Short Description
This proposal outlines updates to the AURORA token economy and community treasury. The focus is on enhancing protocol fees, introducing volumetric bridging fees, and simplifying community treasury mechanics.
Background
AURORA is a governance token introduced by Aurora DAO in Autumn 2021 to support decentralized governance of the Aurora Protocol. The initial governance model proposed allocating 20% of the AURORA token supply to a community treasury, with over 40% retained by Aurora DAO councils for future projects. Despite discussions on governance and community treasury mechanisms, tangible outcomes were limited.
In Spring 2023, a major token economy update introduced simplified staking rewards and protocol fees through AURORA token buyback and burn. Approximately 136k AURORA tokens were burned. Although the community treasury structure was introduced, it was never fully implemented, partially due to complex governance frameworks and challenging market conditions.
The current proposal aims to further decentralize the protocol and integrate new developments into the AURORA token economy and governance framework.
Thinking About the Token Economy
The evolution of blockchain scalability has shifted the value proposition of tokens from raw computational power to more tangible use cases. Established blockchains like Bitcoin and Ethereum demonstrate how scarcity and perceived value can drive token valuation far beyond revenue models alone. However, in a mature market, protocols with tangible revenue models, like AAVE and centralized exchanges such as Coinbase, show more predictable and sustainable valuation metrics. These examples highlight the benefits of volumetric transaction fees and real-world use cases, which form the basis of the proposed AURORA token economy update.
Proposed Token Economy Update
- Replace the current buyback and burn model with a buyback and transfer mechanism to the DAO account for future governance decisions.
- Apply the same buyback and transfer model to all Aurora virtual chains.
- Allow virtual chain administrators to set additional gas fees at the Aurora Engine level.
- Enable virtual chain administrators to establish additional volumetric bridging fees, promoting a native business model for protocols.
- Introduce a 50% revenue-share volumetric fee with a minimum of 1 bip by default for bridging assets between NEAR native runtime and Aurora, with proceeds converted to AURORA and transferred to the Aurora DAO. The fee split is negotiable with Aurora Labs on behalf of Aurora DAO.
These changes establish compute fees for Aurora virtual chains (points 1 and 2), introduce “sequencer fees” (point 3), and create a revenue-sharing model aligning Aurora and virtual chains’ interests (points 4 and 5).
Community Treasury Update
The proposal aims to simplify community treasury mechanics and improve governance participation:
- Allocate 100k AURORA tokens as a bi-weekly (every two weeks) budget for project incentives, with a 3-month trial phase.
- Allow projects to submit proposals on the governance forum using a standardized template.
- Develop a governance interface on Aurora Plus for submission display and voting.
- Implement a weekly voting schedule, with a snapshot of staked AURORA on Wednesdays and voting from Friday to Sunday.
- Voting power is based on staked AURORA, with the option to vote to “save the treasury”.
- Distribute rewards pro rata based on actual votes cast, not the full snapshot.
Pilot Phase and Monthly Calls
- Before the official launch of the governance process, a two-week pilot phase will be conducted with two full voting rounds. This will allow testing of the voting mechanism, familiarizing the community with the process, and identifying potential issues.
- During the pilot phase, proposals will be mock proposals or non-critical decisions, ensuring there is no risk to community funds while testing the system.
- Introduce monthly community calls to review governance outcomes, discuss proposal effectiveness, and provide governance education.
- Conduct retrospectives to analyze what worked, what didn’t, and how to refine governance practices.
- Use insights from these calls to adjust the community treasury process and governance approach as needed.
Conclusion
The proposed updates enhance the AURORA token’s utility and simplify governance mechanics, making it easier for community members to engage in the governance process. The pilot phase, combined with monthly retrospectives, will ensure the approach remains adaptive, transparent, and community-driven.
