I apologize for my late reply to this post - July was a busy month for us as we finished the Optimism deployment.
You’re absolutely correct Daniel, a buyback mechanism should be strongly considered. It will help extend the lifetime of the Moonwell Foundation and will redirect excess reserves (fees captured by the protocol) that would otherwise sit idle to a more productive use. In addition, Morpho vault performance fees are now being directed to the Moonwell core markets for USDC and ETH on Base as reserves.
Now that Moonwell contributors have completed the majority of our product feature work for 2024 (including USDC Anywhere, Smart Wallet support, Morpho integration, and Optimism deployment), we are spending August and September on tech debt reduction in the app, and in the Fall will engage on an improved Safety Module, please read here: Upgrade staking module - #3 by surfingdegen
By staking collateral tokens instead of WELL, we’ll have the capability of providing a better backstop to the protocol, and as a component of this, we can build the capability of redirecting excess reserves (protocol fees) towards Safety Module stakers and WELL buybacks. A simplified example (needs more research) would be like this:
- USDC insurance target rate is 3%
- Excess USDC reserves are redirected to mUSDC (collateral token) stakers who backstop the protocol, up to this target rate
- Additional USDC reserves above this target rate can be used to perform buybacks
While this is a simplified example that requires more research in terms of both smart contract systems and economics, I think this is ultimately how all of the money market protocols like Moonwell, Aave, and Compound will evolve over time.
Thanks for starting the conversation, and we’ll have more details to share as we begin research and development in the Fall. We hope to move quickly (like our other product features) so this can all land in early 2025.