Proposal: xOrca for value accrual to the Orca token

Summary
Create an xOrca token to be used in Governance and to reward token holders. Redirect protocol revenues from the treasury to buybacks which accrue to xOrca stakers.

Description
This is similar to xSushi, xJoe, or xStella (to pick 3 at random from Ethereum, Avalanche, and Moonbeam). The xToken model is quite common and will be familiar to DeFi veterans. For noobies, here’s an explanation:

Orca charges a .25% fee on every trade.
.02% goes to the LP
.01% goes to the Impact Fund (ie saving the whales)
.04% goes to the treasury. We have $5m in Protocol Owned Liquidity sitting in there currently

When you stake your Orca, you’ll receive xOrca in exchange. This proposal would use the above .04% part of the fees to purchase Orca from the market continually. That Orca will go to back xOrca in increasing amounts. And if you redeem your xOrca, you’ll get back your original Orca plus your share of protocol revenues. For example, after a month it could be that 1 xOrca (which cost 1 Orca originally) will be redeemable for 1.1 Orca.

One additional detail is, xOrca should be stakeable to a governance module. Orca holders shouldn’t have to choose between earning a yield and voting.

Specification
The Orca team would develop the staking and buyback protocols. Unfortunately, I am not aware of a project on Solana implementing an xToken that could be forked (though I could have missed one). The closest I can think of would be Astroport on Terra, which would at least be written in Rust. We don’t want to copy Raydium’s plain staking because A) We want a token that’s composable B) We want a token we can then stake in a governance module.

If the team does not have the bandwidth to complete this, I would propose spending treasury funds to add a member to the development team (assuming the team’s budgeted share doesn’t already cover it).

I’m not sure this needs to be part of the specification, but I want to state that I personally do not have the requisite Orca to make a proposal, and would need someone to help champion this.

Motivation

The Orca token can be used to A) LP itself against Solana or USDC or B) Used to vote in Governance. Orca token holders don’t see their token appreciate when the dex does well. There are frequent complaints that the Orca token isn’t useful for anything. This, and governance, give it that. But there is another, more powerful reason than making defi apes happy.

Orca attracts liquidity through a combination of LP fees and Orca rewards. The Sol-USDC farm for instance receives 3500 Orca/day. Thus, we have the following flywheel:

  • Less circulating Orca means higher token price
  • Higher token price means more valuable rewards
  • More valuable rewards means higher APR on each pool
  • Higher APRs mean more liquidity migrates to Orca
  • Pools with deeper liquidity attract more trade volume
  • More trade volume means more fees
  • More fees means more buybacks
    … etc

This would help make Orca the apex dex on Solana.

7 Likes

Whilst I understand the theory behind the xToken flywheel, is there an example where this has actually worked out positively? xSushi is a good example where it didn’t work…


Unfortunately, I am not aware of a project on Solana implementing an xToken that could be forked

gFIDA (https://staking.bonfida.org/)?

2 Likes

TraderJoe has been very successful. And more recently, Stellaswap on Moonbeam. Over a quarter of all Stella is staked for xStella, and the token is up between 50 and 100% since xStella was introduced.

Caveat that Stella (since it’s a new dex) is also incentivizing xStella with additional incentives. I am not advocating that we do this. I believe that simply giving users a way to earn yield on Orca will result in significant increase in interest.

Ultimately, I am open to other ideas for increasing interest in the Orca token, but I firmly believe a value accrual mechanism is a must.

If you want to put out a formal proposal around a “ve” token model instead, for instance, I’m open to discussing it.

2 Likes

If you want to put out a formal proposal around a “ve” token model instead, for instance, I’m open to discussing it.

Ultimately, that’s something one cannot decide in a vacuum. Tokenomics & value accrual must be embedded in the broader strategy of project - something of which we know too little.

2 Likes

I agree with this partially. I will say I’m frustrated that the team hasn’t provided their opinions. Let’s get the most educated voices available speaking on this!

One of the reasons I proposed the xToken model is it feels “simple” to implement (in that it doesn’t require robust governance like a ‘ve’ token, nor particularly adventurous coding), and that it can be “tacked on” based on what I currently know about the state of the project.

4 Likes

In my opinion the issue which needs to be solved is:

  1. ORCA is a startup company with all consequences and focusing only on tech - destructive for token holders
  2. We still don’t have even slightest ideas for potential utility for ORCA token, except gov.proposals
  3. ORCA is agressively incentivize liquidity at the expense of token holders
  4. Protocol revenues (>$5mln now) goes nowhere in the moment, despite huge cash pile from VC investments which ORCA received in september of last year ($18mln)

Not so many utility options in the moment (it is dynamic, but what we have now):

  1. Sharing protocol revenues (xORCA model), can be either in ORCA itself or USDC
  2. Voting Escrow models (here it can be locked like SBR, CRV or dynamic, like JOE, Platypus)

Issue which needs to be solved:

  1. Remove excessive overhang of ORCA tokens from incentive programs
  2. Make it attractive for long term hodling
  3. Incentivize liquidity but in the hands which will be hodling ORCA at least for some period of times

Interesting models to think about:

  1. Locking some amount of ORCA to receive NFT which can be used in voting / proposals (Marinade)
  2. Creating robust second layer i.e. creating tokenomics which can be used by another protocols to provide its users for best APRs possible (ve model)
  3. Bonding of liquidity pools (i.e. fixed term for providing liquidity), have a look at Osmosis

It’s no surprise that biggest liquidity providers on ETH and AVAX networks are not users actually but other protocols, which can be build on top of CRV, JOE, Serum etc… For nor ORCA did nothing in terms of thinking about this and the only way to create such thing is tokenomics. Biggest thesis here is that without proper tokenomics implementation any protocol is doomed to failure, without any exceptions and we’ve seen that too many times in DeFi. Team were talking about sharing of protocol revenues since september of last year actually. Nothing is done for now.

The only reasonable solution in my opinion which can make ORCA attractive in terms of technologies and tokenomics is to make it all at once:

  1. veORCA in either form (dynamic or locked) - this will create interesting opportunities for aggregators which can be build on top of ORCA and finally add non-leveraged liquidity (tulip/francium/apricot) with interesting incentives model (look for CVX and CRV example) + boosted rewards model
  2. xORCA for sharing protocol revenues in the form of ‘locked’ ORCA (same as Aldrin)
  3. Bonding of AMM pools and Range AMM pools (whirlpools) for users in order to receive higher APR (Osmosis)
  4. Governance allowed only with veORCA accumulated

Otherwise protocol won’t solve any issues listed above and simple airdrop or sharing of revenues won’t change gameplay at all. Main pools in terms of turnover are SOL pools so competition here is only between Serum and ORCA in terms of SOL trading and attractive models.

2 Likes

I think this underestimates the impact of the dual effects of Orca buybacks and Orca staking for xOrca.

But like you’re suggesting, xOrca doesn’t necessarily preclude a ‘ve’ model in the future. I believe Astroport on Terra has both.

But governance mechanisms, including convex style value capture from bribes, would take time to think through and implement properly. And you would want to build bribes into it, like Solidly. (Now obviously that project isn’t a very good role model, but the logic behind that piece of it is sound. Curve left a lot of value on the table that Convex was able to scoop up).

We could also experiment with increased rewards for locking. However, I hesitate to use Osmosis as an example though. Osmosis doesn’t really have any peers (Gravity Dex and Sifchain are weak competition). Locking could discourage people as much as it incentivizes them.

One of the big reasons xOrca is a great choice is because of how relatively simple it is. The mechanism is already on Aldrin (as has been pointed out to me) and so could be forked. It doesn’t rely on any other pieces to be in place. And gives people a reason to hold the token for something other than an LP.

1 Like

My thougths are that xMODEL will definitely create utility for orca holders and gonna compete with ORCA AMM pools. So in order to balance staking and LPs activity veMODEL is needed as well. Plus there should be much more modern options for farming (presented above as well). I think that team has to give it a thought and outline it in roadmap if team is interested in ORCA protocol at all though… xORCA should be super easy to make, even if aldring is not forkable by some reasons it’s not that hard to code it from scratch.

1 Like

Yes, perhaps makes sense to first trial xORCA initially and then observe participants’ behavior - then introduce veORCA or something more complex.

1 Like

How well has xToken model worked with Aldrin? I imagine they haven’t been running it for too long?

1 Like

I’d support doing it as a trial. If the team decides after a few months to go another way, it’d be a simple matter to just end buybacks and allow users to unstake for their share of the accumulated Orca. That’s actually a very good idea.

So I can tell you that Stellaswap (disclaimer, I work for Stellaswap over on moonbeam part time) implemented an xToken, and we saw an increase not just in token price, but also in engagement. Now that there was something to “do” with the token, people were more interested in holding it.

As for Aldrin, I haven’t followed them that closely.

1 Like

If xORCA gave locked ORCA rewards, what sort of locked periods (or ratios) would you see as reasonable?

1 Like

Regarding locked rewards: not more than monthly release of ORCAs

Agree with ogre44444 it’s super easy, for aldrin it resulted in much more stable token price than ORCA being honest, as it’s better to stake your RIN, which you received on farming till another cycle + much bigger engagement + much more enthusiastic community thinking about protocol actually …

Without veMODEL there will be no future in the long run for ORCA, without xORCA there will be no future for ORCA protocol at all … we’ll just see token price at $0.10 in the middle of this year and it all end with tears

2 Likes

I don’t know if that really works. xOrca is backed by Orca. It isn’t as if we are issuing new tokens to people that would need to vest.

1 Like

Yep, emission-only protocols death spiral sooner or later, as a falling token price requires greater and greater emissions. Orca-* pools (incentivized by Orca of course) can only soak up so much.

2 Likes

I agree with the need to Orca tokens to accrual value. I just think that, with all this thing of concentrated liquidity, team won’t - and shouldn’t- focus on that for now. Even though I said that, I will take part in this discussion.

TRADERJOE’s model is not xToken anymore. They reshaped their tokenomics and I think it would suit Orca better. In their platform, instead of staking JOE tokens to receive more JOE (old xJOE model), creating sell pressure for the token from farmers and stakers, now you stake JOE to receive sJOE which will rewards you with USDC that comes from platform fees. It seems a much more viable and sustainable model. It would create Orca demand, but not necessarily weekly or monthly sell pressures from investors cashing their rewards out. In this way, people could farm Orca tokens and instead of dumping it could be better to accrue some passive USDC income. If they want more passive income, they would need to buy more ORCA tokens (or provide more liquidity, which is also good), thus creating more demand pressure, instead of just receiving ORCA from single staking.

And just for the record, if I am not mistaken, Tulip has something similar to xToken model. You stake tulip and receive sTulips in return. The stulip token accrues value from the platform and can be redeemable for more tulips. The token have not seen any upside since then, but markets are not viable to upsides either way (for disclosure: I stake tulips). I also believe that staking Raydium rewards the holder not only with incentives but also fees from the platform.

1 Like
  1. Bonding of AMM pools and Range AMM pools (whirlpools) for users in order to receive higher APR (Osmosis)
    I agree