# Towards a KPI-Based Revenue Share Framework for LQ Stakers
**URL:** https://gov.liqwid.finance/t/towards-a-kpi-based-revenue-share-framework-for-lq-stakers/1947
**Category:** Idea Discussion
**Tags:** governance
**Created:** [December 17, 2025, 1:44pm UTC](https://gov.liqwid.finance/t/towards-a-kpi-based-revenue-share-framework-for-lq-stakers/1947 "2025-12-17T13:44:04Z")
**Posts on this page:** 6
**Page:** 1
### Author:  [@gil](https://gov.liqwid.finance/u/gil)
#### Post date: [December 17, 2025, 1:44pm UTC](https://gov.liqwid.finance/t/towards-a-kpi-based-revenue-share-framework-for-lq-stakers/1947/1 "2025-12-17T13:44:04Z")
# Towards a KPI-Based Revenue Share Framework for LQ Stakers
## Summary (TL;DR)
This proposal introduces a **KPI-based framework** for distributing protocol revenue to LQ stakers, based on **clear, objective revenue thresholds**.
- **Goal:**
Re‑establish LQ as a **revenue-sharing token** in a way that:
- **Core idea:**
Define a function
r̄
where:
- **Example (illustrative only):**
Using a 4‑month rolling window:
This proposal is primarily meant to **open a serious discussion** on a KPI-based framework and its parameters. It is **not intended** to go on-chain soon in its first version, but aims to converge the community on:
- The **principle** : revenue share should be a transparent function of protocol performance.
- The **parameters** (thresholds, window size, governance protections).
- **Data driven governance**
* * *
## Motivation & Context
### 1. Funding needs and sustainability
For long-term financial sustainability, Liqwid must:
- Repay outstanding **POL loan debt** :
- Roughly **$1.5M** remains outstanding (on a total facility of around $5M).
- Cover **operational and development costs** :
- As per the **2025–2026 Infrastructure & Operations Budget** , total planned expenditures are around **$456,500** for 2026, i.e. **$38,042 per month**.
- Progressively become **fully funded by protocol-generated revenue** rather than ongoing external financing.
The DAO and Liqwid Labs are also exploring **one-shot funding** sources:
- A **Fund 15 Catalyst proposal** (~200,000 ADA grant).
- A **TWAP-based private LQ sale** (Proposal 111) aimed at repaying the remaining POL debt.
For the purpose of this proposal, we treat these as **complementary, opportunistic sources**. The KPI framework focuses on **recurring protocol revenue** and its allocation between:
- **DAO / Treasury funding** (usable to fund Liqwid Labs, POL interest, salaries, etc.).
- **LQ stakers** (programmatic revenue share).
- (Indirectly) the **core team and ecosystem** via DAO-controlled spending.
Terminology (for clarity):
- **DAO / Treasury** = on-chain and multisig-controlled funds governed by Liqwid DAO.
- **Liqwid Labs / core team** = funded (directly or indirectly) via DAO budgets and treasury flows.
- **LQ stakers / Programmatic Rewards** = LQ holders staking and receiving a share of **protocol revenue** governed by this framework.
* * *
### 2. LQ as a revenue-sharing token
Historically, LQ has been **marketed** as a **revenue-sharing governance token** :
- Governance decisions activated **Programmatic Distributions (PD)** for LQ stakers:
- 50% of the **20% net margin on borrower interest**.
- 50% of the **1% loan origination fee**.
- Documentation and previous governance votes have **explicitly framed** LQ staking as:
- A way to earn **direct protocol revenue share** (not just emissions).
- A key part of the token’s **economic value proposition**.
Recent governance discussions and Proposal 110 (tokenomics overhaul) show that:
- Many DAO members (community and core team) **still see LQ as a revenue-sharing instrument** , but:
- There are strong concerns about **sustainability** and **overly generous revenue share too early** while the protocol is:
- Still in debt,
- Still scaling revenue,
- Still building its treasury and reserves.
In those discussions, core team members (e.g. Florian Volery) have expressed:
> “I will be the first to support re-activating the program rewards for LQ stakers as soon as it becomes financially sustainable to do so.”
This proposal tries to **formalize** that idea:
**“program rewards resume once it is financially sustainable”** → define “financially sustainable” via **explicit KPIs** (protocol revenue thresholds).
* * *
### 3. Long-term financial reality
If the protocol is persistently underfunded:
- Development slows or stops.
- Market share can be lost to competitors.
- The protocol becomes **technologically and economically less relevant**.
- Ultimately, protocol revenue can **shrink** , making any short-term revenue share to stakers worth less and less.
From a long‑term perspective, for LQ stakers it is rational to:
> Forgo some revenue share **now** , if and only if this significantly increases the odds that protocol revenue (and thus future revenue share) will be **larger and more durable** later.
A KPI-based framework is a way to **encode this trade-off** :
- Below a certain revenue level, **all income is reinvested** into the protocol via the DAO.
- Above that level, **stakers resume and increase their share** of protocol revenue in **clearly defined steps**.
* * *
### 4. Current revenue splits (as of December 16th 2025)
Current, but currently under voting:
- **Interest repayments:**
- 80% → **lenders** (this is **not** protocol revenue).
- 20% → **protocol net margin** (this is **protocol revenue** ).
- That 20% net margin is currently split:
- **10%** of total interest (i.e. 50% of the net margin) → **LQ stakers** (Programmatic Distributions).
- **10%** of total interest (i.e. 50% of the net margin) → **DAO treasury**.
- **Loan origination fee:**
- 1% of borrowed principal.
- Currently split **50/50** between **DAO** and **LQ stakers**.
For this proposal, we define:
> **Protocol revenue, R (per month)** =
>
> - (20% share of repaid interest allocated to DAO + stakers) +
>
> - (100% of loan origination fees).
This is the quantity that will drive the KPI thresholds.
* * *
### 5. Protocol revenue data (2025)
From the weekly analytics (as of December 15th 2025):
- **Year-To-Date repaid interest share** (protocol revenue from interest):
**$627.57k** (sum going to DAO + stakers).
- **Year-To-Date loan origination fees** :
**$268.69k** (sum going to DAO + stakers).
- **Year-To-Date total Programmatic Rewards (staker share)**:
**$451.41k** (≈ 50% of the sum above).
Over ~11.5 months of 2025, this corresponds to an **average monthly protocol revenue** of approximately:
- Interest share: ~$54,571.30/month.
- Loan origination fees: ~$23,364.35/month.
So:
> **Average total protocol revenue 2025:**
> **R ≈ $77,935.65 per month** ,
> implying a full‑year projection of **~$935,227** for 2025.
These numbers show that:
- The protocol is already generating **substantial revenue** , but
- There is still a non-trivial gap between:
- Required funding for **debt + operations** , and
- The desire to keep a **meaningful revenue share** for LQ stakers.
* * *
### 6. Trust erosion and “moving goalposts”
Recent governance debates and proposals have highlighted **trust / visibility issues** :
- Revenue share splits and emissions have changed **multiple times** , as per governance
- Some changes (or proposals) involve **retroactive alterations** to Programmatic Distributions.
- The **LQ value proposition** keeps shifting:
- From “strong revenue-sharing token” → “treasury-first, minimal staker benefits (for now).”
For many market participants, the main concerns are:
- The absence of **long-term, rule-based visibility** on how LQ participates in protocol success.
- The perception that **revenue share can be turned off or capped arbitrarily** depending on immediate funding needs.
A KPI-based framework aims to:
- Reduce **arbitrary, ad-hoc** changes.
- Provide a **calculable, predictable link** between protocol revenue and staker share (useful for market participants assessing the value of the LQ token).
- Restore some **confidence and credibility** for LQ’s long-term economic role.
* * *
## Specification: KPI-Based Revenue Share Framework
### 1. Definitions
Let:
- (R\_m) = protocol revenue in month (m), defined as:
- r̄ = **rolling average monthly protocol revenue** over the last **N** full months:
### 2. Threshold-based mapping
(illustrative parameters only)
We introduce 4 thresholds T₀, T₁, T₂, T₃ (all in USD per month). Then define:
- If (r̄ **\< T\_0** → **s(r̄**) = 0% (= 0 % PD)
- If **(T\_0 ≤** r̄ **\< T\_1)** → **s(r̄**) = 12.5% (= 2.5 % PD)
- If **(T\_1 ≤** r̄ **\< T\_2)** → **s(r̄**) = 25% (= 5 % PD)
- If **(T\_2 ≤** r̄ **\< T\_3)** → **s(r̄**) = 37.5% (= 7.5 % PD)
- If **(T\_3 ≤** r̄) → **s(r̄**) = 50% (= 10 % PD)
Where:
-
- **s(r̄**) is a **share of total protocol revenue R** , i.e.:
Revenue to stakers in month m = s(r̄) . R\_m
- The DAO receives:
Revenue to DAO in month m = (1 - s(r̄)) . R\_m
### 3. Rolling window (N)
- Use a **rolling window of N months** to compute r̄.
### 4. Scope of the framework
- This proposal **only** governs the split of **R (protocol revenue)** between **stakers** and **DAO**.
- It **does not change** :
- the 80% share of interest going to **lenders** ,
- the **interest rate models** or market parameters,
- the **LQ staking APR from emissions** ,
- the **market incentives**.
Those can be governed by **separate proposals**. This framework is exclusively about **protocol revenue share** , not emissions.
### 5. Distribution cadence and asset
- **Cadence:**
Revenue shares to stakers are calculated and distributed on a **monthly** basis, consistent with prior PD practice.
- **Asset and mechanics:**
This proposal **does not prescribe** a change of asset or distribution method:
- It can be implemented in LQ (as PD are now),
- Or evolve into ADA-based “real yield” in a separate follow-up proposal.
- The key point here is the **percentage and KPI logic** , not the exact **payout asset**.
* * *
## Parameterization: Choosing Efficient and Fair Thresholds
### 1. Base monthly revenue threshold (T₀)
**Objective:** Protect a **minimum funding level** for:
- POL debt repayment and interest,
- Infrastructure and operations,
- Core development.
**Proposal (principle):**
- Set **T₀** as an **absolute dollar amount** , linked to the planned 2026 budget, not a percentage of it.
**Rationale:**
- Avoids the **“moving goalposts”** problem where budget inflation automatically raises T₀.
- Makes budget proposals and the KPI framework **decoupled** :
- If a future team wants to increase budgets, they must justify it **separately**.
- They do not automatically shift staker thresholds upward.
**Limitation:**
- Over time, **USD inflation / debasement** may make a fixed T₀ outdated.
- Adjustments to T₀ can be done via **separate governance proposals** , ideally with:
- Higher quorum and/or supermajority.
- A time delay before taking effect.
* * *
### 2. Progressive thresholds (T₁, T₂, T₃)
**Objective:**
- Provide **gradual** increases in staker revenue share as the protocol scales, instead of a **binary** on/off.
**Principles:**
- Thresholds should be:
- Wide enough that small variations in r̄ **do not constantly flip tiers**.
- Few in number for **simplicity** (here: 4 thresholds, 5 tiers).
- Thresholds are expressed as **absolute monthly revenue levels in USD**.
**Interpretation:**
- Below T₀: **all** protocol revenue goes to the DAO/treasury.
- Above T₀: **an increasing portion** of revenue starts flowing to stakers.
- At or above T₃: stakers receive the **full historical 50% share** again (= historical 10 % PD).
* * *
### 3. Rolling window length (N)
**Objective:**
- Smooth out **short-term volatility** while ensuring responsiveness to genuine changes.
**Candidate:**
- **N = 4 months** rolling window.
**Rationale:**
- Crypto & DeFi markets can be noisy month-to-month.
- A 4-month window:
- Filters out seasonal or idiosyncratic spikes.
- Still reflects the **current revenue regime** fairly quickly.
- Data is already accessible in weekly snapshots; converting to monthly and averaging is straightforward.
* * *
## Example Implementation (Illustrative Parameters Only)
**Note:** These are **example numbers** used for clarity. They should be debated and refined with more precise inputs from the core team and community.
### Inputs used
- 2025 average protocol revenue: **R ≈ $77,935.65/month**.
- 2025–2026 Infrastructure & Operations budget: **$38,042/month**.
- Current on-chain design:
- 80% to lenders.
- 20% to protocol (DAO + stakers) + 1% loan origination fee.
- 50/50 split of protocol revenue between DAO and stakers.
### Proposed example parameters
- **Rolling window:** N = **4 months**.
- **Thresholds:**
| 4-Month Rolling Average Protocol Revenue (r̄) | LQ Stakers Revenue Share (s(r̄)) | PD equivalent |
| --- | --- | --- |
| r̄ \< $100,000 | 0% | 0% |
| $100k ≤ r̄ \< $125k | 12.5% | 2.5 % |
| $125k ≤ r̄ \< $150k | 25% | 5 % |
| $150k ≤ r̄ \< $175k | 37.5% | 7.5 % |
| $175k ≤ r̄ | 50% | 10 % |
**Interpretation:**
- **Base threshold (T₀ = $100k):**
- **Full-share threshold (T₃ = $175k):**
**Projection:**
Based on **$38,042/month** for infra/ops/dev costs.
| 4-Month Rolling Average Protocol Revenue (r̄) | $ for LQ stakers | $ left for DAO/Treasury per month after costs |
| --- | --- | --- |
| r̄ \< $100,000 | 0 | \< $61,958 |
| $100k ≤ r̄ \< $125k | $12,500 ≤ amount \< $15,625 | $49,458 ≤ amount \< $71,333 |
| $125k ≤ r̄ \< $150k | $31,250 ≤ amount \< $37,500 | $55,708 ≤ amount \< $74,458 |
| $150k ≤ r̄ \< $175k | $56,250 ≤ amount \< $65,625 | $55,708 ≤ amount \< $71,333 |
| $175k ≤ r̄ | \> $87,500 | \> $49,458 |
Such parameters:
- offer **strong** DAO/Treasury revenue in **first revenue growth stage**
- allow **consistent funding across tiers** until high revenue growth targets, then no cap
- **quickly regrow the LQ stakers revenue** share as revenue grows
The parameters are **provisional** and here for discussion. They can and should be adjusted as the DAO refines its view of:
- Debt repayment trajectory.
- Realistic growth paths for protocol revenue.
- Desired speed of reintroducing revenue share.
* * *
## Overall Limitations
This framework has important limitations, which should be acknowledged explicitly:
1. **Rigidity vs. flexibility**
2. **“Why not just vote when needed?”**
3. **Scope**
4. **Governance mutability**
5. **‘sawtooth’ effect** on DAO / Treasury revenue
* * *
## Overall Benefits
1. **Predictable, data-driven link between protocol success and LQ value**
2. **Protection of a hard minimum funding level**
3. **Aligned incentives between stakers and builders**
> The _only_ way for the Core Team to unlock massive resources for the treasury (to hire more, build bigger reserves, etc. passed the minimum guarantees) is to **escape the zone entirely** by pushing revenue well past $175k.
1. **Gradual, smooth transitions instead of binary flips**
2. **Clear, measurable community goal**
3. **Improved perception for both stakers and external investors**
4. **Implementation-light and future-proof**
5. **Partial protection against future “moving goalposts”**
* * *
---
### Author:  [@FlorianVolery](https://gov.liqwid.finance/u/FlorianVolery)
#### Post date: [December 18, 2025, 2:02pm UTC](https://gov.liqwid.finance/t/towards-a-kpi-based-revenue-share-framework-for-lq-stakers/1947/2 "2025-12-18T14:02:52Z")
Thank you for the thoughtful proposal you have put forward.
You clearly outline the current realities and their implications, particularly in points **#2** and **#3** of the “Motivation & Context” part. Following **Vote 110** , the Liqwid protocol has explicitly committed to a path toward **financial sustainability** , and your proposal aligns well with that direction.
Overall, the proposal is well written and introduces several valuable ideas worth considering.
Regarding the current revenue forecasts, the way **2026** will ultimately unfold remains uncertain. Given this uncertainty, I would personally prioritize a **cautious and conservative approach** at this stage.
While I remain optimistic about 2026—especially with two significant Cardano governance initiatives on the horizon ( **50M ADA for DeFi liquidity** and **70M ADA for critical infrastructure** )—I believe it would be prudent to wait until Liqwid is operating under more favorable financial conditions before bringing such a proposal on-chain.
Rest assured, I would be among the first to support **programmatic distributions to LQ stakers**. However, **timing is critical** , and in my view, the current moment is not yet the right one to advance this proposal.
---
### Author:  [@gil](https://gov.liqwid.finance/u/gil)
#### Post date: [December 18, 2025, 3:52pm UTC](https://gov.liqwid.finance/t/towards-a-kpi-based-revenue-share-framework-for-lq-stakers/1947/4 "2025-12-18T15:52:59Z")
Thanks for your reply Florian.
This post is indeed more to start the discussion than to push something on‑chain right now.
While I acknowledge your caution, it feels like your answer doesn’t really engage with what this kind of framework is trying to solve:
1. The whole point is to clearly define things like “under more favourable financial conditions” and “cautious and conservative approach”. Instead of those being open‑ended phrases, the KPI regime says in advance what those conditions mean.
2. The whole point is to remove uncertainty and vagueness like “remains uncertain”, “in my view”, “timing is critical”, “would be prudent”, “I believe”, “rest assured”. The framework is designed so we don’t have to rely on these kinds of subjective judgements every year; everyone can see up front what happens at each revenue band.
3. About “current revenue forecasts” for 2026: such a framework is explicitly made to react to actual revenue, whatever it is, to preserve funding and only share when it makes sense, and at levels that make sense, in a transparent and predictable way for all participants. Such framework is just as conservative as proposal 110 until revenue significantly start growing.
So reading your message, I mainly see a continuation of this more discretionary, phrase‑based approach that this framework is intended to resolve. I am happy to read you think some of the ideas are worth considering, but without engaging with the mechanism itself or suggesting alternative KPIs/conditions, we stay in the pattern of “later, when things are better” without saying what “better” is.
Thanks again for highlighting some qualities of this post.
Sidenote (with genuinely good intentions):
I think the whole DAO – core team and community – could benefit from building a culture of discussions and proposals that are:
- more balanced and transparent,
- more analytically rich,
- more explicit about trade‑offs and limitations,
- less one‑sided and less marketing‑framed,
- less heavily weighted toward upside language, and more careful with understatements.
That’s what I’ve tried to do here, and I’d love to see that style become the norm for major strategy and tokenomics changes going forward.
---
### Author:  [@FlorianVolery](https://gov.liqwid.finance/u/FlorianVolery)
#### Post date: [December 19, 2025, 3:49pm UTC](https://gov.liqwid.finance/t/towards-a-kpi-based-revenue-share-framework-for-lq-stakers/1947/5 "2025-12-19T15:49:25Z")
Thank you for taking the time to engage so thoughtfully and for sharing your perspective in detail.
First, I want to reiterate that I genuinely appreciate the amount of work and reflection that went into your model. It clearly has value from a conceptual and long-term standpoint, and I do not question the effort or the good intentions behind it.
That said, I believe it is important to distinguish between **long-term structural discussions** and the **immediate challenges** the protocol is currently facing. At this stage, our priorities are necessarily focused on addressing concrete constraints—namely, **repaying the POL loan, increasing revenues** , and managing costs. Your proposal does not directly engage with these short-term requirements.
Given the existing outstanding obligations and the need to secure funding for the 2026 budget, implementing such a model today would, in practice, likely result in no programmatic distributions being released in the coming months. For this reason, I do not believe the timing is right, even though I do see merit in the framework itself and would be open to revisiting it once conditions are more favorable.
On the broader governance and cultural points you raise, I agree that these discussions are nuanced and deserve careful handling. I have made sustained efforts in the past to engage constructively on these topics. However, my experience has also shown that expectations around incentives and distributions can sometimes become disconnected from operational and financial realities.
In this respect, I believe it is useful to look at **established models of corporate governance** , not as a rigid template, but as a source of practical insight. Decentralization does not imply the absence of structure, accountability, or trade-offs. Even in DeFi, DAOs ultimately operate within a **capital-weighted governance framework** , where participation and influence are necessarily linked to stake and risk exposure.
Finally, I do not dispute that much of the recent discussion has been constructive, nor do I question the good faith of participants who are seeking alignment. My intention is simply to emphasize that, **under current conditions, financial sustainability must take precedence over distribution mechanisms, regardless of their longer-term appeal.**
I value the exchange and the contribution you are making to the discussion, and I hope we can continue to build on this dialogue as the protocol evolves.
---
### Author:  [@gil](https://gov.liqwid.finance/u/gil)
#### Post date: [December 19, 2025, 8:50pm UTC](https://gov.liqwid.finance/t/towards-a-kpi-based-revenue-share-framework-for-lq-stakers/1947/7 "2025-12-19T20:50:37Z")
Good reply. Back to work.
---
### Author:  [@ADA\_Matt](https://gov.liqwid.finance/u/ADA_Matt)
#### Post date: [December 28, 2025, 1:32am UTC](https://gov.liqwid.finance/t/towards-a-kpi-based-revenue-share-framework-for-lq-stakers/1947/8 "2025-12-28T01:32:26Z")
What metrics are you using to determine when we reach a financially sustainable level? Can we track in the reports?