[NIP-41] NOTE Token Burn

Summary Proposal to implement buy and burn of NOTE Tokens

Context NOTE tokens are emitted from the treasury to reward nToken holders for providing liquidity in vaults and its utility limited to governance and LP staking.

Currently a portion of the treasury funds are added to the Balancer NOTE/WETH pool and sNOTE received is then distributed to the liquidity providers as rewards.

The LP rewards started out in Q2 2022 however since then we have seen an overall decline in the market impacting the price significantly. During this time the IL suffered by LPs would have been higher then the rewards received. The NOTE token holders involved actively in the governance have also been impacted severely.

The number of NOTE tokens in the Balancer pool has increased from 3mn(a few days after the start of LP) to 14.9mn as of today which is currently 33% of the total circulating supply.

The current mechanism of reinvestment of treasury funds into the pool strengthens it temporarily. The sNOTE received can eventually be converted to NOTE/ETH and then dumped into the market. This entire process becomes a zero sum game and adds no real value to the eco system.

Proposal A portion of the funds that is being rewarded to stakers should be re-allocated to buy and burn the NOTE token. For e.g. if earlier 1 ETH was being provided as rewards to stakers every week and if community agrees to utilize 50% of rewards for buy and burn then only 0.5 ETH should be rewarded to stakers and the remaining 0.5 ETH should be used buy and burn NOTE tokens from the pool.

Advantages

• Adds deflationary aspect to the tokenomics.
• Incentivizes holders of the NOTE actively involved in the governance.
• Incentivizes long term stakers who have witnessed a significant IL.

Disadvantages

• The rewards to LP would be reduced by 50%
• Affect the NOTE liquidity if LPs withdraw due to lower rewards

Additional Details Duration - Buy & Burn is done using funds from reinvestment program . Hence , till the time reinvestment program is active the buy and burn should be active as well.

Timing & Mode of Execution - Team to decide based on minimum dev work as they see fit

Options - 4 options to be considered for voting. The template of following options - % reinvestment funds to be used for buy & burn , % reinvestment funds to be used for staking

• 75% Buy & Burn , 25% Reward to Stakers
• 50% Buy & Burn , 50% Reward to Stakers
• 25% Buy & Burn , 75% Reward to Stakers
• 0% Buy & Burn , 100% Reward to Stakers (For those who want to vote but interested in maintaining status quo)