What Should DAO Do with Buybacked Governance Tokens?

DAO Proposals
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21

A dynamic hybrid model should be the way to go, no?

For example, starting with a high percentage burn rate like 90% and reducing it the more get burned until a decided amount of WRT remains and the burn is reduced to like 10% or whatever (just some numbers to get the idea across).

At the same time, the amount to use in incentives would get higher in percentage, a little lower most likely in hard numbers (as the amount of WRT would start to shrink, given the burn).

I would not go without buybacks for incentives, as to be able to incentivize the one thing a DEX needs to survive the long run - liquidity – should be considered important (given the goal is a lasting product and not a token value cashout). As the amount of incentive is already locked to holding WRT in vaults, a buyback would be like a week burn in a way.

Also, I do not see a problem with people selling their rewards, as it would be roughly a net zero effect on the token price and no “dump”. So WRT holders have two ways to “profit” from wingriders.

  1. liquidity provision + holding WRT in vaults = profit with extra fee sharing (would be the same effect, if instead of buybacks, the liquidity providers would get a highter fee percentage, but the WRT vault seems cooler)

  2. The burn would reward long-term holders and incentivize liquidity providers to not instantly “dump” their rewards, as they would theoretically (as long as the DEX works) get more and more valuable.

So, this would be the way I would tackle it. Also, as mentioned, the Firstriders need to have WRT to get, which would only be possible if the hard numbers would not go below a treshold - hence a high burn rate at the start and a low one at the end near the minimal decided WRT amount everyone would be happy about. Also, the burn would make firstriders more and more valueable over time, which would be nice for its holders - but we could also use a solution, in which the ada amount a firstrider would get would be reduced by the same percentage the burn had happened. This would solve the firstrider wrt amount in a “fair” way, but Im not a fan of it, as we have other options (just wanted to point this solution out).

Just my two cents late at night :slight_smile:

Tldr.: Hybrid with high burn rate start, lowering over the time until a predetermined new max WRT amount. The rest goes into buybacks for farming, vault (prefer higher vaults for WRT lockup) and other potential stuff.

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22

Im against a different reduction rate of firstriders income. If the amount is reduced (which could be discussed), every tier should be reduced by the same percentage (imo).

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23

I agree with the essence of krebsmenschen’s proposal. I share that essence 100%. A hybrid model of burn and system maintenance, keeping the farming system and the vault, to help attract liquidity while maintaining the percentage received by firstriders, albeit reducing their benefits by the same percentage at which a burn occurs.

As a variant, I would like to introduce the idea of first setting aside a reserve to incentivize liquidity (for example, 10% or 8%), and then carrying out a 100% burn of whatever accumulates in excess in the treasury.

We have to take into account that if USDCx TVL and native Bitcoin TVL enter Wingriders DEX, then, through fees, WRT would go to the moon relative to its current price, and that is the key to attracting all liquidity. In other words, WRT would finally be truly fulfilling its mission. If we manage to get WRT into a virtuous cycle of price appreciation, we’ve won the game.

I also wouldn’t be opposed to considering a 1 or 2 year lock up on the WRT received from the FT Firstriders, which would be deposited separately in the vault, in the sense that it would not be received as WRT tokens, but would instead be forcibly sold through some mechanism enabled for this purpose via one of the farming pairs, with those LPs (for example, NIGHT/ADA) being locked for 1 or 2 years. These would be measures that would increase the DEX’s TVL.

I’m still listening to your opinions.

24

Burning coins don’t generate value and incentivizing pools with a coin that doesn’t governs much isn’t attractive.

Lets build a dao liquidity and generate more yield, then we will have much more to talk.

Stop the buybacks and build ada/night/etc liquidity with it and burn the rewards from those farms.

Later on we could enable through automation the ability to burn wrt in exchange of a ratio of the liquidity, that would give intrinsic value to the token + perenity of the dao.

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25

Update on WRT Incentives and Next Steps

Following the community discussion and valuable feedback received so far, the team has started working on a comprehensive proposal for the next phase of WRT incentives and buyback utilization.

Current work is focused on:

  • Evaluating technical options that could support long-term models, including enhancements to Vaults, Firstrider utility, fee utilization models, treasury utilization, and other approaches that could align incentives between liquidity providers, WRT holders and the protocol

  • Modeling different scenarios based on protocol data, including historical WRT emissions, current buyback rates, and competitive incentive programs across the Cardano DeFi ecosystem.

  • Gathering feedback from active and large-scale institutional liquidity providers to better understand practical constraints and stakeholder expectations. For example, some LPs have highlighted that direct redistribution of trading fees to WRT holders may not be suitable for all participants, particularly where exposure to WRT is limited by risk-management policies related to impermanent loss and token volatility.

Our objective is to design a sustainable framework that balances the interests of all stakeholders, including liquidity providers, long-term WRT holders, DAO participants, Firstrider holders, and the protocol itself.

Given that the original 40 million WRT allocation for liquidity incentives has now been fully distributed, the DAO has temporarily continued incentives using WRT accumulated through LP provision and Boosting Vault. However, this is intended as a transitional measure while a long-term, governance-approved model is developed.

As part of this transition, the team is also evaluating an interim approach that would continue liquidity incentives at a lower emission rate, preserving WRT buyback reserves while maintaining support for protocol liquidity until new mechanisms can be implemented.

Considering the scope of analysis required, ongoing infrastructure work related to the upcoming Van Rossem hard fork, and the time needed to prepare a robust DAO proposal, WRT emissions will be temporarily reduced in the coming period.

The reduced emission schedule is intended to:

  • Preserve buybacked WRT reserves.

  • Extend the runway for liquidity incentives.

  • Allow sufficient time for community discussion and governance review.

  • Ensure the DAO can make an informed long-term decision rather than a short-term one.

We will continue to share updates as the analysis progresses and look forward to presenting a formal proposal for community review and voting.

26

Thank you for the update.

There is one specific point that I would like to better understand. The announcement mentions that some liquidity providers believe that the direct redistribution of trading fees to WRT holders may not be suitable due to limitations related to token exposure, volatility, and impermanent loss.

Honestly, I do not fully understand how this concern aligns with the objective of building value for WRT. If certain liquidity providers wish to participate in WingRiders while at the same time considering it inappropriate for part of the value generated by the protocol to benefit the protocol’s own token, then a fundamental question arises: how is the WRT buyback program and WRT value capture expected to be sustained over the long term?

I completely understand the need to balance the interests of all stakeholders involved, but I also believe that the interests of WRT holders should remain central to any proposal. After all, token holders are the ones who have assumed the risk of supporting the protocol and who ultimately depend on a clear mechanism for value accrual.

I also feel that the announcement lacks a more concrete explanation regarding the role of Firstrider within this new model. Firstrider holders represent those who supported WingRiders from its earliest stages, and it would be valuable to understand explicitly how they may be affected by the changes currently being considered.

Furthermore, I believe that achieving a level of sustainability that allows WingRiders to become increasingly independent from external funding requires a strong WRT token. This is not only a matter of carefully managing emissions; it also requires effective value capture, a healthy token valuation, and the ability for the protocol to accumulate meaningful reserves through buybacks over time. The greater WingRiders’ ability to generate and retain value within its own ecosystem, the less dependent it will be on external sources of funding in the future.

I hope the final proposal will provide greater clarity on these matters, particularly regarding the long-term sustainability of the buyback program, value capture for WRT, and the future role of Firstrider holders.