Authors

Hourglass Core Team

Abstract

This proposal recommends pursuing one of four strategies to utilize Hourglass’s accrued veFXS yield to bolster the pitchFXS to FXS peg:

1. Buyback with POL
2. Buyback and Burn
3. Combination of 1) and 2)
4. Incentivize gauge

Background and Motivation

This proposal brings forth four options to utilize the protocol’s accrued veFXS yield to support parity with pitchFXS, introduced by members of the Hourglass community.

Under the Buyback with POL Strategy, Hourglass will use its veFXS yield to accrue Protocol Owned Liquidity with pitchFXS. In other words, the protocol would use its yield to buy it pitchFXS in the pitchFXS/Frax pool, or the pitchFXS/FXS pool (whichever is more efficient), and then providing protocol-owned liquidity back into the pool. This allows Hourglass to increase its voting power for pitchFXS power, flywheel its yield, and provide important support for the peg. Moreover, it opens the possibility of allowing Hourglass to dynamically buy, sell, or burn portions of its POL reserves depending on pitchFXS’ peg health and the community’s desires.

Under the Buyback and Burn without POL Strategy, Hourglass will use its veFXS yield to buy back pitchFXS and burn it, thus reducing circulating supply and supporting the peg price. This strategy ensures that pitchFXS moves toward equilibrium, as each unit of pitchFXS bought and burned will simultaneously decrease supply and increase demand. It also increases the governance power of pitchFXS holders, since each pitchFXS holder would control a proportionally larger quantity of veFXS.

Under the Combination Strategy, Hourglass will execute strategy 1), buyback and POL, until the community has decided that it’s earned enough POL to flywheel the token growth. At that point, the protocol will transition to strategy 2, buyback and burn.

Under the Incentivize Gauge Strategy, Hourglass will periodically use its veFXS yield to incentivize the Fraxswap V2 pitchFXS/FXS gauge. This strategy doesn’t do anything to directly support the pitchFXS peg, but it does incentivize further liquidity in the pool, which indirectly increases demand for the token. Another benefit of this strategy is that it distributes the protocol’s accrued veFXS yield to governance participants who vote for the pool.

Proposal

Option 1: Buyback and Burn with POL

Option 2: Buyback and Burn without POL

Option 3: Combination of 1 and 2

Option 4: Incentivize Gauge