For the FXS FLE, the proposal describes how revenue will

Question

For the FXS FLE, the proposal describes how revenue will

flow to the FXS FLE. To quote:

> If FXS 30-day trailing price is lower than the prior month, then 25% of protocol revenue is allocated to the FXS Liquidity Engine instead of veFXS. If the 30-day trailing price is higher than the prior month, then 25% more of protocol revenue is distributed to veFXS instead.

My reading of that says 25% of revenue is distributed out in a binary fashion. It will go either 100% to veFXS or 100% to FTL.

Is there any value in making this smoother instead of binary 0/100?

For example, maybe we make it a walk...where we walk between 0:100 and 100:0 based on a smaller step size. To be concrete, suppose we split the 25% revenue 50:50 into veFXS:FTL in the first month. Then if the 30day trailing price is higher than the prev month, we will move to 75:25. If that repeats in the next month, we go to 100:0. If it repeats again, we stay at 100:0. If it flips, we decrease to 75:25. Etc. Step size could be controlled by governance.

Another idea instead of a walk is that we could make departure from 50:50 be a function of how big price difference is compared to the prior month. So a flat price diff would be a 50:50 distribution of the 25% revenue. If the price increased by 10% (or higher), then we would cap out and go fully to 100:0. At a 5% increase, we would be at 75:25. At a 5% price decrease relative to last month, we would go the other direction to 25:75. Etc. The exact relation would need to be chosen. This example is linear with caps at 10% and -10% price differences of fxs.

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23.03.2024