This proposal aims to increase the community pool tax from 2% to 6%. This to ensure the community re-gains optionality around investment and SCRT allocation to potential new integrations, constellation chains and native dApps. Currently the secret community pool holds approximately ~750k SCRT which equates to ~ 0.3% of the current SCRT supply. In order to increase the impact of potential (liquidity) deals we think a target of min ~1% of the supply is important.
Why a larger community pool is a good idea
Preparation for Growth: As more constellation partners and native dApps join the Secret network and other ecosystems are increasingly more liberal with their liquidity resources, we think it is important to have the means to make similar decisions where needed. With a larger community pool, we’ll have the flexibility to engage in potential mergers and acquisitions, liquidity as a service for SCRT integrations, supporting the native liquidity of LSDs and potential gambleFi apps, interact in token swaps with potential constellation chains and overall facilitate the growth and development of the Secret ecosystem. The current size of around 770k SCRT in the pool may limit our ability to seize these opportunities.
Enhanced Resources and Tooling: With the recent advancements such as DaoDao and the coming SDK 0.50, the community will have access to better ownership and governance mechanisms. These tools allow for proper management of POL deals through easily managed multisigs but also enhanced ownership through chain-governed VETO rights. By utilizing the new tools, we reduce trust assumptions on potential recipients, can vest tokens more easily and mitigate past challenges of taking money but not delivering. Overall it ensures more transparent and effective resource allocation.
** A focus on mutual beneficial deals and liquidity over grants and committee lossmakers:** We think the community is better positioned than any other chain to truly vet coming deals due to the rich past of often failed proposals. With a strong DeFi oriented community we also think Secret might be more effective in deploying POL than other chains. The community is an important voice next to SNF and SCRT labs and its important that it has some resources available to make decisions where it deems needed. The pool however should be safeguarded from becoming a slush fund or fallback option for unsuccessful projects - a separate proposal for a clear COC might be beneficial to assure the community of its responsibilities in managing the pool.
The expected pool growth rate after this proposal is:
Year 1: The pool is expected to grow to approximately ~2.4m SCRT.
Year 2: By the end of the second year, the pool could reach approximately ~4m SCRT, equivalent to approximately 1% of the total supply at the end of 2025.
The expected impact on staking APR should be minimal:
Even with the proposed increase, the pool wouldn’t be resourced enough to handle liquidity deals or other large spends without price of the underlying asset increasing significantly. Fortunately though, now rank / price is the primary KPI for SNF which is helpful. Additionally, with SCRT Labs doing tokenomics research I’d prefer to see the results of that or get input from them instead of seeing proposals that impact tokenomics without their input, doing 1 off props impacting the how attractive staking is for scrt stakers without accounting for a larger picture of that research seems ill advised. Mainly for these reasons I can’t support this.
I do think it would be good at the very least to have an update on the tokenomics overhaul before voting on this proposal so we can make an informed decision.
In general it would be good to get a cohesive approach to these types of changes and make sure there’s synergy between these proposals. That also allows for some analysis without introducing confounders every other month.
While the goals of the proposal sound good, it seems premature to change the tax given the tokenomics research. It also raises many questions that should be addressed about other members of the ecosystem. For instance:
How would this affect profitabiity for our existing validators?
What would be the impact on a request for a tax for SNF in the future?
The best approach is to include such a parameter in the modeling so we can answer the questions and make an informed decision of what to change in context of the whole ecosystem.
I dont think its premature at all, in order for secret community to gain ownership again in making decisions on potential liquidity deals it needs capital. Waiting for a research deadline we do not have does not seem optimal.These parameter changes are small enough that one can take quick action without too much consequences if need be.
Profitability impact for validators is noted in the proposals, their income will reduce with ~4.5% as a result of this proposal - in line with staking apr.
This question cant be answered as long as there is no clear intent/guidance on wether or not a SNF tax is needed, that deadline might be even further out than the tokenomics research. I dont know if we have the time to wait for that. But taking an example where Secret Network foundation needs a 4% tax next to the 6% to the community (SNF would get ~1m tokens per year = 400k USD in that case) then the staking apr would drop with ~9% in total instead of ~4.5%. Stakers would still have a real positive ~4-5% return in this scenario.
This proposal is to get the conversation started and we hope to see a lot more feedback. We are in no rush to bring this to the chain but do see it as a topic we should start discussing right now. If tokenomics research is revealed in the meantime it can be considered.
The only scenario where an SNF tax isn’t needed is if the organization shuts down after it runs out of funding and stops working on growing Secret Netwrok. New people in the community should take note of this, as there is not another scenario where they could continue after their 1 year (estimated) runway is gone.
Regarding use cases for the increased pool tax, you mentioned “supporting native liquidity of LSDs”, yet Carter from Shade said the best option for this was actually working with Slabs as the amounts needed would be in the million(s) not hundreds of thousands.
This alone is 1 single play for 1 dapp. You also mention “With a larger community pool, we’ll have the flexibility to engage in potential mergers and acquisitions, liquidity as a service for SCRT integrations,” and i think if these ideas are going to be taken seriously either you, slabs, or SNF should start publicly talking about these opportunities. Guy already discussed an MPC chain in the constellation opportunity (which would have costed around 20 million USD), but that idea isn’t an option anymore and importantly didn’t require a tax change of any kind if we would have done it. This sort of highlights that even with the increased tax, we wouldn’t be able to do much that you mentioned we’d be able to do, at best it would just enable more small plays and nothing big at all.
Another thing to mention is that, the estimated SNF taxes communicated in prior discussions are not 4% or 6%, they were around 10% in all prior discussions. So once that comes up, which would be after the token economics research, then it seems Secret would be looking at 15%+ taxes on stakers if the pool taxes increased.
Please share some concrete or real potential opportunities that this would enable if possible, otherwise this indeed seems like a non needle moving tax increase.
I think it is shortsighted to think that the community should NOT participate in Defi with its assets simply because SCRT Labs might do so.
The idea is here to be prepared and engage the community to make more bold choices, so i dont think its a matter of having potential deals lined up but preparing for the case that they might be there. With an empty community pool no lead gen will happen in this area either, its a prerequisite to grow the pool.
Nevertheless, potential ideas are: depositing SCRT on Kujira ghost for lending, engaging with Levana on a spot SCRT perp, deploying in the sSCRT/stkd-SCRT shade pool, aquiring teams that build modules like a recent automation module deal that came by, working with known cosmos teams on support like Coinhall, Supporting secret dApps with direct token investments etc.
Please be aware the above proposal is an idea to give the community additional power/ownership over growing the networks treasury and bringing in potential teams. Although it impacts tokenomics and thereby the SNF Tax, the tax in itself is not up for discussion here.
Even with your projections on pool holdings, it doesn’t bring us to a large sum of value unless SNF achieves (or more likely exceeds) its KPIs regarding rank. If that does happen then they’ll need a tax around 10% which still brings total taxes at 15%+. I’d be curious to know what other chains have taxes that high, how it has worked out for them, and how competitive staking returns are on those chains. Perhaps you could share some data on this since this discussion isn’t accounting for the tokenomics research slabs is doing which could account for this sort of assessment.
A wholistic discussion regarding things that this proposal would impact makes the SNF tax a relevant consideration, and it was brought up by SNF itself in this thread.
Thanks for listing some things here. Can you estimate or give examples on how much each of these would cost and what level of “ownership” secret stakers would have in such a scenario with a 6% tax?
Oh, look who it is, our resident visionary, Ertemann, back with another proposal to skyrocket the community pool allocation. How refreshing!
It’s truly heartwarming to see you haven’t lost your knack for grandiose schemes after your unforgettable stint with the “Secret Agency.” Ah, memories of wasted resources and dashed hopes. But hey, who needs results when you can dazzle us with your boundless optimism and disregard for the rules?
I must admit, your unwavering commitment to ignoring past failures is truly awe-inspiring. Why bother learning from mistakes when we can just keep blindly charging forward, right? After all, the bright side is all that matters in your world, isn’t it?
So here’s to you, Ertemann, our eternal beacon of hope, forever leading us down the path of wishful thinking. May your proposals continue to light up our forums with their boundless enthusiasm and utter disregard for reality. Cheers!
