Following the introduction of xUwU staking and our buyback system, we have another major update to our revenue sharing system!
Moving forward, the treasury will be the exclusive liquidity provider for UwU tokens. As such, the treasury will now receive 100% of LP revenue. Previously, 90% of protocol revenue was distributed to LP stakers and 10% was used for UwU buybacks. Now, the vast majority of this protocol revenue will be dedicated to buybacks.
This new system not only ensures positive price development for UwU due to the focus on buybacks, but also enables users to gain substantial rewards by simply staking xUwU. This eliminates concerns such as impermanent loss, costs of gas for claiming rewards, withdrawing and swapping various reward tokens, etc., and allows a more passive option for earning rewards. Find out more below!
Former System
Initially, 100% of revenue was shared proportionally between all LP stakers. This system offered stakers direct rewards in the form of a basket of assets from each of our supported collaterals. Many users felt that the gas costs to claim rewards, withdraw and swap negated some of the benefits. Community feedback showed that some did not prefer receiving so many different tokens and wished for an auto compounding reward option. Impermanent loss was another often mentioned concern.
System Overhaul
To address these concerns in a comprehensive manner, UwU Lend will further refine the protocol’s rewards system. Moving forward, the treasury will act as the exclusive liquidity provider for UwU.
The majority of protocol revenue will be utilized exclusively for UwU token buybacks. The remaining will be allocated to covering necessary protocol expenses such as development costs, audits, and growing the liquidity of our LP. UwU token rewards from early exit penalties go to the platform, and are then deposited into the xUwU contract to distribute to stakers.
The tokens acquired through buybacks will be shared with xUwU stakers as before. This enables stakers to auto-compound their position while simultaneously benefitting from the positive price support. Holders may also opt to borrow against their UwU tokens on Llamalend rather than selling, allowing them to make full use of their funds while still holding long term.
The following example shows the advantages, not only for the protocol itself but for all xUwU stakers, emission farmers and even those using UwU as collateral.
Example: This example assumes protocol revenue of $100,000 and protocol expenses amounting to $25,000. Under the new rewards system, the revenue used to facilitate strategic buybacks would amount to $75,000. With the former system, assuming same protocol revenue, the funds used for buybacks would only have amounted to $10,000.
To enable this new system, our rewards contracts have been updated and therefore audited before implementation with help from our friends at AstraSec. Their report can be found here.
