Summary

Amend KIP-114 and add a threshold requirement before a fee distribution cliff.

Abstract

Fees from Synthetix Perps V3 intended for KWENTA stakers are to be distributed after a $500k threshold is reached to decrease the gas cost burden on smaller stakers.

Motivation

On Optimism, fees are rising to levels that would make claiming fee distributions unprofitable for some stakers. To alleviate this, it's recommended to distribute fees after a threshold is reached, and ensure a majority of stakers can make profitable claims on fees.

Also as Perps V3 is in the early phase of scaling up, volume and subsequently fee revenue is expected to be lower than Perps V2. Until substantial volume is flowing through V3 it's only viable to do a distribution of fees after a threshold is reached.

The Dencun upgrade will bring support for EIP-4844 (blobs) and is expected to bring gas costs down on rollups like Optimism. However, for now and the distant future, it's important to make sure that fees are claimable by smaller stakers.

Specification

At the time of writing, the current fees accumulated by Perps V3 is $63.40. With 467,758 KWENTA tokens staked this amounts to $0.0001355402 per token staked.

To give a point of reference with the current gas costs on Optimism, an average DEX trade is around $0.15 cents. An expected fee claim should fall somewhere around this value.* Claiming distributions from multiple epochs will have a linear increase in gas costs, however, each additional epoch claimed should cost less than the previous. For example, if one epoch claim costs $0.15 cents, two epochs should cost ~$0.28 cents, three epochs should cost ~$0.40, so on so forth. Note these are rough estimations and all this is to say that there exists ceiling on gas costs per fee distribution claim ($0.15 with the DEX trade example).

This KIP proposes to implement a threshold amount of $500,000 before fee distribution. At the current staked token amount this amounts to roughly > $1 of value per token staked. Extrapolating from current Perps V2 volumes and fee revenue (~$500k a week), assuming 20% returns to KWENTA stakers, the threshold should be reached every 5 weeks.

The treasury DAO is responsible for escrowing these funds until the target is reached. Once the accumulation target is reached the treasuryDAO will deposit these fees into the distribution contract.

* The first claim each epoch can potentially cost more because this person is fronting the gas cost to set up the distribution for everyone else. However, anyone can front these gas costs