What is MVL Treasury, and why do we need it?
Treasury is an on-chain fund pool controlled by the project team or DAO and consists of single or multiple accounts. Most DApp projects or DeFi protocols have operated and possessed their own Treasury. Treasury funds are obtained from service usage fees, such as the DEX transaction fees or bridge fees.
Treasury funds are usually used for the following purposes:
- Formation of the initial token liquidity pool
- Rewards for ecosystem participants
- Various expenses are required for project operations
- Token buyback or burn
Creating and operating a separate account called Treasury is to achieve this purpose of managing funds reasonably and transparently disclosing sources and expenditure details.
Cases of Treasury
The case explanation of the specific uses of Treasury with examples from other projects.
The Pancakeswap is the most representative Decentralized Exchange (DEX) protocol of the BNB chain. The source of Pancakeswap’s Treasury funds is fees for using various services of Pancakeswap, such as token swap, lottery, and prediction market. These collected funds are used as buyback or burning the $CAKE token for the smooth operation of the token economy and used to cover the cost of operating the protocol. These costs include labor, audit and other maintenance costs. Treasury is also used as a source of rewards returned to users, such as prizes in the prediction market or bug bounties.
Frax Finance is a protocol that issues $FRAX, a hybrid stablecoin that combines collateral assets and algorithmic stablecoins, with a market capitalization of approximately $2.7 billion, the sixth-largest of all stablecoins. Frax Finance’s Treasury is allocated 5% of the total issuance of $FXS, a governance token, and a fee is accrued to Treasury for issuing or burning $FRAX. Treasury funds are used to supply AMM initial liquidity, partner with exchanges and DeFi projects, compensate developers, and cover audit costs and bug bounty.
STEPN is a Move-to-Earn project where tokens are mined when you run with sneakers NFTs. The STEPN team reserves the fees generated from the NFT marketplace in a separate account to cover operating expenses. In STEPN’s Treasury, fees from NFT upgrades or new NFT minting processes are accumulated. Unusually, some part of fund collected in the STEPN Treasury is donated to reduce carbon emissions by the votes of the $GMT holders, the governance tokens.
C2X is a blockchain gaming platform being built by Com2us and utilizes Treasury to operate an ecosystem consisting of C2X tokens and game tokens. 5% of the total issuance of C2X tokens is allocated to Treasury, and fees incurred within the ecosystem will be reserved in Treasury in the future. The tokens collected in Treasury are used for the stable operation of the C2X ecosystem, such as supplying initial token liquidity and providing funds to stabilize the economy for each game.
As such, the purpose of the Treasury varies somewhat depending on the nature of the project, and it is sometimes used for ecosystem revitalization or the public interest, or it is used as a source of funds for service operations like a corporate account. For this purpose, each team manages Treasury as a multi-sig wallet within the team or has a transition plan from centralized management to management by governance.
About MVL Treasury
In the meantime, MVL has not structured a separate account to spend as rewards for ecosystem participants such as TADA Driver, but as the expansion to the on-chain ecosystem is in full swing, there is a need to design a more fair and transparent reward system for the community. Accordingly, we plan to build an MVL Treasury to create a systematic on-chain-based incentive system.
The approximate use of the MVL Treasury is as follows.
- Exchange rate setting and initial liquidity suppling when registering DEX pair
- Rewards for Mobility Service Participants
- Rewards for DeFi Service Participants
- Various events and promotions
- Funding for partnerships, marketing, etc.
MVL Treasury can consist of various cryptocurrencies such as MVL, bMVL, ETH, BNB, BUSD, etc. These will be accumulated as a source of sales and various fees within the MVL ecosystem, and the first source will be the MVL Bridge fee.
Raising Treasury fund through Bridge Fee
MVL Bridge, launched last January, is a bridge service that moves MVL between the Ethereum mainnet and the BNB chain. The bridge transfers ERC20 MVL on Ethereum to the BNB chain by wrapping MVL to BEP20 MVL (bMVL), and works in the opposite direction by unwrapping .
About 152 million MVLs have been wrapped in bMVL through the bridge, and these are being traded through DEXs such as Biswap.
As of April 22, 2022, the bridge fee is deducting 300 MVL only when sending MVL from the BNB chain to Ethereum. As we decided to raise Treasury fund from bridge fee, from April 25, 2022, Ethereum → BNB chain and BNB chain → Ethereum will all be changed to deduct a fee of 10000 MVL.
Existing Fees (~2022.04.25. 08:59 UTC)
Ethereum → BNB chain: 0 MVL
BNBchain → Ethereum: 300 MVL
Changed Fees (2022.4.25 09:00 UTC~)
Ethereum → BNB chain: 10000 MVL
BNBchain → Ethereum: 10000 MVL
There are the following backgrounds in raising Treasury’s financial resources through the bridge fee changes.
- Based on the BNB chain, it is expected that the transaction and demand of bMVL will increase as the linkage with the actual business proceeds and the DeFi service is provided. Accordingly, the demand for using the bridge is expected to increase, so we decided that the bridge would be an effective way to secure Treasury funds to activate the MVL ecosystem.
- As bMVL liquidity for DEX transactions is secured, investors who want to acquire bMVL are now able to purchase bMVL directly from DEX BNB chains, without using the Bridge. Therefore, the bridge fee increase is not expected to be significant for investors other than liquidity providers and arbitrators who manage large-scale funds.
In addition to MVL Bridge fees, Treasury’s fund will be raised through NFT sales revenue and transaction fees, game sales and in-game marketplace fees, linkage with mobility business, advertising and promotion revenue through partnerships with other projects, and liquidity mining. Therefore, the MVL team will use the secured Treasury as a fund to revitalize the ecosystem, grow both the blockchain community and the actual business, and establish a virtuous cycle structure in which this growth leads to the expansion of Treasury again.