Kanpai: Bear Market Protection with Treasury Revenue

[yuan-han-li]

TL;DR

Introduce a governance-controlled ‘payout ratio’ parameter (initially set to 90%). This will divert a portion of trading fees (100% - payout ratio) from xSUSHI stakers to the Treasury as revenue denominated in a reserve asset, e.g. ETH or DAI. At a payout ratio of 90%, xSUSHI holders are paid out 90% of the 5bps, or 4.5bps, and the remaining 0.5bps are sent to the treasury as retained earnings. Introducing retained earnings will offer valuable bear market protection as well as allow SUSHI holders to govern a new cash flow, which could be used to reinvest in growth or generate non-operating income.

Summary

Written by Yuan Han Li and Aleks Larsen (@aleks-bcap) on behalf of Blockchain Capital

As recent market dynamics have shown, crypto asset prices remain highly volatile and we should expect this to be the case for the foreseeable future. Sushi’s treasury is currently denominated entirely in SUSHI, and while this provides great upside for the treasury, it also leaves the treasury vulnerable in the event of market dislocations. Since the treasury has no income other than SUSHI emissions (which will end in 2-3 years), and since operational expenses are incurred in USD terms, the treasury might be forced to pay expenses by selling SUSHI in a prolonged bear market (=bad for token price, bad for our Master Chefs, and bad for xSUSHI stakers at the SushiBar).

Thus, as SUSHI holders, if we want to continue enjoying delicious SUSHI at the SushiBar by staking xSUSHI, it is important that we show appreciation to our hardworking Master Chefs by making sure they have an income model that is sustainable longer term. Traditionally, when eating at a sushi bar, one way to do this is by offering the hardworking chefs some sake and saying “Kanpai!”. In our case, we can support the hardworking Master Chefs of the Sushi ecosystem in perpetuity by introducing a ‘payout ratio’ to start retaining some earnings in the treasury.

The ‘payout ratio’ is a parameter that corporations typically have which determines how much of their net income is distributed to shareholders as dividends vs how much is retained in their treasury for reinvestment purposes. Normally, high-growth companies are able to re-invest at a high rate of return, and for that reason they typically choose to set the payout ratio to 0 until they can no longer find productive ways to reinvest the capital. We think this concept is extremely useful and should be a governance-controlled parameter for Sushi holders to determine and change over time.

High-level contours of our proposal:

• Our suggested approach is to divert a portion of trading fees determined by a new parameter, ‘payout ratio,’ into a reserve asset (e.g. ETH/USDC/DAI/USDT/WBTC) and send it to the Treasury as retained earnings that governance can decide what to do with. For example, if the payout ratio were set to 90%, this would mean that 10% (0.5bps) of the 5bps currently earned by xSUSHI holders as dividends would instead be sent directly to the treasury.
• Using total fees generated in the last 30 days ($74.56mm), the Treasury could have generated ~$1.24mm in revenue (@ a payout ratio of 90%), which annualizes to nearly ~$15.12mm.
• While this is a big number and more than covers Sushi’s operational expenses, any excess (i.e. profit) could be used to yield farm to grow the treasury, conduct long-term sustainable liquidity mining programs, pay core team salaries, incentivize the core team with bonuses, and/or diversify the Treasury’s asset base for enhanced bear market protection and further ensure we can continue to support our hardworking Master Chefs.
• Moreover, having a healthy Treasury means that if SUSHI price evers drops too much, Treasury funds (from retained earnings) can be used to buyback SUSHI to support token price and allow xSUSHI stakers to enjoy even more SUSHI!

Motivation

The purpose of Sushi’s DAO and Treasury is to support and maintain the Sushi protocol in perpetuity. This means that the Treasury needs to always be able to meet Sushi’s operational expenses (e.g. audits, dev salaries, marketing etc.).

Currently, the Treasury’s only income stream is SUSHI block emissions, but SUSHI will reach its supply cap in the next 2-3 years, so this is not a long term solution. Moreover, the vast majority of Sushi’s operational expenses are incurred in USD terms, so block emissions and existing SUSHI held in the treasury cannot be used to meet expenses without being sold.

Although the ~$616.7k worth of stablecoin/ETH in the Sushi Dev Fund and the $2.5mm in stablecoin/ETH/BTC from the sushiHOUSE proposal is a good start to diversifying the Treasury, ~$3.12mm in non-SUSHI assets where >50% is held in ETH/BTC could still prove to be insufficient to meet all operational expenses if BTC/ETH experiences another multi-year bear market like in 2018-19. If this occurs, the Treasury might be forced to sell SUSHI at very low prices to meet operational expenses, which would then cause a further downward spiral in SUSHI prices. It is thus paramount for the Sushi community to expand current Treasury Diversification efforts, and ideally find a Treasury Management solution that:

1. Will have minimal, and ideally no impact, on SUSHI price.
2. Is low risk (the DAO could choose to collateralize Treasury SUSHI for a stablecoin loan, offering liquidity without selling SUSHI, but this has the potential to go very very wrong—especially without any Treasury income).
3. Can generate sufficient amounts of revenue to always cover operational expenses.
4. As a bonus, can generate income in excess of yearly expenses so that leftover profit can be used to expand the current Treasury diversification efforts and further protect the Treasury’s asset base in the event of a bear market (i.e. use excess income to Yield farm, stake ETH with Lido/RocketPool, lend stablecoin on Aave/Compound/Cream, invest/do token-swaps with strategically aligned protocols like Yearn, buyback SUSHI, etc.).

We think the best solution that meets all of the above requirements would be for the DAO Treasury itself to have an operational income stream denominated in hard currency, just as traditional corporations and many of Sushi’s peers do (Yearn, BadgerDAO, Aave, and Index Coop all generate income through their product-lines that is sent to the treasury). The most elegant approach to enabling this would be by introducing a governance-controlled ‘payout ratio’ parameter.

This proposal is limited to the establishment of a new governance-controlled cash flow via a payout ratio. Future proposals will be required to determine the processes for how the new treasury income will be spent on operational expenses (dev salaries/bonuses, audits, marketing etc.) and other initiatives (liquidity incentives, investments, SUSHI buybacks).

Specification

Sushi currently charges traders 30bps on all trades: 25bps goes to LPs and the other 5bps is reserved as fees until someone generously chooses to serve it up as SUSHI to xSUSHI stakers in the SushiBar. With this take rate, in the last 30 days, the total fees generated for LPs and xSUSHI holders was $74.56mm; annualizing this figure gets us to ~$907.15mm.

We propose the introduction of a ‘payout ratio’ on the 5bps currently sent to xSUSHI stakers (to be set to 90% initially). Concretely, this means 0.5bps would be reserved by the protocol as Treasury income and be served up as ETH/USDC/DAI/USDT/WBTC to the Treasury with the remaining 4.5bps going to xSUSHI stakers as SUSHI. If the ‘payout ratio’ had been set to 90% previously, the Treasury would have generated ~$1.24mm in the last 30 days, which annualizes to nearly ~$15.12mm in income.

We think that a payout ratio of 90% is a relatively low amount of dilution (just 10%) for xSUSHI stakers but would still be very effective in helping the Sushi protocol be sustainable in the long term, since millions of dollars in revenue every year will allow the Treasury to support Sushi’s operational needs comfortably while also giving the Treasury ample amounts of excess profit to invest and diversify its asset base, or conduct SUSHI buybacks during bear markets.

Alternatively, the community might also think that 90% results in too much dilution of xSUSHI income, or that LPs should also give up some of their income too; however, we believe that given Uniswap currently gives LPs the full amount of fees, Sushi should not be diluting LP income any further lest Sushi weaken its competitive positioning. Furthermore, the ‘payout ratio’ of 90% is just a suggestion and can be increased for less dilution of xSUSHI stakers, e.g. to 95% (which amounts to ~$621.33k in the last 30 days and annualizes to nearly ~$7.56mm), but we think that giving the treasury more income will allow the treasury to have a healthy surplus to invest and diversify its assets without having to sell SUSHI.

Implementation:

Currently, when SUSHI is served to the SushiBar (through the SushiMaker.sol or SushiMakerKashi.sol contract), tokens reserved as fees are removed from the liquidity pool, swapped into WETH, and then finally swapped from WETH into SUSHI and ‘served up’ to the SushiBar (e.g. DAI and USDC reserved as fees on SushiSwap are removed from the USDC-DAI liquidity pool, swapped into WETH, then into SUSHI and served to the SushiBar). One possible way, then, to send the 0.25bps of fees allocated to the Sushi Treasury might be to modify _convertStep within SushiMaker.sol and SushiMakerKashi.sol to:

1. Convert 1 - payoutRatio of all fees already denominated in SUSHI into WETH, then send this WETH to the Treasury address before serving the rest of the SUSHI directly to the SushiBar (currently, all fees already denominated in SUSHI are sent directly to the SushiBar within _convertStep).

2. In all other cases, during the final stage of the _convertStep process (when the tokens are converted into WETH before they are converted into SUSHI), send 1 - payoutRatio of the WETH to the treasury before converting the rest into SUSHI to serve xSUSHI stakers in the SushiBar.

If this proposal is passed and implemented as outlined, no active management will be required and all Treasury revenue/income will then be denominated in WETH. We leave it up to future governance proposals to decide what to do with this WETH, but one idea would be to create a program which programmatically swaps WETH into stablecoin and WBTC every once in a while (e.g. on a monthly basis).

Conclusion:

Managing the Sushi Treasury’s income streams and assets to more closely match its fiat expenses is crucially important if the DAO and Treasury are to support the Sushi ecosystem/protocol in perpetuity.

The Treasury’s current near 100% SUSHI allocation could prove to be risky in the event a prolonged bear market occurs, so the Treasury is in need of expanding its ongoing diversification efforts. By creating a new governance-controlled ‘payout ratio’ parameter, to be initially set to 90%, 0.5bps of the 5bps of the fee revenue currently paid to xSUSHI stakers will be sent to the Treasury instead. This gives the Treasury enough revenue every year to cover operational expenses and also an ample surplus to invest in low-risk assets to further diversify the Treasury and bring in non-operating income (e.g. by yield farming, providing liquidity on SushiSwap, staking ETH).

Polls

Overarching Proposal Poll

I support this proposal in principle:

• Yes
• No

Payout Ratio

Payout Ratio	95%	90%	85%	80%
Treasury’s Fee Rate	0.25bps	0.5bps	0.75bps	1bps
xSUSHI Fee Rate	4.75bps	4.5bps	4.25bps	4bps
Annualized Treasury Revenue	$7.56mm	$15.12mm	$22.68mm	$30.24mm
Annualized xSUSHI Revenue	$143.63mm	$136.07mm	$128.51mm	$120.95mm

Vote for the value the payout ratio should be set to initially:

• 95.0%
• 90.0%
• 85.0%
• 80.0%
• Even smaller ratio

Income Denomination

Vote for the income’s denomination:

• WETH
• Stablecoin
• WETH+Stablecoin (50/50)
• WETH+Stablecoin (Some other split)

Additional Resources:

1. Aave Revenue Collector Wallet
2. Badger Revenue Collector Wallet
3. Index Coop Treasury/Revenue Collector Wallet
4. Sushi Treasury Wallet (NB: A large portion of the SUSHI held by the Treasury is unvested SUSHI held on behalf of onsen farmers as per this proposal)
5. Sushi Growth Fund/Operations Multisig/Devfund Wallet

[Guerilla]

Please don’t touch my 0.05% and find another way to manage the Treasury.

[hhk]

This is a really good proposal, strong yes !

[ceteris]

good and needed proposal imo, never too early to start thinking about long-term funding. think having 50/50 exposure eth and usdc would be a good balance. could integrate with some yearn vaults (50% lido staked eth/50% usdc) or just lp weth/usdc. would support aggressive treasury fee rate at this stage in sushi’s life.

[oxide]

As indicated in my tweet, I think this is a great idea. I’m not fully familiar with Sushi’s operations and the dev team’s funding mechanism at this point in time, but I’ve tried to provide my opinion on this without too many assumptions. Please correct me where I’m wrong, but hopefully my thoughts can be of some value.

Benefits of a Diversified Treasury

Creating a diversified treasury is key to the longterm stability and development of the Sushi project. This is true not only because selling Sushi from the treasury during a bear market to finance development is counter intuitive - most firms buyback their shares when prices are low - but because the success of Sushi will be correlated with the broader success of Ethereum and DeFi. It makes sense to achieve this diversification through a Payout Ratio (a small cut of xSushi returns) because it represents a consistent income stream that will finance development in perpetuity - so long as xSushi continues to earn some kind of yield. Long term this might allow for development of Sushi to be funded entirely by operating revenue of the Sushi platform and not by selling Sushi, which might allow some sushi in the treasury or dev multisig to be burned, used on the onsen, or airdropped to users.
See Yearn: Own the Land on Which We Operate for an argument as to why holding Eth in a treasury is beneficial.
However, care should be taken to not scare Sushi investors with the prospect of the returns of Sushi/xSushi changing significantly due to the payout ratio changing significantly.

Payout Ratio Floor and Effective Payout Ratio

I believe we should first vote via Snapshot on a hard floor for the payout ratio, the Payout Ratio Floor, and then vote on an Effective Payout Ratio that lies between 1 and the Payout Ratio Floor value. The Payout Ratio Floor value would indicate that the community only supports a payout ratio at or above the floor value. This should ease fears of sushi holders that worry their xSushi returns might be significantly reduced, if a proposal to set a payout ratio, at say 75%, were to pass. In my opinion, a reasonable floor value would be 0.5bps/90%, ie. the cut towards funding a diversified treasury should not exceed 10% of the total xSushi revenue. The Effective Payout Ratio would be adjustable by a community vote/proposal, but could never be lower than the Payout Ratio Floor.

Voting

Ideally, setting the Payout Ratio Floor would be done through a super majority 2/3 vote. First, vote on what the payout floor should be, the most popular option wins, and then a super majority vote would be required to either accept or reject the given payout ratio floor.

Once this proposal has passed, it would then make sense to move forward with voting on an Effective Payout Ratio, ie. the ratio that will be implemented and take effect in diverting funds to the treasury. This vote could be achieved by listing a number of effective payout ratio options in the valid range, 1 → Payout Ratio Floor. The option that represents the median point of votes, with 50% of voters lying at or above the ratio, and 50% at or below the ratio, would be implemented as the Effective Payout Ratio. The Effective Payout Ratio could be re-voted on a predetermined schedule, or by any core team proposal, using the same voting method. This method guarantees a result of re-voting on the Effective Payout Ratio, and ensures the majority of voters get a result that is favorable, even if no single effective payout ratio value has a majority vote.

Summary

This system for voting on the Payout Ratio Floor and Effective Payout Ratio should help ease fears of Sushi holders worried about uncontrolled reductions to xSushi returns, whilst allowing an Effective Payout Ratio to be easily picked and revoted on. Making the Payout Ratio Floor a fixed value gives certainty to Sushi holders that no Effective Payout Ratio proposal will decrease xSushi returns beyond the value allowed for by the Payout Ratio Floor.

[Vogz]

I support this proposal in principle, but:

I think payout ratio should be dynamic, to target a certain yearly Treasury revenue amount.

• Once this amount is reached, the payout ratio should reset back to where it is now.
• The amount should be inflation weighted, as defined by yearly M2 increase, so the relative value will be retained instead of diluted by the money printer.

[hhk]

As i said before, I think it’s a good proposal for the long-term.
But after reading few comments here & on twitter, short-term, it clearly seems we could achieve the same goals with a better usage of the current treasury.

[yuan-han-li]

Thank you everyone for the valuable feedback. Feedback so far (across Twitter, here, and Discord) seems to fall into two broad camps, we provide these views along with some of our thoughts below:

I agree with Kanpai in principle, but let’s find a way to put a cap on the amount of income that can be taken from xSUSHI stakers

The point of Kanpai is to have surplus income after operating expenses are paid. Having the surplus income is important because it can be used to build up treasury reserves in ETH/DAI that offer valuable diversification for bear market protection or be spent on strategic initiatives/investments. This is why it doesn’t make too much sense to cap the amount of treasury income.

Why not just sell SUSHI instead? We can sell treasury SUSHI, or we can sell new SUSHI emissions, after all, divesting SUSHI:

1. Achieves the same thing (Kanpai results in reduced buying pressure which is equivalent to more selling pressure)
2. Doesn’t touch contracts, so would be simpler to implement
3. Does not touch xSUSHI yield

First of all, while it is true that divesting SUSHI will achieve a similar set of end goals (except for setting the correct precedents to enable governance to control income retention in the future), feedback from the core team indicated that divesting large amounts of SUSHI or starting some kind of periodic divestment program could be more politically difficult to pass.

Though it is also true that Kanpai will reduce buying pressure by (1 - payoutRatio)%, we’re not sure that reduced buying pressure is necessarily equivalent to selling pressure because optically, especially when the thing doing the selling is a whale (such as the Sushi treasury), the reactions of other market participants tend to be more panic-stricken when sales occur. Also, governance can always elect to use some of the reserves built up by Kanpai for a discretionary buyback program like Yearn’s, which would result in increased buying pressure during bear markets. Surely concentrated buying pressure to support token price during bear markets more than makes up for a general reduction in buying pressure? It should also be noted that trading fees are also a function of trading volume (which is likely to be higher in a bull market), so if it is true that reduced buying pressure is equivalent to selling SUSHI, then Kanpai is akin to DCAing sales of SUSHI—surely this is a better way of divesting SUSHI than doing so discretionarily?

The contract changes entailed by Kanpai are also super simple to implement and won’t take up much dev-time at all, it is simply a few lines in two contracts. By comparison, every time SUSHI is divested discretionarily will use up valuable core-team-time.

Finally, we do think modifying xSUSHI income makes a lot of sense because Sushi is essentially an on-chain corporation developing a number of DeFi products (SushiSwap, MISO, Shoyu, Kashi, etc.). No corporation in the real world has a 100% dividend payout ratio, especially fast-growing tech startups. This is because in traditional finance if the ROI of investing in the core business (ROIC) is higher than the cost of capital, a corporation should be retaining and investing all its earnings in the core business rather than distributing any of it to shareholders. This is how Amazon became who they are today. Given Sushi is essentially a fast-growing tech startup, and given you all believe that the ROI of investing in the Sushi protocol is higher than the opportunity cost of capital (otherwise rationally-speaking you wouldn’t/shouldn’t be investing in SUSHI), this naturally means that the protocol itself should be retaining income. Furthermore, just thinking long term, governance should have the ability to determine whether earnings are retained and how to reinvest them—this is a proposal to do exactly that and give governance these tools.

[Tangle]

Good points in this. Having Dynamic rate could be an interesting way to satisfy anyone who is on the fence about this proposal. If, target is reached, then back to rewards as usual. Also the relation to Inflation is a key aspect as well, as that could get slippery in the current economic environment. I’ll look into this some more, but I there is some good stuff here.

[Graine]

Thanks for writing a detailed proposal!

While I see this as a potentially interesting solution, the problem discussed is many months away.

The previous treasury management proposal was meant to be a trial run before committing more funds.
I firmly believe that if it manages 10%+ APR consistently, then increasing allocation to $30-50M should cover any and all development costs. And if it doesn’t - we should just stick the same funds into a yearn vault or similarly insured & battle-tested solution.

We should maximize the yield of the funds we already have, instead of trying to dedicate even more funds as a lazy band-aid.

The reason of why previous treasury proposal passed (at least for me) was that it addressed funding during prolonged bear market.

Tampering with xSushi yield that is already not competitive will trigger a flight of liquidity even further.

I am expecting hoping the dev team will come out with a rider detailed budget report, so that we could accurately estimate whichever expenses they expect to incur.
Thus, I believe we should postpone the implementation of this proposal until either previous treasury proposal proves to be inadequate, or new iron-clad argument of Kanpai’s necessity is introduced.

P.S. Dynamic taxation, whether in a FED-like ‘we set the rates beforehand’ or an algorithmic curve derived from a fiat balance on specific wallet, will introduce the hanging sword of uncertainty to anyone still willing to consider having xSushi for its yield. Nothing like opening your wallet and seeing your tokens yield for last month was a big fat zero, because all the proceeds went somewhere else.

I’m slightly surprised by the speed of corporatization discourse. Talks of bonuses and unconditional fiat targets. One would think the appreciation of sushi was a sufficient bonus already, for those who chose to align their payouts with the prospects of the protocol.

[zafalijadev]

Counteproposal: Sushibar could buy SUSHI from the treasury

I propose that the bps subtracted from the SushiBar and diverted to the treasury in the original proposal are matched by an equal amount of Sushi (denominated in dollars) by the treasury.

In other words: all the bps not used to buy SUSHI from the SUSHI-ETH pair are used to buy SUSHI from the treasury; the Sushibar is buying the same amount of SUSHI, hence the APY for xSUSHI holders is untouched.

---

Pro:

• xSUSHI APY stays the same
• the treasury can stack harder money (ETH, stables) to hedge against SUSHI volatility (stables are of course less coupled to SUSHI than ETH)
• NO additional selling pressure
• buying pressure from the Sushibar stays the same*
• team members can sleep better knowing that the treasury won’t risk financial default

* you could say that the “missing” (ie diverted to the treasury) bps are not used to buy SUSHI-ETH, so there’s slightly less buying pressure; this reduced buying pressure is largely offset by the removed selling pressure.
Since the Sushibar is financing the treasury (and the team) with a few bps of harder money, you could say that the selling pressure will be largely reduced because the treasury won’t be forced to sell any SUSHI.

---

Cons:

• slightly less fees generated on the SUSHI-ETH pair, can be easily fixed increasing the allocPoints

I can’t see anything else to be honest.

[yuan-han-li]

@zafalijadev you also need to think about how the circulating supply of SUSHI will come into play. Although the original Kanpai reduces staking APY, it does not increase the circulating supply of SUSHI (since Treasury SUSHI is effectively locked up and non-circulating). By comparison, your suggested counter-proposal will increase circulating supply and can therefore still indirectly lower your SUSHI APY—with more SUSHI in circulation than before, some of the new SUSHI will end up in the hands of new stakers, which can/will dilute away your individual APY.

[yuan-han-li]

Here is also some additional analysis as to why we think Kanpai is the right approach to take if we want Sushi to succeed over the long term:

1. A big reason to reduce staking APY in the first place is the fact that although it means tokenholders will earn less yield today, the reduced yield you are earning will translate to more overall price appreciation over the long term (which will outweigh your reduced APY if you believe in Sushi succeeding in the long term) since that yield will be reinvested into the protocol’s growth. This is how every high-growth tech company we know today grew so quickly, became dominant in their space, and generated outsized returns for shareholders even after going public; had Amazon/Facebook/Google/Apple paid out all of their profits as dividends and only relied on new equity issuance to finance operations, they would look like very different companies today. In fact, it isn’t even analogous since corporations pay out profits after expenses as dividends, Sushi is currently paying dividends out before expenses are even covered (some of you have suggested a dynamic model that covers all expenses then sends “excess income” back to stakers which would then be analogous). Part of Kanpai is thus an attempt to make Sushi follow the same playbook as the most successful corporations by reinvesting its earnings into growing the protocol.
2. By taking APY away from the SushiBar to fill the treasury with hard assets, Sushi’s Core Team can sleep better and also grow their dev team with more confidence. With all the products Sushi is launching (Mirin, Deriswap, Shoyu NFT platform, possibly also going multichain), lots of dev-time will be required and being able to grow the team and retain talent is critical. If Sushi wants to retain talent and attract more devs it needs to be able to pay for it—Sushi’s core devs can/will jump to other protocols or build their own if they feel Sushi will not able to compensate them adequately. With a large amount of income in hard assets flowing into the treasury, @0xMaki and co. will have much more budgeting confidence and be able to grow the team and retain talent more effectively.

[zafalijadev]

By comparison, your suggested counter-proposal will increase circulating supply

Pardon my autism but this is wrong.
My counter-proposal doesn’t increase circulating supply compared to now.
It’s your proposal that lowers circulating supply compared to now, but xSUSHI holders bear all the weight without being compensated.

Since the Sushibar will help covering the protocol expenses, I think it deserves some kind of compensation…otherwise it’s just a tax

To be clear: I’m not against a development tax, I’m against a tax disguised as something else.

To be quite honest the xSUSHI staking model is entirely parasitic and should be redesigned from scratch, maybe it’s the right time to reform it completely since apparently we will have AMMv2 + MCv2 soon (and maybe oSUSHI?)

[yuan-han-li]

Currently, all SUSHI sent to the SushiBar is purchased through the SUSHI-ETH pair, thus, all SUSHI currently being sent is already in circulation. Kanpai will reduce the amount of SUSHI that is bought from this pair by the SushiBar, but this doesn’t actually affect circulating supply since the “unbought” SUSHI will remain in the SUSHI-ETH pair and therefore remains in circulation. If you then proceed to distribute SUSHI from the Treasury to the SushiBar as in your counter-proposal, we would argue that you are then increasing circulating supply since any Treasury SUSHI cannot be treated to be as part of circulating supply.

We also disagree that xSUSHI holders will not be compensated by Kanpai and disagree that Kanpai is equivalent to a “tax”. By reinvesting the “dividends” that would have originally been sent to xSUSHI stakers into the Sushi protocol itself, this will lead to more long term SUSHI price appreciation if the Sushi team executes well and Sushi succeeds (and this will outweigh whatever decrease in APY you see in the short term).

[Wangarian]

DeFiance Capital would recommend that alternative strategies be pursued in diversifying the SUSHI Treasury at this point in time. Whilst the proposal put forth has its merits, we believe it is premature to divert a portion of xSushi yield to funding the development & operations of Sushiswap.
Currently, there is ~51m SUSHI (~$600m USD as of 4 June 2021) that is being held and sitting idle within the Sushi Treasury. With this amount of SUSHI sitting idle, I believe our focus should be to begin exploring ways in which we can utilise this powerful reserve. A number of immediate possibilities come to mind. The two low hanging fruit are:

1. Turn a portion of the Treasury into a yield bearing asset. Various lending protocols accept SUSHI and xSUSHI as collateral. These venues (AAVE / CREAM) can be utilised to borrow stablecoins that can be deposited onto Yearn to generate yield. The community can then vote for what this yield (denomindated in stablecoins) will go to.
2. A sale of a portion of this Treasury to institutional DeFi funds with a long-term lockup. This serves to both replenish the Sushi stablecoin Treasury and onboard excellent partners that will cement SushiSwap as a mainstay DeFi blue-chip. The moratorium would also allay any concerns that investors would be dumping their Sushi in the near term. Given the extremely large Treasury, even a 5-10% sale of the immediate Treasury would nett Sushi ~10-20m USD for stablecoin reserves.

With these solutions implemented, the Sushi development fund would have sufficient runway for all its projects / developments into the foreseeable future. The original proposal put forth makes economic sense, but contextualises the current scenario incorrectly. Let’s tap the low hanging fruit first (which gives a significant runway), instead of looking to dilute yields prematurely.

[zafalijadev]

If the Sushibar buys SUSHI from the treasury as stated in my counter-proposal:

1. there’s no yield dilution
2. no need to be rescued by funds
3. long term strategy, not a low-hanging fruit but a permanent solution

The bps can be dinamically adjusted so that the treasury can sell more SUSHI during a bull market and less during a bear.

Also you could say the xSUSHI staking model is pretty parasitic.
I think it’s time we xSUSHI holders start bearing a bit more weight on our shoulders.

You propose that we sell more SUSHI to funds, I propose that the Sushibar acts as a community-owned fund where everyone gets his share bought from the treasury.

[JiroOno]

One thing to note, is half or a little over half of the sushi in the treasury is for the vesting merkle drops

[levit8]

Seriosuly. And, the voting results seem sus.

Some of the ideas peeps are having now are born out of bear market fear, I would vote to have such ideas delayed indefinitely, at least until the market recovers better. Currently, eth is already recovering and these proposals look very bad.

I vote no.

[zafalijadev]

Please notice that with my counter-proposal our xSUSHI APY is untouched AND the treasury can stack ETH/stables