Context
Lately, MUX launched the MUXLP senior and junior tranches to meet the demands of LPs with different risk-exposure preferences.
Senior TrancheThe senior tranche is a delta-neutral USDC-only pool that will lend liquidity to the junior tranche. The senior tranche’s yield will derive from a portion of the junior tranche’s income. LP’s principals in the senior tranche won’t be affected by market volatility; the junior tranche strategies & liquidation setup will ensure the principals supplied from the senior tranche won’t bear any losses.
Junior Tranche
- The junior tranche, a MUXLP leveraged mining pool, offers the potential for exciting leveraged MUXLP yield. Its strategies will use up to 2.5x leverage, amplifying the LP’s potential returns. However, junior tranche LPs will also face default and auto-deleveraging risks, and there are liquidation risks associated with using the junior tranche. The junior tranche LP’s principals will be affected when liquidation happens.
MUX moved up to 100% POL from the MUXLP pool to the MUXLP senior tranche based on the passed proposal to accelerate the tranche adoption. However, since the junior tranche deposit hasn’t reached its cap yet and can’t fully utilize the assets from the senior tranche, the senior tranche yield hasn’t been ideal. This outcome will cause veMUX holder rewards to decrease in the short term.
MUX will launch more campaigns to speed up the adoption of the tranches. Meanwhile, MUX contributors propose amending the MUXLP income distribution to reduce the impact on veMUX holders’ rewards.
Proposal
MUX contributors propose to update the protocol income distribution as follows:
From
- MUXLP Income Distribution
- Total Protocol Income × (70% × POR + 15%): Allocate for veMUX holders (in ETH)
- POR is the rate of Protocol Owned Liquidity
- Total Protocol Income × 70% × (1 - POR): Allocate for MUXLP stakers (in ETH)
- Total Protocol Income × 15%: Purchase MUXLP and add it as protocol-owned liquidity
- Total Protocol Income × (70% × POR + 15%): Allocate for veMUX holders (in ETH)
- 100% of POL income from MUXLP Senior Tranche and DegenLP will be allocated to veMUX holders
To
- MUXLP Income Distribution
- Total Protocol Income × (70% × POR + 30%): Allocate for veMUX holders (in ETH)
- POR is the rate of Protocol Owned Liquidity
- Total Protocol Income × 70% × (1 - POR): Allocate for MUXLP stakers (in ETH)
- Total Protocol Income × (70% × POR + 30%): Allocate for veMUX holders (in ETH)
- 100% of POL income from MUXLP Senior Tranche and DegenLP will be allocated to veMUX holders
The 15% protocol income that was originally allocated for the MUXLP POL will now be moved to veMUX holders. MUXLP POL temporarily won’t increase from protocol income after this change; however, after the junior tranche is more widely adopted and able to generate more yield for the senior tranche, the 15% protocol income will be proposed to be allocated for the MUXLP POL again.
Next Steps
- Community discussion surrounding this proposal
- Community members vote to approve/disapprove of this proposal