Hello all
Noticing the upcoming positive changes to crypto regulation in the United States, Orca could consider a revenue share model with token holders. Below I’ve outlined an initial proposal to begin discussions and seek feedback. It would be great to hear what community thinks.
Orca token revenue share model:
Model was developed by examining Orca’s fee mechanism and rewarding ORCA token holders who show long-term alignment with the project.
Understanding Orca’s Fee Mechanism
Orca generates revenue primarily through trading fees on its liquidity pools:
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Constant Product Pools: A 0.30% fee is charged per trade. Of this, 0.17% goes to liquidity providers (LPs), 0.10% is allocated to the Orca Treasury, and 0.03% supports the Orca Impact Fund (for charitable causes like climate initiatives).
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Whirlpools (Concentrated Liquidity Pools): Fees range from 0.01% to 1% depending on the pool tier (e.g., 0.01%, 0.05%, 0.25%, 1%). For this model, we’ll assume a representative fee of 0.25% per trade, with 0.20% currently going to LPs and 0.05% allocated to the Treasury.
The Orca Treasury, which accumulates fees (primarily in tokens traded on the platform), ties the protocol’s financial health to ORCA’s value. These funds can be used for development, token buybacks, revenue sharing, or other initiatives benefiting the ecosystem.
Goals of the Revenue Share Model
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Reward Long-Term Alignment: Incentivize ORCA holders to lock tokens for extended periods, reducing sell pressure and increasing the token’s value.
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Leverage Fee Revenue: Distribute a portion of trading fees to committed holders, aligning their interests with the protocol’s growth.
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Sustain Ecosystem Growth: Ensure sufficient Treasury funds remain for development and liquidity incentives.
Proposed Token Revenue Share Model
Here’s a detailed model that integrates Orca’s fee mechanism with a revenue-sharing system for long-term ORCA holders:
Long-Term Alignment Mechanism
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Staking/Locking Program: ORCA holders can lock their tokens in a smart contract for predefined periods (e.g., 6 months, 1 year, 4 years) to qualify for revenue sharing. Longer lockups yield higher rewards to reflect commitment.
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Alignment Score: Assign a multiplier based on lockup duration:
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6 months: 1x
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1 year: 1.5x
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4 years: 4x
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Minimum Threshold: Require a minimum stake (e.g., 100 ORCA) to participate, ensuring meaningful commitment while remaining accessible. This would also encourage investors to increase their holding to meet the minimum threshold, increasing buy pressure on Orca.
Revenue Distribution
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Revenue Pool: 50% of the Treasury’s fee revenue (0.05% from Constant Product Pools and 0.025% from Whirlpools per trade) is allocated to the revenue share pool. The remaining 50% supports development, buybacks, and other protocol needs.
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Distribution Frequency: Fees are distributed quarterly to staked ORCA holders, converted to a stablecoin (e.g., USDC) or SOL for simplicity and predictability.
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Pro Rata Share: Each participant’s share is calculated based on their staked ORCA amount multiplied by their alignment score, divided by the total weighted staked amount:
- Individual Share = (Staked ORCA × Alignment Multiplier / Total Weighted Staked ORCA) × Revenue Pool
Example Calculation
Assumptions:
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Daily trading volume: $50 million (consistent with Orca’s historical averages).
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Treasury fee per trade: 0.10% for Constant Product Pools, 0.05% for Whirlpools (assuming equal volume split for simplicity).
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Revenue share pool: 50% of Treasury fees.
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Total ORCA staked: 10 million (20% of circulating supply, assuming ~50 million circulating as of early 2025).
Daily Treasury Revenue:
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Constant Product Pools: $25,000,000 × 0.0010 = $25,000
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Whirlpools: $25,000,000 × 0.0005 = $12,500
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Total: $25,000 + $12,500 = $37,500 (e.g., $37,500 in mixed tokens).
Revenue Share Pool:
- $37,500 × 0.5 = $18,750 ($18,750 daily).
Quarterly Pool:
- $18,750 × 90 = $1,687,500 ($1,687,500 per quarter).
Individual Example:
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Holder A stakes 5,000 ORCA for 4 years (4x multiplier) = 20,000 weighted ORCA.
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Total weighted staked ORCA = 18 million (hypothetical total with multipliers).
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Holder A’s share:
- (20,000 / 18,000,000) × 1,687,500 = $1,875 ($1,875 per quarter).
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APY ≈ 81%
Governance Integration
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Voting Power: Staked ORCA retains governance rights, with voting power scaled by the alignment multiplier, further incentivizing long-term participation.
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Proposal: Initial implementation requires a governance vote by ORCA holders to approve the fee adjustment and revenue share framework.
Benefits of the Model
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Long-Term Alignment: Locking tokens reduces circulating supply, potentially increasing ORCA’s price and rewarding holders who believe in the project’s future.
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Revenue Incentive: Holders earn a passive income stream tied to Orca’s trading volume, aligning their financial interests with the DEX’s success.
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Sustainability: Retaining 50% of Treasury fees ensures funds for development and liquidity incentives, balancing rewards with growth.
Conclusion
This revenue share model leverages Orca’s existing fee mechanism to reward long-term ORCA holders with a share of the DEX’s trading fees, fostering alignment with the protocol’s success. By adjusting Whirlpool fees, establishing a staking program with alignment multipliers, and distributing revenue quarterly, Orca can create a compelling incentive for committed holders while maintaining funds for ecosystem growth. Given Orca’s position as a leading Solana DEX with significant trading volume, this model could enhance its tokenomics, making ORCA not just a governance tool but a revenue-generating asset for the faithful.
This could seriously shift the meta on Orca if investors could realise a potential APY of circa 81% each and every year, over a 4 year lock-up. This would be a exciting and compelling investment opportunity and make Orca stand out.
All feedback welcome.