At this point in time we have a wave of requests of protocols asking for a part of the community pool to strengthen their service. We have seen in the very recent part:
The proposal from Stride has passed, the one from Eris is rejected and currently the proposal from Levana seems to be passing.
With another 70 million OSMO in the community pool (and growing on a day to day basis, looking at the fact that 5% of the daily emissions are going to the community pool) we have a need of a strategy how to work with this enormous pool of funds. We need methods to make sure it doesn’t end up in “who-do-I-like-most?”, but follows a process which judges based on “facts” and generates reproducable outcomes.
We could ofcourse also choose to burn the CP, then we get rid of this problem in the first place.
I think that we should be using the Community pool Taker fee revenue to establish protocol liquidity with this OSMO, which
Increases the circulating OSMO supply with no dilution
Diminishes the proportion of OSMO supply in the community pool - although may take a while.
Provides rent-free liquidity that in turn facilitates more volume to generate more taker fees.
I think burning is pointless as long as we are judicious in the spending of it so as to not cause undue dilution of circulating supply without a targetted gain.
Protocol size vs funding size is certainly a big one for me. My main issue with both of the LST spends was the size vs the protocol size. stOSMO being 2x the value and ampOSMO not having any usage boosted. Levana’s on the other hand was smaller than the amount deposited to the Protocol and potentially earns yield in return that does not originate from the existing emissions schedule.
Is the Taker fee also going to the CP?
I thought it went to OSMO stakers? If not, then that would be open for debate imo. Why would we even further want to enlarge the CP where we already know it is oversized?
Furthermore, since when does liquidity generate volume? We can have gazillion dollars of liquidity but no volume. It is really time we need to learn to see that difference. Liquidity is good for low slippage, but nothing more than that. For the rest it is a complete vanity metric which does not say anything.
Volume is all the more important, since that hints on usage (where ofcourse we need to filter out wash trading if any).
Can I also summarize / deduct from your post that the list should be expanded with “protocol size vs funding size” as important element as well as “what profit does Osmosis have with funding the protocol?” ?
Thank you for starting this discussion. I agree: we should increase the standards for any funding proposal. Who’s asking should be able to build a business case for the OSMO community or provide clear, measurable objectives and maximum transparency for the community. Any fund sent somewhere could be an opportunity cost if not sent elsewhere.