Proposal: Increase veMUX’s Share of Protocol Income & Reduce POL’s Share

Background

Upon genesis, the Protocol-Owned-Liquidity (POL) setup was designed to ensure MUX won't fully rely on external LPs and that the native pool can gradually become self-sufficient. Also, to ensure veMUX, the governance token holders, are bound with the protocol growth, veMUX's income share is calculated based on POR using the following formula:

• Total Protocol Income × 70% × POR: Allocate for veMUX holders (in ETH)

During the first year of MUX's runtime, the POL has grown from $6.57M to $9.9M (after deducting $400K first year marketing budget, $1.9M second year development & market budget and bearing $120K Multichain & Fantom black swan incidents losses for all LPs); however, the total MUXLP pool size also increased from $6.57M to $49.3M. Although the total protocol income has been over $10M, veMUX holders' share has been decreasing due to increased external LPs.

To ensure veMUX holders' interests are aligned with MUX for the long term, after learning community feedback, MUX contributors looked into directions to increase veMUX holders' income share while still allowing POL to grow and serve its crucial functions:

• Serves as the foundation of the MUXLP pool to support trading demands.
• Funds annual development and marketing activities
• Binds with the governance token, veMUX's share of income.
• Serves as the safety fund to protect all LPs during black swan incidents.

Proposal

Based on community discussions and careful evaluations, MUX contributors propose to update the protocol income distribution as follows:

From

• The protocol income collected from trading fees will be allocated as follows:
• Total Protocol Income × 70% × POR: Allocate for veMUX holders (in ETH)
  • POR is the rate of Protocol Owned Liquidity
• Total Protocol Income × 70% × (1 - POR): Allocate for MUXLP stakers (in ETH)
• Total Protocol Income × 30%: Purchase MUXLP and add it as protocol-owned liquidity

To

• The protocol income collected from trading fees will be allocated as follows:
• Total Protocol Income × (70% × POR + 15%): Allocate for veMUX holders (in ETH)
  • POR is the rate of Protocol Owned Liquidity
• Total Protocol Income × 70% × (1 - POR): Allocate for MUXLP stakers (in ETH)
• Total Protocol Income × 15%: Purchase MUXLP and add it as protocol-owned liquidity

Using the existing formula, veMUX holders’ share is around 15% and is entirely dependent on POR. After the change, the veMUX holders' share will be increased to approximately 30% and will be less reliant on POR. This change aims to allow veMUX holders to earn a higher share of income while still enabling the POL to grow and serve its crucial functionalities.