1. Executive Summary

Pear Protocol has reached a critical inflection point. No longer an early-stage experiment, Pear is now a live, high-performance order management system for pair and basket trading. With a consistent ~$5M in daily notional volume, the protocol has established a clear product-market fit.

Since TGE (27 September 2024), the protocol has distributed over 134.64 ETH (~$393k–$500k) to stakers under an 80/20 ETH-denominated revenue share model. While this model successfully bootstrapped early utility, it is no longer optimal for long-term value accrual.

This proposal recommends transitioning protocol revenues to a 70/30 split:

70% Allocation: Weekly Buybacks, Permanent Burns, and Liquidity Support. **30% Allocation: **Treasury Reserve for expansion through 2026.

The Strategic Objectives:

• Direct Correlation: Protocol usage must directly support the $PEAR price.
• Structural Demand: The DAO becomes the structural marginal buyer.
• Scarcity: Revenue compounds into permanent supply reduction.
• Utility-First Staking: Transitioning from "passive yield" to "gated benefits" (Trading fee discounts, Agent Pear signals, LLM tooling, and high-performance vaults).

2. The Case for Change: Why Now?

Pear has matured into a seamless execution layer. Users rely on the protocol for optimized pair execution and automated risk management. At this scale, tokenomics must shift from incentivization to capital allocation.

The core question for the DAO is: Does protocol revenue strengthen the $PEAR token, or does it bypass it?

The Failure of Prior Models

Phase 1 (Direct Yield): Models used by GMX or Vertex often lead to immediate extraction. Capital exits the ecosystem, and the native token lacks a structural buyer during market drawdowns.

Phase 2 (Buyback & Redistribute): This merely delays sell pressure. Stakers eventually monetize emissions, preventing a persistent floor from forming.

The Distinction: Buyback & Redistribute is a yield model; Buyback & Burn is a capital structure model. Only the latter creates durable scarcity.

3. Opportunity Cost of ETH Distributions

To date, 134.64 ETH has been distributed. While this rewarded supporters, $PEAR received no structural benefit from this $500k outflow. Had this value been directed toward $PEAR:

Circulating supply would be materially lower. The price chart would natively reflect protocol growth. The protocol would have established a stronger base for future CEX listings.

4. Revenue & Buyback Projections

The following scenarios assume a conservative blended effective fee of 0.04% (4 bps), accounting for all existing discounts and rebates.

*Mechanics of the 70% Allocation *The DAO will dynamically deploy these funds to:

1. Weekly on-market $PEAR buybacks.
2. Permanent token burns (removing supply from the curve).
3. Liquidity Provision: Strengthening $PEAR pools to ensure deep liquidity as the protocol scales.

5. Mathematical Impact: AMM Reflexivity

Using the constant-product formula x⋅y=k, we can model the mechanical price impact of sustained buy pressure.

Assumptions: Initial Liquidity: $1.08M (50/50 split). y (USDC Reserve) = $540,000 | x ($PEAR Reserve) = 540,000.

For modelling purposes only, assume Initial Price (P0​) = $1.00.

Stakeholders are encouraged to model various outcomes and we can provide additional tools to do so in the discord governance section.

6. Evolution of Staking: Access-Based Utility

To prevent "free-riding," this proposal shifts staking utility from passive inflation to exclusive access. Staked $PEAR will serve as the gateway to:

High-Performance Vaults: Exclusive deposit rights into automated, strategy-led vaults. Agent Pear AI: Access to proprietary signals and LLM-driven trading insights. Fee Optimization: Maintaining the existing tiered discount and rebate structure for active traders.

7. Proposal Options

Option A: Transition to Buyback, Burn & Liquidity (Recommended) Sunset ETH distributions. Implement 70/30 revenue split (Buyback & Burn / Treasury). Pivot staking to access-based utility.

Option B: Status Quo Maintain the 80/20 ETH distribution model.

8. Conclusion

Pear Protocol generates real value. PIP-3 ensures that value is captured within the $PEAR ecosystem rather than leaked to the broader market. By aligning token scarcity with protocol usage, we create a reflexive loop that rewards long-term holders and strengthens the protocol's balance sheet.

The core team recommends Option A.

Discussion

Ongoing discussion and Q&A will take place in the Pear Discord governance forum. Stakeholders are encouraged to provide input.