LIP👊4: How to use the Clawback funds ?

1. Proposal Number & Name LIP-4: How to use the Clawback funds:

2. Keywords Unclaimed LUCHA Tokens, Allocations Clawback

3. Simple Summary Decide where to send & how to allocate the Lucha received from the Clawback.

4. Context The discussion around LIP-3 started around mid December 2022 and continued before being voted around mid February 2023.

The «1 month claim deadline» has been voted as result with 1139 Luchadores (60.91%), Luchadores holders have until Feb 23 to claim the yield from year 1.

This proposal will focus on where to send the clawback funds (either to treasury.luchadores, to the rewards.luchadores.eth or to a burn address), as well as how to use these funds.

5. Rationale:

The Current Lucha DAO treasury is composed of the following assets.

Single assets:

• 7868 MATIC (Team Compensation from Pinatas sold)
• 116732 LUCHA (Team Compensation from Pinatas sold)
• 1761 WMATIC (Treasury from MUST sold, can be LP)

Protocol owned liquidity:

• WMATIC-LUCHA Cometh LP: 6,449 WMATIC + 31,0515 LUCHA
• LUCHA-MUST Cometh LP: 91,590 LUCHA + 147 MUST
• B-80LUCHA-20WMATIC Balancer LP: 2,937 WMATIC + 573,500 LUCHA

Retrieving up to 2.38M Lucha tokens from year 1 will offset 38.5% of year 2 yield cost and can be used for several expenses detailed below:

A) Improve the Protocol Owned Liquidity strategy on Balancer (POL)

At the time of writing, the polygon pool B-80LUCHA-20WMATIC is already created, and the DAO multisig holds 80% of the TVL (17K over 21.3K$). The goal of this proposal is to update the POL positions to mostly focus on Balancer by minting unclaimed tokens to pair it with MATIC which will increase the POL & propose a gauge eligibility to earn BAL rewards.

Considering the low amount of WMATIC available, we can consider withdraw the LUCHA-WMATIC liquidity, updating the available amounts of LUCHA to 2.69M (2.38M + 0.31M) and the amount of WMATIC to 8.21K WMATIC (6.45K + 1.76K). The LUCHA MUST LP could be kept for arbitrage purposes.

Selecting this option would send the funds to treasury.luchadores.eth and would require several steps:

• Mint up to 2.38M LUCHA Unclaimed & Send to treasury
• Withdraw 100% of the WMATIC-LUCHA Cometh LP
• Add All WMATIC & LUCHA equivalent available
• Create a Balancer proposal to add the Gauge
• Create vote incentives with the remaining LUCHA

This option would currently create the following position:

8.21K WMATIC + 1.6M LUCHA (will update depending on prices) for a total LP worth 46.8K$. Additionally, the DAO already owns 16.6K$, bringing the Balancer POL to 63.4K$.

Additionally, the Luchadores DAO already will keep 4.3k$ worth of POL on ComethSwap,

With the current prices and WMATIC holdings, this option would leave 1.09M LUCHA available, some of it can be used to create vote incentives until the DAO acquired enough voting power on veBAL to sustain its own emission and the remaining can be progressively added in the pool as WMATIC holdings increase.

Minting unclaimed Lucha and adding in liquidity would have limited direct impact on the price, but will double the market cap and quintuple the liquidity. This would also result in the DAO accumulating some veBAL voting power, that will be used to redirect more BAL emission on the LUCHA-WMATIC gauge, as most of the liquidity will be owned by the DAO.

B) Create various community incentives:

The yield 2 already started for Luchadores holders, which will reward over one year. The LUCHA budget could be used to create new incentives such as Liga Rewards, Tournament Rewards, Community prizes and contests etc This option would send the funds to treasury.luchadores.eth**. **

C) Increase the player's dedicated supply:

Add up to 2.38M Lucha to be distributed in game through different mechanisms once the full supply is minted. This option would send the funds to rewards.luchadores.eth.

D) Reduce the $LUCHA total supply:

Burn up to 2.38M tokens to update the total supply up to 97.6M $LUCHA tokens instead of 100M. This option would send the funds to a burn address.

6. Means: Dev work: Mint LUCHA unclaimed tokens and, deploy the Balancer gauge if Option A is voted.

7. Metrics $LUCHA total supply is 100,000,000. The first year yield represents 6.18% of the total supply : 6,180,000.

As of the time of the proposal post (16/03/2023), the circulating supply (meaning the already claimed $LUCHA) is 4,063,373 which is 33.71% of the claimable yield from years 1 & 2. .

8. Forward-thinking considerations

• Vote on the LIP 4 about the Clawback destination address and utility

9. Implementation overview This proposal will be discussed on the discord for 4 days and voted between March 16 and 23, to be ready once the Clawback deadline is finished.** **

10. Voting options A - POL strategy B - Community Incentives C - Increase the players rewards D - Burn to reduce the total supply E - Abstain