Summary
If passed, this proposal will approve:
(i) building and deploying an autonomous, open-source liquid staking smart contract (“xORCA Pool”) into which ORCA tokenholders may supply their ORCA in order to receive xORCA, which entitles participants to receive staking-based rewards, funded from discretionary token contributions to the xORCA Pool and then may be used to withdraw staked ORCA and rewarded ORCA in the xORCA Pool;
(ii) utilizing 20% of the protocol fees (“Protocol Fees”) generated by Orca’s “whirlpools” autonomous, open-source smart contract (“Whirlpools”) to purchase ORCA on the open market and deposit it into the xORCA Pool to support incentive mechanisms based on staking activity;
(iii) depositing 30% of the Protocol Fees in a treasury wallet to be utilized at the discretion of ORCA tokenholders, subject to governance, to drive Orca ecosystem growth, which may include additional buybacks to feed the xORCA Pool, acquisitions, community grants, or such other initiatives it deems appropriate;
(iv) providing the initial development team with a grant of the current USDC balance in the Orca protocol fee treasury wallet (the “Protocol Fee Treasury”), so that the initial development team can utilize them as follows:
(A) 10M USDC will be dedicated to purchasing ORCA on the open market which will then be used for incentive-align grants (subject to at least a one-year eligibility period and a four-year lock-up) for contributors and new hires over next six years; and
(B) 19M USDC (net taxes) will be utilized to provide the initial development team with sufficient fuel to fund its existing operational and growth objectives required to help Orca achieve continued success in the ever-evolving and competitive Solana DeFi landscape;
(v) relinquishing governance control of Whirlpools to ensure the initial development team can efficiently deploy upgrades and product improvements, provided it builds and deploys the xORCA Pool and honors the intent of this proposal; and
(vi) burning 25M of the ~40M ORCA remaining in the ORCA community treasury wallet (the “ORCA Treasury”).
Description
Since ORCA tokenholders voted to reallocate its trading fees via governance, the Orca community has continually been exploring various alternatives to utilize the fees generated by Whirlpools,Orca’s decentralized peer-to-peer finance application which is a decentralized concentrated liquidity automated market maker comprised of certain public, open-source or source-available smart contracts deployed on the Solana blockchain on which traders or liquidity providers of SPL tokens can transact on a peer-to-peer basis. ORCA tokenholders and community members have been discussing these matters at length on Orca’s governance Forums (see e.g. this post), in Discord, at Orca events around the world, and through various other channels. The Orca Governance Council has heard you! This comprehensive proposal represents an amalgamation of all these suggestions and feedback.
We firmly believe this proposal is consistent with Orca’s commitment to “leveling-up” as we rounded the corner on the 4th anniversary since its community launched as one of the first decentralized peer-to-peer finance applications on the Solana ecosystem! Now, let’s break down each component of this proposal and explain how it levels up Orca and ORCA.
Development of xORCA Pool
The conception of the xORCA Pool is motivated by the desire to create a means for ORCA tokenholders to participate in protocol-aligned staking incentives, funded by the protocol trading fees (i.e., Protocol Fees) generated by the autonomous, open source smart contract referred to as Whirlpools. This proposal would charge the initial development team with scoping, building and deploying an open-source autonomous liquid staking smart contract (i.e., the xORCA Pool) into which ORCA tokenholders may supply their ORCA in order to receive staking participation incentives funded by protocol-directed reward allocations of the Protocol Fees! Specifically, here is how it will work:
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Tokenholders may elect to supply ORCA tokens into the xORCA Pool in exchange for xORCA tokens that represent their initial share of the ORCA plus any allocable share of ORCA rewards earned during the staking period in the xORCA Pool; provided, however, that such staked ORCA does not begin earning rewards until two days after it is initially staked, i.e., there is a two-day eligibility period.
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20% of the Protocol Fees generated by Whirlpools each week will be used to programmatically purchase ORCA from the open market (the “Programmatic Buybacks”), and then all of the purchased ORCA will be deposited into the xORCA Pool, thereby increasing its total size.
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Since xORCA represents a share of the xORCA Pool, as the total amount of ORCA in the xORCA Pool grows due to the open-market buybacks being deposited, the value of each xORCA increases proportionally.
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The exchange rate between xORCA and ORCA is given by: Exchange Rate=Total ORCA in PoolTotal xORCA Supply\text{Exchange Rate} = \frac{\text{Total ORCA in Pool}}{\text{Total xORCA Supply}}
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Initially, 1 xORCA might equal 1 ORCA. Over time, as more ORCA is added, 1 xORCA may be redeemable for a greater amount of ORCA, subject to participation rules and protocol-defined parameters.
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xORCA will be transferable and liquid. In other words, even though a tokenholder’s ORCA would be in the xORCA Pool, the tokenholder would still have liquidity when holding xORCA. Tokenholders would be able to trade or use xORCA in various decentralized applications, all while their share in the growing ORCA in the xORCA Pool continues earning protocol rewards fueled by the Programmatic Buybacks utilizing a portion of the Protocol Fees!
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In addition to being transferable and liquid, xORCA may be redeemed for its initial staked ORCA plus any allocable share of ORCA rewards earned during the post-warm-up staking period in the xORCA Pool (collectively, the “Redeemable ORCA”). Mechanically, once a tokenholder deposits xORCA back into the xORCA Pool, the amount of Redeemable ORCA will be set (i.e., ORCA rewards will no longer accrue to such deposited xORCA) and will be eligible to be withdrawn after a 15-day cooling off period.
While we considered granting 50% of the Protocol Fees to buyback ORCA to be deposited into the xORCA Pool, given current market conditions, we believe it is more prudent to initiate this endeavor with a split of 20% being dedicated to the Programmatic Buyback for the xORCA Pool and 30% being dedicated to the Protocol Fee Treasury. As market conditions evolve, ORCA tokenholders can continually choose how to utilize the Protocol Fee Treasury through governance, which may include further feeding the xORCA Pool, community grants, or any other initiative it deems appropriate to drive Orca ecosystem growth.
We believe development and implementation of the xORCA Pool optimizes for the goal of utilizing the Protocol Fees to accrue value to ORCA in an efficient manner, which provides ORCA tokenholders with ongoing liquidity optionality and simultaneously improving the overall health of the ORCA token.
In connection with building and deploying the xORCA Pool, we are proposing to relinquish governance control of Whirlpools to ensure the initial development team can efficiently deploy upgrades and product improvements, integrate it with the xORCA Pool, and build an automated mechanic to effectuate the Programmatic Buyback.
Grant to the Initial Development Team
Orca’s initial development team has been an extremely responsible steward of capital since it raised its initial capital from their private sale of ORCA 3.5 years ago. They have fully distributed all the tokens that were sold in that private sale, so there is no overhang remaining from the raise, and they still have approximately three months of runway remaining. They have responsibly utilized that capital to build one of the most successful decentralized DeFi protocols on Solana, which has generated over $300B in trade volume, over $390M in LP fees, and over $39M in protocol fees from over 8.5M unique traders and over 290K liquidity providers transacting on a peer-to-peer basis on Orca’s smart contracts. However, the initial development team is not sitting on its laurels; instead, they are leveling up, scaling their product/engineering team, and continuing to ship innovative product improvements, such as the recent launch of the new Liquidity Terminal in beta and upcoming release of Adaptive Fees, currently in audit. To ensure the development team has the fire power and fuel necessary to achieve continued success status in the ever-evolving and competitive Solana DeFi landscape, as well as to incentivize it to build and deploy the xORCA Pool smart contract scoped out above, we are proposing to grant them the current USDC balance in the Fee Treasury so that the initial development team can utilize these funds as follows:
(A) 10M USDC will be used to purchase ORCA on the open market which will then be used for incentive-align grants for new hires (subject to at least a one-year eligibility period and a four-year lock-up); and
(B) ~19M USDC (net taxes) will be utilized for ongoing operations and scaling the team.
To reduce the net economic impact of this grant on the ORCA tokenholder community, we are proposing an accompanying burn of 25M of the ~40M ORCA remaining in the ORCA Treasury. This will reduce the total supply of ORCA tokens by ~25%, taking it down to 75M from 100M. The ORCA tokenholder community will continue to have governance rights over the remaining ~15M of ORCA Treasury.
Conclusion
We are supportive of this proposal because (a) the xORCA Pool is an efficient mechanism to accrue value from Whirlpools to the ORCA token and (b) the ~27M USDC grant to the initial development team will provide them with the resources necessary to win. In addition, this proposal would greatly reduce the cognitive load of governance and increase operational efficiencies, as it would limit assets over which ORCA tokenholders would have governance rights to (1) the autonomous xORCA Pool, (2) the remaining ~15M ORCA in the ORCA Treasury, and (3) the growing assets in the Fee Treasury, including ~50K SOL.
By passing this proposal, ORCA tokenholders will also be directing the Council and the Board of Directors of Orca Foundation to take any and all actions they deem necessary or appropriate to implement the direction and intent of each component part of this proposal, including by amending the Bylaws.
Let’s level up and grow Orca into the dominant Solana liquidity layer we all know it can become!
Council Discussions and Preliminary Approval
This proposal was discussed and considered during the Orca Governance Council meetings convened on 28 January 2025 and 18 March 2025. Unanimously, all present Council members endorsed the submission of this proposal for an on-chain ORCA tokenholder vote.
Governance Process
Forum Discussion
This proposal will be posted here for a discussion period of at least 4 days before it is formally put to a tokenholder vote. This period allows community members to review the details of the proposal and share feedback.
Voting
After 4 days, a Council member may submit the proposal using their Council Token to the Contracts Governance account (4rxdK…6WNGt). The account contains the following voting parameters:
Voting Period: 5 days
Tokenholder Threshold: 3,000,000 ‘yes’ votes
Veto Threshold: 4 Council votes
Cool-down Period: 2 days