (requires a few days of further research).

Total incentive pool per Season 1 (3 months) is 4.5M NEXT NEXT Staking Rewards NEXT holders will be willing to stake and receive vbNEXT for two main reasons:

They can vote where to direct the solver emissions They can receive the share of protocol revenues In the early stages of the protocol, revenue will be modest as the system scales and network effects take hold. Here’s a quick breakdown:

With $100-500M in monthly volume and a 0.5bps net protocol fee, revenues would range from $5-25k per month. This is a solid start, but the protocol will need time—approximately a year—to mature and scale before generating revenues significant enough to support sustainable staking returns.

To address this, the proposal recommends providing a NEXT incentive totaling 1.75M NEXT over a 3-month period. This is necessary to kick-start the system and ensure robust participation in voting. Which means:

20% APR if 35M NEXT were staked in total 15% APR if 52.5 NEXT were staked in total 10% APR if 70M NEXT were staked in total

Incentive paid is the vbNEXT / locked NEXT or in ETH/stables if any were to occur (protocol fees or some WETH from the Arrakis ARB that potentially can be deployed for staking incentives given low utilization of the vault).

vbNEXT and Governance This RFC proposes enabling vbNEXT and vesting tokens to participate in governance through delegation.

The introduction of the vote-bonding mechanism via vbNEXT tokens seeks to enhance governance participation and better align incentives with the protocol’s goals. This new system retains the flexibility of delegation while increasing the responsibilities of delegates.

Key features of the proposed governance structure:

Implementation of a vote-bonding system, allowing users to lock NEXT tokens in exchange for vbNEXT.

Governance participation for vbNEXT and vesting tokens will be possible exclusively through delegation.

A likely increase in the proportion of tokens being delegated, raising the importance of delegate roles.

While these changes aim to strengthen the governance system, they introduce new challenges, such as heightened responsibilities for delegates and the need for token holders to understand the implications of different token states. As the community adopts these changes, ongoing evaluation and potential adjustments will be critical to ensuring the governance system remains effective and aligned with the protocol’s long-term vision.

NEXT-CLEAR Migration After a thorough investigation, it was determined that the migration is feasible, though it will involve some operational overhead.

Potential Benefits of Migration

1. Aligned Brand Identity: Simplifies the association of the CLEAR token with the newly branded Everclear and its clearing and settlement product.

2. Eliminates Brand Confusion: NEXT is closely tied to Connext and may still be perceived as a bridge token. Long-time followers of Connext’s multiple evolutions might carry brand debt. New market participants, aware of Everclear through post-launch growth campaigns, may be unfamiliar with Connext’s history. Searching for Everclear’s associated token could require additional research.

3. Alignment with New Token Design: Launching the new NEXT token design alongside a ticker upgrade to CLEAR would likely maximize impact.

Legacy content regarding NEXT’s previous token design could cause confusion with the updated tokenomics tied to Everclear’s clearing protocol.

Migration Overview Implement a lockbox migration. Provide a user interface and clear instructions for 1:1 token migration. Only 26% of holders on Ethereum Mainnet will need to take action; others will not. Identify and update all major data feeds and venues where CLEAR will be quoted. Reiterate the upcoming change and pin messages across communication channels, including X, Telegram, and Discord.

The benefits of migrating from NEXT to CLEAR appear to outweigh the operational complexities. Moreover, delaying the migration until after the December 6th unlocks could increase complexity, as a larger circulating supply would require more oversight and manual intervention. Therefore, this RFC proposes executing the token migration now.

Steps to Implement Token system & Parametrization The smart contracts have been developed and are currently under audit with Creed DAO. The system is expected to go live before December 6th 2024.

vbNEXT and Governance vbNEXT and vesting tokens can only participate in governance through delegation as outlined in Vending Machine’s RFC 3 and a custom script on snapshot will make this possible.

NEXT-CLEAR Migration Implement the lockbox migration. This will include a third-party audit to review the lockbox migration code. Creed DAO will be asked to conduct this audit as well. Provide the UI and instructions for 1:1 migration.

Identify and update all major data feeds and venues where CLEAR will be quoted. Reiterate the upcoming change and pin messages across communication channels, including X, Telegram, and Discord.

Overall Costs

Incentives: This proposal is seeking 6,250,000 NEXT to fund the first three months of incentives.

4.5M NEXT token incentive for solvers. 1.75M NEXT token incentive for stakers. All tokens not used for incentives will be returned to the DAO.

Incentive funds will be sent to newly created multisig: 0xf617C72ae242AFc7cD92BF2F1875fE4Abd9B1A03 Signers are: MInistro, Stefan and Veil as delegates, Khalil as Foundation representative and James as Labs representative. Threshold is 4/5.

Development costs & audits: development costs were already covered by the Foundation and any related audits will be conducted by Creed DAO which was funded by the recently passed.