🔗 TIP-18 Ideation and Discussion (this proposal was drafted by community member @villageId)

Summary

Thorswap is built around revenue sharing and its core token $THOR.

$THOR should not only act as a claim on revenue but also capture part of the revenue in the form of market cap.

Token holders and stakers buy $THOR not only for daily rewards and reduced trading fees but also as a bet on future scarcity and price appreciation.

With historic data points, we can see there is a clear disconnect between the revenue being shared and the token not performing well long-term.

Paying all the revenue (75%) to stakers does not seem to motivate new buyers or encourage further exposure to $THOR.

Proposal

Redirect 20% of all revenue generated from Thorswap and use it for direct $THOR buybacks.

• 25% Developers
• 20% Buyback
• 55% Revenue share with stakers

Thorswap team will not lose any share of revenue. Stakers ($vTHOR/uTHOR/yTHOR) will sacrifice some of their short-term yield, proportionally split between all staking pools. Stakers will direct this revenue flow toward market buys of $THOR. $THOR will be deposited into burn address 0x0

Benefits

Potential demand increase for $THOR. Potential marketing opportunity with buybacks getting spotlight. Potential volume and revenue increase for the TS team and $THOR stakers. Potential new speculatory angle.

Costs

Reduction in APY (around ~6% APY across all staking $vTHOR/uTHOR/yTHOR pools). Slightly increased complexity in revenue share payment procedure. Will require marketing effort to help with visibility

Rationale

Buybacks are arguably a major DeFi use case for most revenue-generating projects. Thorswap has generated more than $8M in pure revenue for $THOR stakers while retaining only a 7.3M market cap.

Thorswap's P/E(price vs earnings) is under 1. With Thorswap's liquidity profile of 1:50, that $8M revenue could generate a market cap floor around 8M x 50 = 400M market cap floor without any speculative outside buy pressure.

That makes Thorswap's $THOR value capture 7.3/400 = 1.8%.

Approximately 98% of revenue got bypassed from $THOR holders or got captured by $THOR sellers. If we had run a 20% buyback since the beginning -> 8M / 5 = 1.6M x 50 = 80M market cap floor. This proposal is to radically flip the script and start investing in our own valuation.

Technical Details

villageId will be working with the TS dev team to create the contract and scripts, and to design the redistribution flow. All contracts will be open-source and simple enough for anyone to understand the flows. The TS team will be responsible for the revenue share split and deposits to the 0x0 burn address. A testing run will be announced.

FAQ

• Why 20%? Why not start with a smaller figure? 20% should be enough to see an impact in the short to medium term. 20% allows us to still keep substantial revenue share for stakers, while we can see the impact much sooner.

• Why change token economics now? The main reason for the change is the obvious disconnect between the $THOR token price and the revenue Thorswap generates. While expectations of $thor demand were based on revenue sharing, they did not come to fruition as good enough incentive for long-term demand. Buybacks are a way to ensure revenue does not bypass $THOR and actually captures value over time.

• Why don't we use $THOR later, for example, for further funding? Tokens are a claim on $THOR market liquidity. Anyone buying the token is essentially exchanging their liquidity for $THOR. Allowing $THOR tokens to get back on the market puts pressure on an already supply-heavy market. We need to attract more liquidity into the $THOR market and the current token configuration. Attracting more attention to the $THOR token gives us marketing opportunities, attracts more potential volume and revenue. More revenue translates into better funding, while just reusing tokens and selling them into the same static liquidity only extracts value from current holders.

• Where is the restake option? While restake option is technically feasible, it does not bring enough benefits to justify feature. Buyback + burn will work essentially the same, makes proposal simple and lean.

• I am a yTHOR staker; what is the upside for me? While yTHOR stakers are not enjoying the potential upside of $THOR, they are going to be exposed to potential increases in revenue coming from $THOR PA. Rising in CMC ranks brings attention to the project and more potential rewards.

• Why should I care about $THOR market cap? I want maximum yield; I don't really care about $THOR price! From a rational standpoint, every $THOR token holder should care about $THOR market valuation, unless they got tokens for free or extremely cheap. In order to get exposure to revenue share, a $THOR buyer has to keep holding a financially risky asset. This risk has to be outweighed by possible rewards. Long story short, if a buyer gets $100k of $THOR, stakes it for $u/vTHOR to get 20-30% yearly yield, they definitely do not want to see $THOR falling 90% in meantime. A small sacrifice in daily yield will help everyone in Thorswap ecosystem mid-long term.

• We already tried token burning; how is this different? Previously, Thorswap ran emission burns Essentially, stash of $THOR was reserved for future inflation and other incentives. This stash was never really circulating, and burning from it did not really do anything for market $THOR. Buybacks are fundamentally different, accessing real supply and real market.