DAPG - [jameskbh]

Research and Discussion
1

Identifying title of the idea:
Introduce seVLR Voting rights: Power to define governance-selected fee advantages for specific pairs

DAO-recognized name:
jameskbh

Individual or Organization?:
Individual contributor

Twitter handle:
@jameskbh

Details of the idea:

Currently, seVLR is only used for governance-related proposals. The aim here is to introduce another relevant utility for staked token holders: weekly/bi-weekly voting for seVLR holders to decide which specific trading pairs on Velora receive fee advantages (discounts or rebates). This is a utility upgrade, expanding seVLR from passive revenue share to an active right to influence how Velora fees are applied at the pair level.

Important to note (as proposed):

  • This does not reallocate fees elsewhere within the protocol.
  • It selectively applies fee advantages to the pairs chosen by governance.

This mechanism can target strategic Velora pairs, such as:

  • pairs that Velora wants to bootstrap (new assets, new chains, etc.)
  • pairs with partners/integrators who would benefit from incremental volume
  • pairs where lower fee → meaningful volume response → higher revenue feedback loop

This is a governance-based “volume growth engine” with strong alignment: By letting seVLR holders actively choose these pairs every epoch, the staking asset becomes a capital allocation power, not just a passive revenue share.

How will this idea help VLR growth:

  • Increases the value of locking VLR into seVLR (goes from receiving rewards → active influence) - it may even evolve to a “voting incentives market”
  • stimulates partners/market makers to acquire seVLR to support their preferred pairs
  • creates recurring demand for locking VLR
  • selective fee advantages can increase volume → increasing total revenue
    (lower fee → higher flow → higher net income)

Mapped KPIs or expected impact:

  • seVLR total locked value increase
  • increase in volume on pairs selected by vote
  • net protocol revenue impact week over week

Preliminary feasibility assessment:

Medium/High feasibility.

The mechanism is aligned with proven veTOKEN governance models in the industry, and the creation of a specific snapshot space for voting is not very complex.

Velora already has infrastructure for fee-based payouts (referral program), so rebates could reuse that pipeline.

How will the idea be implemented?

  • Create a new Snapshot space for seVLR Fee Voting
  • Define cadence (weekly or bi-weekly)
  • Define a cap for the maximum % of fees that can be adjusted each epoch, and which pairs would be eligible
  • Vote determines which pairs receive fee advantages for the following epoch

Execution format TBD by governance (both possible):

  1. discount = lower fee applied at execution
  2. rebate = refund a portion of the fee post-trade

VLR and other token amounts eventually involved:

No direct VLR/treasury expenditure required.
This uses protocol fee economics, not spending.

Does it require any technical development or additional resources?

Yes — parameter config + UI/UX

  • A more detailed study on fees distribution between all trading pairs (trading volume, etc)
  • need to enable dynamic fee parameters per pair
  • If the rebate model is chosen, integration with the payout pipeline (referral system) may be required

Are there any associated costs or budgets?

Potentially minor engineering scope + design for UI.
No upfront token spend.

Who should be involved in the implementation?

  • Velora core contributors (for technical validation)
  • Governance tooling owners (Snapshot space setup)
  • seVLR holders (voting)

Additional note

This post is meant to spark the conversation. I hope other contributors add their points here so we can check the real feasibility of the proposed solution.

2 Likes
Delegate Activation Program for VLR Growth (DAPG)
2

Hi James, thank you for your proposal to the DAO. Prior to advancing with the discussion, we had a couple questions to ask regarding your proposal:

As an established delegate who has voted in the past for the rewards distributions, we are confused as to why you excluded seVLR’s staking utility and revenue incentives from the proposal. It is incorrect to say that seVLR Is used only for governance-related proposals.

Additionally, these mentioned fees are related to the UI frontend, which are not subject to DAO governance. The DAO is in control of the protocol and its treasury, and all proposals should fall within this scope.

1 Like
4

Thanks for reminding this . Just to clarify, as I’m drafting something similar — is the DAO unable to propose adjustments to the fee structure and protocol revenue distribution?

5

Hello! Thanks for your input!

In hindsight, I acknowledge that the wording was not the best here. What I meant is that after creating a seVLR position to benefit os the staking rewards (“passive revenue share” = staking in this context), the owner does not have much to do with their tokens besides engage in governance activities that, in general, are not related to operational parameters from the protocol. Aave token holders vote on protocol parameters: Balancer, Curve, Aura token holders vote on protocol parameters.

The DAO was asked to come up with ideas to enhance VLR “value”, and my suggestion was to think a bit out of the box and try to introduce additional utility to the token, which brings us to your next point.

Thank you for pointing out a complete oversight on my part: I should have made it explicit that this relates to the percentage taken by the DAO.

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2 Likes
6

Hi @jameskbh! We appreciate the submission and the effort behind it, but we won’t support its implementation as it is, although it certainly is a topic worth exploring further and we definitely encourage you to keep working in that line.

The way we see it, the decision to exclude strategic pairs from the flat UI fee is an ad hoc mechanism precisely due to its strategic nature and not a rolling decision that should be made recurrently. With the presented scheme, it is likely that one or two-week voting cycles aren’t enough to derive any impactful insight, and thus running recurrent votes would mean a massive overhead for the DAO, in which most of the exclusions are already being considered. Moreso, this would mean to change the fee structures every other week in order for the DAO not to receive those fees or have them returned afterwards, which are the two options we are seeing. The technical overhead of updating those fee structures at the protocol level is also not trivial, for it to be made in such a short period of time.

As you mentioned, this initiative is thought of as a veTOKEN mechanism that implies a governance system thought in that sense (such as Aura, Curve, Puffer, etc.), and which is something that might require a deeper thought than the one intended for the DAPG, although it certainly brings an interesting discussion.

In that sense, further exploration regarding the item you mention should be insightful to keep the topic going:

3 Likes
7

Hi @jameskbh! We appreciate the thoughtful approach to expanding seVLR’s utility and the clear articulation of how this could drive both protocol growth and deeper stakeholder engagement. The idea of empowering token holders to direct fee advantages at the pair level is indeed interesting and attractive, while details need to be fleshed out as a deeper topic to consider additional utilities to the token.

One area that stands out is the technical and operational feasibility of implementing dynamic, pair-specific fee adjustments. While leveraging the referral program infrastructure could be promising, we would like to understand more about how fee changes will be implemented, enforced and monitored in practice, particularly as the number of eligible pairs grows. Have you consulted relevant parties about the feasible implementation plans and potential specifications?

The governance implications of introducing frequent voting cycles deserve attention. Regular voting can increase engagement but may also lead to voter fatigue or low participation over time. How does the proposal plan to sustain meaningful participation and prevent governance capture as the system scales? Do you consider different mechanisms to voting, e.g. a special council to vote on them, or special voter groups to do so, or any other ways to mitigate the voter fatigue while making the system works as intended?

1 Like
8

Hi @jameskbh,

This is an very interesting proposal that touches on the “VeToken” model of directing incentives. However, we want to add a layer of economic analysis to the “feasibility” discussion, particularly regarding the incentives for seVLR holders.

1. The “Pay Cut” Dilemma One thing to consider is the game theory for stakers. There is an inherent tension in this design: seVLR holders currently earn yield from protocol fees. By voting to grant fee discounts on specific pairs, they are effectively voting to reduce their own revenue capture per unit of volume.

For this to be rational for a voter, the Price Elasticity of Volume must be > 1. (i.e., a 10% fee cut must generate >10% more volume to be net-positive).

  • If we discount fees on a pair dominated by “sticky” retail flow (who aren’t fee-sensitive), we just lose revenue without gaining volume.
  • If we discount a highly competitive pair (like stablecoins), we might steal market share—great.
  • But if we discount a niche asset where traders don’t really care about a 0.05% difference, we’re just donating revenue for no volume gain.
  • Have we identified which pairs are actually elastic? (e.g., highly competitive stablecoin pairs vs. long-tail assets). Without this data, voters are flying blind.

2. Solving the “Technical Overhead” (Rebates vs. Parameters) @SEEDGov raised a critical point about the risk/effort of constantly updating core contract fee parameters.

  • We should strictly decouple Voting from Contract Execution. Instead of changing the fee at the router level (which requires complex parameter updates), the voting should direct a “Rebate Budget.”
  • Traders pay full fees at execution (keeping the contract safe/stable). At the end of the epoch, a rebate is airdropped or made claimable based on the voting results. This utilizes the “Referral Program” infrastructure you mentioned without touching the core protocol code every week.

3. Maybe we should test it first? Before we build a custom Snapshot space or new smart contracts, I suggest we test the “Elasticity Hypothesis” first.

  • Can we run a manual pilot for Epoch 39?
    • Governance selects just 3 pairs manually.
    • We apply a specific rebate (e.g., 50% refund) for 2 weeks.
    • Goal: Measure if volume actually increases enough to justify the revenue cut.

If the pilot shows that volume remains flat despite the discount, we save ourselves the engineering effort of building the full voting system.

2 Likes
9

Appreciate all the feedback and the idea. That said, my main question is still: why would we add more workload to the DAO when the market is clearly moving toward governance-minimized protocols?

It’s also worth pointing out that we’re not Aerodrome, nor a launchpad that can lean on partner tokens for incentives. Given that, adding more DAO overhead feels like extra complexity without a clear payoff.

I do think the core idea—lowering trading fees for stakers—is solid and worth exploring. It probably makes more sense to work on this in a separate proposal or discussion, with some focused changes to the staking module to make it more effective and better aligned long term.

2 Likes
10

Hello all. Thanks for the input!

I will address some items in my reply, but I assume this initiative will not move forward, as it would require some adjustments (a new snapshot subspace) that we are not willing to do now.

The idea here is to provide financial incentives for traders (by lowering fees) and for those who are voting (a voting incentive), in the same way other ve/vl tokens are used.

That would be a good idea to test the hypothesis.

No. I presented this as an idea of a model that works in other protocols and suggested an adaptation. The main venue of discussion is this thread.

I will keep all feedback in mind and check if there is any other way to improve the token’s utility.

Thank you to all who engaged with this idea.

2 Likes
11

Thanks for putting this forward! We think the core instinct (“give seVLR holders an active lever that can drive volume growth”) is directionally aligned with how ve/locking systems create demand and stakeholder engagement. The most promising version of this, in our view, is one that stays firmly within DAO-controlled economics

We think overall the proposal could work well with tighter guardrails and an evidence-first rollout. The key question is price elasticity: a fee advantage only makes sense if the targeted pair is fee-sensitive enough that incremental volume more than offsets the fee reduction. We think a small pilot like picking 2–3 pairs, applying a fixed rebate/discount for a defined window, and seeing how the data and outcomes work would be ideal.

Also, we think the rebate route seems cleaner than constantly changing fee parameters per pair, traders pay normal fees at execution, and an epoch-level rebate is distributed based on the voted pairs, leveraging existing payout rails where possible.