Proposal for SOMM Token Burn Mechanism Using Strategy Vault Fees

Proposal for SOMM Token Burn Mechanism Using Strategy Vault Fees


Implement a burn mechanism for SOMM tokens by allocating 50% of the protocol revenue fees from strategy vaults. This initiative aims to reduce the circulating supply of SOMM tokens, resulting in a deflationary token supply.


Sommelier’s strategy vaults generate significant protocol fees. This proposal suggests optimizing the use of these fees to benefit the SOMM token economy by introducing a burn mechanism, balancing ecosystem rewards with strategic token scarcity.

Proposal Details:

Burn Rate: Allocate 50% of strategy vault’s protocol fees for the SOMM token burn, adjusting the ecosystem’s economic model towards a deflationary mechanism.


Convert the designated fees into SOMM tokens.

Burn the converted tokens, permanently removing them from circulation.

Detailed implementation of the burning mechanism and burning rate parameter to be discussed and to be implemented by the team.


Value Appreciation: Decreasing SOMM’s supply is expected to contribute to its appreciation, benefiting all stakeholders.

Economic Balance: This measure aims to improve long-term sustainability and attractiveness of the Sommelier ecosystem.


By adopting a burn mechanism funded by strategy vault fees, Sommelier can enhance the intrinsic value of SOMM tokens and support the ecosystem’s growth. This strategic adjustment is expected to provide a balanced approach to reward distribution and token value appreciation.


It could be a great idea to have such mechanism in place. I wonder what is the rationale behind your 50% proposal. Why not just 100%? I kind of thought the auction mechanism is pretty unclear and clunky at this stage so 100% could get us rid of it?

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This doesn’t remove the auction mechanism. It just burns the fees instead of distributing them.

There isn’t any issue with burning the fees but it asks the question if Somm should have staking rewards either now or once we move to Eigenlayer.

For a long time Somm didn’t have staking rewards. They feel necessary for consensus security right now.

The auction mechanism will become more user friendly over time

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Thanks. 50% was a trigger for discussion, assuming that part would still have to go as reward for stakers. Believe that the final proposal should refer to a burning rate parameter, which would be set initially to X%, but possible to change by gov in the future.

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As you confirm I’m also under the impression that the burning rate parameter may have impact in the consensus security of the protocol.

If a burning mechanism is to be implemented, maybe its burning rate parameter should have a upper limit predefined (TBD: 50%, 75%, … lower than 100%).

As for the move towards Eigenlayer and relation with staking rewards, ie security, maybe you or others should detail a bit more what the impact would be and the relation with staking rewards and security consensus. Personally I’m not acquainted with such details so I can’t really express an opinion.

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ok. I think the community is looking for that kind of mechanism but would be great to poll them in the various groups (Twitter, Telegram, discord) to confirm that is the case. If it’s positive then the team would be able to make a governance proposal.
And in the meantime work on a rationale for the exact % to make sure it doesn’t compromise the network security in any way.

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