Implement interest-based “utilization fee” to replace existing “exercise fee” on pool capital.

Abstract

This proposal is to gauge sentiment/support for replacing the existing 3% “exercise fee” with a new 2.5% interest-based “utilization fee”, as part of the first round of PREMIA tokenomics upgrades. This fee will continue to be distributed to PREMIA stakers, as with existing fees, to align the long-term incentives of LPs and protocol supporters.

The utilization fee would only be charged upon settlement of positions, as a 2.5% interest fee determined by the amount of capital and the length of time the capital was utilized, as opposed to the current standard 3% nominal amount.

Specification and Implementation

Currently the protocol charges a 3% nominal fee on the exercised value of an option, upon settlement for facilitating the service. Upon replacement of this fee, the protocol will no longer charge a nominal fee on settlement, rather, the protocol will now charge a 2.5% interest-based fee, determined by the amount of capital and the length of time the position was held open.

As protocol stakers receive the majority (currently 80%) of protocol fees, this fee will ensure that long-term supporters of the protocol are rewarded for providing and incentivizing utilization of pool capital. In addition to this, with the introduction of further tokenomics upgrades (such as vePREMIA), this fee becomes more important as it ensures protocol stakers are highly incentivized to direct Liquidity Mining yields to the pools with the highest potential utilization returns. This fee ensures the long-term profitability of the protocol, so long as the protocol is able to garner enough pool capital and utilization of that capital.

Clarification

Currently the pool charges a 3% nominal “exercise fee” upon settlement of option positions. It is proposed to replace this fee with a 2.5% interest-based “utilization-fee”, to align long-term incentives of protocol users and LPs.

• Vote in Favor/In Support of: Replacing exercise fee with utilization fee

• Vote Against/In Opposition of: Replacing exercise fee with utilization fee