Change leverage liquidity pool fee ownership to 60% to sustain protocol activity

It should be clear that this does not mean the percentage of fees holders get decreases. Holders are still getting a 50% share of fees of any protocol revenue.

NOTE THESE CHANGES ONLY APPLY TO THE LEVERAGE PROTOCOL

Let's define the current terms and what the change suggests. Currently, the fee breakdown looks like this...

25% of fees generated by the leverage trading platform are sent to LPs, allowing the volume on UniDex to happen.

75% of fees are distributed as protocol revenue, of which 1/2 of this is distributed to holders ( 37.5% of protocol revenue ).

We believe 60% of fees generated by the leverage platform should be distributed to LPs which would mean 40% go to protocol revenue ( 20% to holders 20% to team development ). Statistically, this would mean holders at face value would be earning around 45% less than the current value, but this would be misleading.

In reality, there are more numbers to show why this is a necessary change to ensure the protocol survives.

Currently, our TVL stands at $415,000, which is an 80% reduction from ATH, which has happened for many reasons.

1. Incentives to the pool are far too low to encourage staying in the pool. The opportunity cost was extremely high as pooling is a long-term engagement; however, short-term trader PnL did not outpace LP fees (USDC pool shows a good example). We've seen a 70% drop in the USDC pool TVL because the time spent in the pool is not worth the cost compared to other protocols, which pay much higher to take this risk.

2. It remains far too risky for most users without the benefit of the security these fees would allow. Poolers already expect more trader loss than gain but want security for multi-month one-sided markets.

3. Volume has dropped heavily because of lower TVL, and thus lower protocol allowed trade sizes. As TVL dropped, so did the allowed trade sizes the protocol could process to keep things healthy. Therefore there's less reason to pool without incentives that fees would generate since there's less to go around. Other protocols pay 70-90% of fees to their poolers yet do far more revenue. How is this achieved? Let's dive into that as well.

Rational:

Token holders from a revenue standpoint would make more in the long term with these changes and let's show an example.

Uniswap currently sends 100% of their platform fees to their LPs as there is no current revenue sharing model. This has allowed Uniswap to capture an extreme amount of TVL and volume despite severely lacking features. Sushiswap sends 75% of its platform fees to LPs for a similar comparison, and 25% goes to sushi stakers. This has allowed them to keep large TVL and thus volume, providing a reason for newcomers to continue to LP ( a positive feedback loop ). But still gives room for token protocol revenue and maintains a healthy relationship between poolers. Let's also be clear that the sushi token contributes nothing of value to the protocol as it is not needed to help volume grow or allow more volume to the protocol. However, liquidity providers are okay with this because the split is healthy and not seen as greedy. This revenue going to holders can convince more people to try the protocol through word of mouth, which benefits LPs.

However, if we reverse the roles here where 25% gets sent to LPs and 75% is sent to sushi stakers, you would get a different picture. Suddenly there's no reason to LP on Sushiswap. Your return will always be higher on another platform & even if you stay in the LP, others will likely jump ship and thus cause less volume on the platform due to worse entry and exit prices for traders. Sound familiar?

By increasing the protocol fees distributed to leverage poolers, we would allow TVL to grow once again, go faster than before, and allow larger trade sizes and new products. We are also saying these things are not possible with the current fee structure for poolers.

Important takeaway

Since we would theoretically be doing more volume and assuming our TVL increases by 2x because of these changes. Our maximum trade volume would also be increasing by around 4-5x respectively under full load, which would mean more net revenue at the end of the day for token holders while keeping things healthy for poolers.

Our current model paints a picture like this Example A ( current model assuming full utilization ) $50 TVL $100 in volume which extracts $37.5 in holder revenue

Example B ( proposed assuming full utilization ) $100 TVL $200 in volume which extracts $40 in holder revenue

(140% increase in rewards for poolers gives more reason to pool. We use only a 100% increase in TVL for more conservative numbers. This increase in TVL allows double the volume to be processed in USD, which holders will net $40. This number could also be theoretically much higher now that there is more TVL which can allow more frequent trades, so its possible to see $45 or $50)

Our stats page found here (https://leverage.unidex.exchange/#/stats) outlines the total PnL, Volume, and other core metrics that will be necessary to make an informed judgment on the proposal.