Create Structural Demand for WELL Token

There has been musing on prior posts about adding ‘utility’ to the WELL token, but I think a more pertinent topic to discuss is how we can create structural demand for WELL to offset the continuous sell pressure from those seeking to “lock in” the yield they earned. For Well to be successful, the long-term value of the token must be directly tied to the economics of the marketplace and backed by real cash flows. The most obviously idea, and one previously proposed in 2023 on this forum, would be a token buyback mechanism using a % of profits from the platform. It’s simple, yet effective, and if you believe in the long-term success of this platform, the buybacks should be highly accretive to long-term holders who believe a token today will be backed by more cash flows in the future. Additionally, this would incentive more people to hold their WELL rewards rather than convert to stablecoins.

I believe Moonwell has reached a level of maturity where a buyback mechanism should be re-considered to attract more long-term oriented holders. I would love to hear input directly from the internal team and those closer to the treasury on what % would be maximally beneficial to both token holders and developers to support LT growth efforts.

In summary, a buyback mechanism would:

  • Create structural demand from the buybacks;
  • Increase demand from long-term holders and potentially institutions that use tradefi valuation methodologies to value tokens;
  • Reduce the outstanding supply of tokens;
  • Reduce sell pressure from investors locking-in Well rewards;
  • And ultimately, create a more stable token holder base of loyalist who are holding for the right reasons and not short term speculation
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I would like to see metrics on revenue generation vs emissions. This should be available on-chain and I wouldn’t be surprised if there’s a dune analytics page for it already (could someone share a link?)

But I’d also like to see data on expenses. Is the protocol profitable after paying salaries and other expenses? We wouldn’t want buybacks to come at the expense of growth.

But if the profitability is there then I 100% support buybacks.

Moonwell is a protocol that is very concerned about regulations, particularly in the USA. That would preclude a buyback-and-distribute model, as that would be “security-like”. But straight buybacks I suspect may pass legal muster.

Alternatively, if it doesnt, we could (instead of issuing WELL rewards) issue the tokens we are earning as fees as rewards. Lower WELL issuance would accomplish the same as buybacks but potentially without the legal ramifications.

All great points!

I would love to see the books to get a better understanding of the current economics, but I’m not sure Moonwell needs to be profitable (after salaries) for the buyback to make sense. The upside for the team is in the token price, not their cash comp. Most developers are likely only paid in Well tokens. To Moonwell team: is this information publicly available?

I also agree with your regulation point and think a straight token burn would clear regulatory hurdles vs. a fee sharing arrangement. If token holders have no claim on the treasury’s cash or the protocol’s cashflow, the next best thing is to start burning tokens for all the reasons mentioned in my first post.

And for your last point…I would expect the Well token issuance to taper off after the grants dwindle down and the extra incentive is no longer necessary to attract liquidity.