Economic analysis

Performance Mining

The performance mining program is aimed at rewarding ecosystem participants, who drive the protocol's fee revenues. Beyond incentivizing protocol participation and its user growth, the program's ranking system aims to achieve two related goals:
  1. 1.
    Incentivize investment into the best-performing funds on an objective basis.
  2. 2.
    To promote responsible and high-quality fund management.
The aim is to promote and sustain long-term capital appreciation and to maximize fee revenues generated for the protocol.

STRT staking

Rewarding STRT stakers represents an alternative to a buy-and-burn. A buy-and-burn rewards all token holders irrespective of their alignment with the long term vision of the project and represents a transfer of value equal to the value of tokens burnt to the remaining tokens.
Rewarding STRT stakers represents a targeted value redistribution to ecosystem participants who exhibit behavior that will help the protocol in the long run — i.e. by locking up supply for the long term and participating in governance. Relative to a buy-and-burn, this redistribution harms those who are not staking their STRT tokens, but this can be viewed as a beneficial outcome and one that should drive a larger proportion of STRT tokens to be staked, as holders aim to prevent token dilution.
Furthermore, as STRT stakers have already demonstrated a willingness and propensity to lock up their tokens, it is possible that by redistributing additional tokens to these participants that additional upwards pressure will be applied to the number of STRT tokens locked up.

Revenues, Staking Reward Ratio and the Performance Mining Redistribution Cap

There are important dynamics at play when considering the potential path for fee revenues and the impact this will have on the proportion of protocol fees attributable to stakers or to the performance mining program.
The constantly-declining cap on the tokens able to be redistributed via the performance mining program means that over time the protocol fees will naturally begin to favor STRT stakers over time at the expense of the performance mining program — ensuring that the interests of early investors who helped bootstrap the protocol are justly rewarded. However, the trade-off is that the resources available to the performance mining program may diminish over time. This will diminish the beneficial pressure on investors and fund managers to invest in the best funds and strategies.
The trajectory for fee revenues is an important consideration for the protocol's tokenomics. High fee revenues are associated with high staking and performance mining rewards, however, sufficiently high revenue will result in a greater proportion of these protocol fees being redistributed to STRT stakers as the performance mining redistribution cap binds — rewarding stakers at the expense of dampened protocol growth, but when it is already running high. When revenues are low, the opposite effect takes hold and a greater proportion of rewards are funneled to the performance mining program. However, the shift is bounded by the Staking Reward Ratio which ensures that protocol stakers continue to receive a minimum portion of the protocol revenues.
Last modified 4mo ago