SGP 6 - Update of Fee Collection and Distribution

Summary

This proposal aims to enhance the allocation of Spectra’s pool fees by directing them to veSPECTRA voters, discontinuing bribe fees, and allowing the DAO to collect YT fees in ETH.

Context

Following the approval of SGP4, the Spectra Protocol began accumulating yield token (YT) fees, while trading fees had been in place since the protocol's launch. Currently, the DAO collects the 3% YT fee, while trading fees are distributed with 50% going to LPs and 50% to the Curve DAO due to Spectra’s reliance on Curve pools.

With the successful migration progression from APW to SPECTRA and the transition toward a ve(3,3) model, it is now the right time to refine the mechanics of fee distribution to better align with the protocol’s incentives and growth strategy.

Current Fee Structure and Proposed Changes

• Pool Fees: Currently, 50% of pool fees are directed to LPs, with the remaining 50% allocated to the Curve DAO. Under the new model, 60% of fees will go to veSPECTRA voters (of the next voting cycle, or back to LPs if no gauge is created for that pool), 20% to LPs, and 20% to the Curve DAO. Fees will be converted to ETH before being redirected to voters and Curve DAO.This shift aligns with the ve(3,3) model by reinforcing governance participation while continuing to support liquidity providers and maintaining the Curve partnership. Importantly, Curve team approved the reduction in their share of pool fees, recognizing the need for Spectra to strengthen its ecosystem and accelerate growth.*

• YT Fees: The current 3% YT fee is collected in various tokens and held by the DAO. This proposal keeps the 3% fee but swaps it to ETH before collecting it in the Spectra DAO treasury, reducing inefficiencies and improving sustainability.**

• Bribe Fees: As all bribes already ultimately go to veSPECTRA holders, we believe that removing the bribe fee would be more beneficial overall, allowing for a more competitive bribe market, which should stimulate more active participation and higher voter engagement.

*Fee redirection and redistribution will occur once the collected fees are substantial enough to justify the operational costs, including network fees, gas costs for swapping, and bridging expenses, ensuring efficient distribution

**YT fees are not collected in real time but only when users claim their yield. Given their lower proportional revenue and misalignment with voting periods, these fees will be progressively accumulated by the DAO to avoid unnecessary recurring operations and excessive transaction costs.

Rationale

1. Strengthening Governance Incentives

• Allocating a larger share of pool fees to veSPECTRA voters enhances governance participation and aligns incentives with long-term protocol sustainability.
• LPs will still receive a share of pool fees while benefiting from improved capital efficiency in Spectra’s broader incentive structure.

2. Optimizing Fee Allocation for Growth

• Adjusting the Curve DAO’s share of fees from 50% to 20% was made possible with their approval, acknowledging that this change supports Spectra’s expansion while maintaining the ongoing collaboration.
• The updated allocation structure supports Spectra’s long-term expansion and incentivization strategy.

3. Enhancing Protocol Efficiency

• Using ETH, the most liquid asset on most networks, to streamline YT fee collection reduces operational costs while maintaining consistent revenue flow.
• Removing bribe fees fosters a more competitive and engaged governance process, benefiting overall voter participation.

Proposal

We propose to update the fee distribution as follows:

• Pool Fees: 60% to veSPECTRA voters, 20% to LPs, 20% to Curve DAO. Only the fees for veSPECTRA voters and Curve DAO will be swapped to ETH for easier distribution.YT Fees: Maintain the 3% fee, swap to ETH, and collect it in the Spectra DAO treasury.
• Bribe Fees: Remove entirely.

This proposal refines Spectra’s fee distribution to reinforce governance participation, optimize long-term incentives, and enhance integration with Curve while improving overall operational efficiency.