Burn Pyth Token Using a Percentage of Fees

Ideas Bank
1

This is a proposal from @gnarleyquinn and i am posting in his behalf

Hi guys,

I’d like to make a proposal regarding token burns and earnings.

Essentially, the idea is this:

Take a small percentage of the fees earned each month to buy the PYTH token on the open market, then burn the allocation.

I’m open to suggestions about modifying the amounts etc, but here is an idea to get things started.

Part 1:
4% of existing earnings from the past six months to be used to buy the token on open market.
( 1% each week during the month of August).

Part 2:
At the end of each month starting in September, 2% of the fees earned for that month are used to buy on the open market.

In both cases, the transaction details and burns are published to the community to be verified.

Primary justification for the proposal:
~ Create a constant buying pressure for PYTH token each month
~ Establish a direct correlation between earnings and PYTH token price
~ Percentage means the amount of PYTH burnt will fluctuate with market conditions

4 Likes
2

Great idea.
I believe that buying tokens on a weekly basis would be better than on a monthly basis as it will create a more stable buying pressure and not an all of a sudden big green candle once a month.
I also believe that additional use cases for the bought tokens such as rewards for contributors/stakers/IA might be a decent option instead of burning only but I guess that would depend on the amount of fees collected.

Overall seems like a very good direction and I would like to hear more details about it

3

Thanks for posting bats.
Yes, I firmly believe that we need a better utility for the PYTH token.
Governance voting and staking rewards is something pretty much all tokens do.
A real connection to the success of the token price can be directly correlated to the success of the price feeds.
Using fees to buy back and burn tokens will decrease supply.
With the integration of so many price feeds, no other product could boast that sort of utility.

2 Likes
4

no problem!

Regarding the proposal,
Take note that there aren’t much fees generated by the Price Feeds Update (for now),
which is the main product of Pyth for a time now,
before having Entropy and Express Relay.

In EVM for example, from the Dashboard below
As of July 12, 2024, accumulated Pyth Price Feeds Update Fee is $1,012
image

https://dune.com/synthquest/pyth

but i am excited on this kind of proposals using the Fees when all of the blockchains update fees have been updated like opBNB.

5

Yes I will be voting to start pulling fees from the other blockchains. But I think having the mechanic in place to automatically start burning tokens will only ensure the success further.

1 Like
6

gm @bats4 and @gnarleyquinn

Thanks a lot for putting once again a good idea in front of the Pyth DAO and community

While I agree with the sentiment, I think we might want to step back first and think about not only one way to use the fees (buy and burn as you suggested) but rather how to wholly allocate/later use the fees collected by the Pyth contracts (Price Feeds, Entropy, etc).

As you mentioned, the fees are not high today, so I do not think there’s a rush to see this implemented.

To rephrase: I am NOT AGAINST such an idea, and even the numbers mentioned seem in line, but I do not think these mechanisms should be thought of in isolation.

IMO fees collected by the Pyth smart contracts have 2 high level goals (and therefore target recipients):

  1. Reward publishers for their work (running Pythnet + contributing data) that make the Pyth Network valuable and revenue generating. The higher the fees distributed to publishers, the more likely new publishers will want to join the network; the higher the fees distributed to publishers, the more competition there will be to become the best/most accurate publisher.
  2. Finance the Pyth DAO so it can govern the oracle network and implement community approved endeavors. For instance, existing councils (and their members) could be reimbursed/paid for their work/time, or a regularly refreshed budget for the Community Council could be set up. — Specifically for this discussion, I envision the Pyth DAO deciding something like ‘allocate x from its retrieved fees to y’. It could be buy and burn as mentioned, or it could be some type of ‘insurance fund’ on top of the CIP.

The first question would be: what is the split in between publishers rewards and the Pyth DAO?

Is it 75/25, 50/50, 25/75 or something else?

Once this split is established, each of these buckets would need to have further segmentation or granular distributions to be determined.

For Publishers Rewards, we need to know how to rank publishers as well as how to determine the distribution shape.

For the Pyth DAO, it would like be a slightly different decision process, more akin to a traditional company budgeting (how and where to allocate revenues). The latter is relevant to discussion of something like buy and burn, as well as e.g. funding the councils, and as many other potential ideas.

5 Likes
7

It is really hard to remove features like buy & burns, and it makes me wary of these things in general. It is a small sum of funds and sets a precedent that can be really hard to navigate efficiently. Overall agree with your sentiments, Marc.

3 Likes
8

It’s an interesting idea in theory but I think the Pyth fees would be better used on building long term value.

In traditional business some companies give dividends whereas others use their retained earnings to invest back into the company to improve revenues/growth. The companies who do the latter typically have much greater stock appreciation where the dividend providing firms often see much lower growth. The dividend firms are sacrificing growth to reward shareholders, typically because of their line of business has lower growth opportunity so money reinvested is less rewarding. Pyth has endless opportunity so this wouldn’t be as applicable.

This idea in theory would result in price appreciation through buy back and burns but those are one time actions and it would result in Pyth losing one of its revenue/profit generators. In the long run this would handicap growth where the fees could’ve helped Pyth grow it would instead be used to provide short burst of price purchase. It would also reduce total token supply which isn’t necessarily a good thing.

I personally think we would be better off using those funds to grow, if we’re able to capture more market share, increase product offerings, reinvest into vehicles that can further increase future price fees, I believe Pyth will see more LT success.

3 Likes
9

Something that I find interesting about this proposal is that it would distribute value to all Pyth holders equally. Would it be better to only reward stakers?
I guess the simplicity of buy and burn is the strength of this design.

1 Like
10

I don’t have a problem with rewarding stakers, but I think there are other mechanics that could be put in place to reward those instead.

The primary reason for pushing a token burn connected to fees is to create a direct correlation of the price to PYTH earnings.

BONK have done it successfully.

11

As I said, the primary reason for this is to create a connection of earnings to the token price. Right now, the price of PYTH is in no way correlated.

Using fees to create buybacks is something major companies do as well.

Right now, unfortunately the token is basically a meme. There is no utility for it.

12

@RealPythGod
This is not a traditional business though, and token holders are not shareholders - or are you considering being a DAO as “like shareholders?”

The point is, the PYTH token does not actually need to exist to build the business and products or offer services in the current form, considering you generate income and fees in other currencies.

I have a proposal for fees to be paid in PYTH instead (creating a circular economy) but it has been stuck in my drafts for a month because of my forum activity. I can only like and comment on so many old posts to try and build my credibility here. :smiley: I guess I should have asked someone else to post on my behalf like the OP did.

"
Should we consider some way for fees to be paid in PYTH, or when native fees are collected, they are sold to purchase (and burn) PYTH which would support a healthy economy?

Someone more technical than me could expand on how we could get this to work in practice.

I feel this is important as it is becoming obvious that tokens that are “only” for DAO voting and no other utility are at a disadvantage."

13

Yeah the forum mechanics are shit. I gave up trying to post it after months of getting nowhere. Thankfully @bats4 offered to post the proposal for me.

And I agree with your comments regarding the difference between token holding and shareholding. Sorry @RealPythGod but we dont get dividends from holding PYTH, which unfortunately right now is still a useless token.

1 Like
14

i personally love the idea of using a small percentage of fees to buy PYTH at the open market, BUT not to burn. that would certainly be a wasteful use of resources. so instead, why not do it to build a treasury, and PYTH stakers themselves make proposals and vote on how the treasury will be used.

1 Like
15

Adding one technical input:
not all Pyth oracle deployed smart contracts already have the withdraw function ; in other words, the ability to retrieve the funds from chain A to the Pyth DAO wallet on Solana.

This function is not hard to implement but will require a smart contract upgrades on all chains to enable this – such upgrade is an OP-PIP that the Pythian Council needs to approve

16

Thanks for the feedback.

Tbh, I’m not sure where to go from here. I’ve suggested the idea, so its up to the DAO to decide if its worthy of a formal vote or not…

17

thanks for starting the conversation. i guess it’s still ahead of it’s time since there isn’t a significant amount of fees being generated at the moment.

but the big question of what to do with fees is something that the DAO will definitely continue to talk about. other than burning tokens, there may also be other ways to give value to token holders (e.g. revenue distribution in various forms).

3 Likes
18

We would like to express our appreciation for the thoughtful proposal and ideas shared. As a fellow community member, XBTO appreciates innovative ideas being put forward to support the network’s growth and token value-accrual mechanism. After careful consideration of the proposal and the ensuing discussions, we would like to share our perspective on why we believe implementing this mechanism at this time may not be optimal:

• Revenue generation potential: As noted by other community members, the current fee structure generates modest revenue. Implementing a buy-and-burn mechanism at this stage may not have a meaningful market impact.
• Growth: We believe that Pyth is in a crucial phase of development, where reinvesting fees back into the protocol can yield greater long-term benefits. This could enhance infrastructure, expand product offerings, and increase market share.
• Holistic fee allocation approach: We strongly concur with the sentiment that a comprehensive approach to fee allocation should be considered, taking into account various factors and potential use cases.
• Strategic flexibility: Maintaining optionality at this stage allows for rapid adaptation to evolving market conditions and emerging opportunities.

While we do not endorse the implementation of this proposal at present, we commend its introduction. It underscores critical considerations regarding token economics and community incentives that will undoubtedly inform future conversations about fee allocation strategies.

3 Likes