Author(s): SaucerSwap Labs
SaucerSwap Voting Interface: TBA
Related discussions: SaucerSwap V2 Tokenomics, Incentives Realignment and HBAR Rewards Simplification, SaucerSwap V3 Launch Economics, V3 Order Book Calibration
Submission date: August 22, 2026
Summary
SaucerSwap is preparing to launch its first perpetuals market: a native, self-custodial HBAR/USD venue built from the GMX V2 architecture. Traders will be able to take leveraged long or short HBAR exposure, while liquidity providers supply the WHBAR and USDC balance sheet that backs the market.
This RFC treats the launch as an opportunity to update the wider SAUCE economy at the same time. It proposes three coordinated changes:
- Launch HBAR/USD perpetuals with conservative initial parameters, including 2x maximum leverage, 5/7 bps position fees, Chainlink pricing, and a $1 million target GM liquidity pool.
- Reduce and retarget MasterChef emissions by cutting the emission rate 50%, temporarily strengthening V1 and V2 before GM rewards begin, and redirecting the devcut tranche currently sent to Mothership to burn.
- Unify BrewSaucer routing so eligible value from V1, V2, V3, HBAR native staking, and perpetuals follows one downstream allocation: 40% xSAUCE, 30% Development, 10% burn, and 20% protocol-owned liquidity and incentives.
The emission and BrewSaucer changes may be activated before perpetuals launch. GM rewards begin only after the HBAR/USD market and GMRewardVault are deployed, audited, and ready for deposits.
The result is a new product category, the first major SAUCE emission-rate reduction since V2, a clearer revenue-recycling system, and more targeted use of the remaining emission budget.
Why now
The previous major emission reduction accompanied the launch of SaucerSwap V2 in 2023. At that time, governance reduced the MasterChef emission rate by 60% as V2 introduced more capital-efficient concentrated liquidity. The same principle applies here: incentives should remain large enough to support useful liquidity, but issuance should not remain fixed when market structure and activity have changed.
Perpetuals represent another transition point. They add a new trading product, a new use for xSAUCE, a new liquidity program, and a new potential source of protocol fees. The supporting tokenomics infrastructure is also more mature than it was at V2 launch: SaucerSwap now has xSAUCE revenue accrual, recurring SAUCE buybacks, a burn destination, HBAR native-staking revenue, and a protocol-owned liquidity and incentive reserve.
The market environment has also changed. Bear-market conditions and weaker Hedera DeFi activity have reduced trading and fee generation across the protocol. The remaining emission budget should be calibrated to the market that exists today while retaining the ability to revisit incentives when competition and activity recover.
This does not remove the need for incentives, but does mean that an annual gross issuance rate of approximately 73.33 million SAUCE should be recalibrated to current activity and deployed more selectively. The objective is not simply to reduce emissions, but to combine lower inflation with a new perpetuals product, stronger fee recycling, and targeted liquidity support that can scale as the market recovers.
1. HBAR/USD perpetuals
What the market does
A perpetual contract lets a trader take long or short exposure without an expiry date. The first SaucerSwap market will track HBAR/USD and use the GMX V2 market structure.
The market is backed by a shared GM liquidity pool. LPs deposit WHBAR, USDC, or both and receive the market’s GM token, which represents their proportional ownership of the pool. The pool acts as the balance sheet behind the market: it pays profitable traders, receives trader losses, and earns 63% of eligible market fees. As fees accrue, they increase the value represented by each GM token. GM is therefore risk-bearing market-making capital, rather than a conventional constant-product LP position.
SAUCE incentives are distributed separately through a GMRewardVault. An LP who wants to earn these rewards deposits their GM tokens into the vault while retaining the economic exposure represented by those tokens. The vault tracks each LP’s share of the staked GM supply and distributes SAUCE incentives proportionally. These rewards can come from the MasterChef allocation and from SAUCE recycled through the POL + Incentive Reserve.
HBAR/USD is the natural first market because HBAR is SaucerSwap’s benchmark asset, external HBAR derivatives markets give professional LPs a way to hedge, and the market can be backed directly by WHBAR on the long side and USDC on the short side.
Launch configuration
| Parameter | Initial setting |
|---|---|
| Market | HBAR/USD |
| GM backing | WHBAR long token / USDC short token |
| Target GM TVL | $1,000,000 |
| DAO opening GM position | $100,000 |
| Opening composition | $50,000 WHBAR / $50,000 USDC |
| Maximum leverage | 2x |
| Initial long OI cap | $100,000 |
| Initial short OI cap | $100,000 |
| Balance-improving position fee | 5 bps |
| Balance-worsening position fee | 7 bps |
| GM share of explicit fee classes | 63% |
| Primary oracle path | Chainlink HBAR/USD and USDC/USD |
| Affiliate rewards | 0% at launch |
The DAO opening position may be funded from undeployed or underutilized inventory currently managed by Skynet, SaucerSwap’s market maker.
The protocol and interface will both launch at 2x maximum leverage. This provides additional liquidation headroom while the team establishes live evidence around oracle delivery, keeper execution, liquidations, withdrawals, trader PnL, and GM retention. Leverage is a configurable market parameter, so a later increase does not require a new market or a new GM token. Any increase—which are expected—will require a separate governance proposal.
Position fees and the 63% GM share
Each open, increase, decrease, or close is a fee-bearing position action. Actions that reduce the absolute long/short open-interest imbalance pay 5 bps; actions that increase it pay 7 bps. Borrowing, funding, price impact, execution reimbursement, and liquidation charges remain separate.
The proposed 63% GM share follows the standard GMX V2 allocation on Arbitrum and Avalanche. GM liquidity providers receive the majority because they supply the balance sheet that pays profitable traders and bears trader-PnL, inventory, liquidation, and withdrawal risk. The remaining 37% is the protocol side before trader discounts or any later affiliate allocation. Using the GMX V2 split provides a tested starting point for the fork rather than introducing a new fee allocation without operating data.
Funding remains a transfer between traders, execution reimbursement is a pass-through cost, and trader PnL is not fee revenue. Only the protocol-side residual becomes eligible for Unified BrewSaucer after GM compensation and applicable discounts are resolved.
xSAUCE position-fee discounts
The perpetuals market will use the same tiered xSAUCE concept introduced with V3. A trader’s xSAUCE balance reduces the position fee charged on opens, increases, decreases, and closes:
| xSAUCE threshold | Discount | Improving fee | Worsening fee |
|---|---|---|---|
| None | 0% | 5.00 bps | 7.00 bps |
| 10,000 | 5% | 4.75 bps | 6.65 bps |
| 50,000 | 10% | 4.50 bps | 6.30 bps |
| 250,000 | 15% | 4.25 bps | 5.95 bps |
| 1,000,000 | 20% | 4.00 bps | 5.60 bps |
| 5,000,000 | 30% | 3.50 bps | 4.90 bps |
| 10,000,000 | 40% | 3.00 bps | 4.20 bps |
The discount applies only to the position fee. It does not reduce borrowing, funding, price impact, execution reimbursement, or liquidation charges. This gives xSAUCE a direct use in the new product: active traders can lower recurring costs by staking and retaining SAUCE. It also gives traders a recurring reason to acquire and retain xSAUCE, extending the same utility model introduced with V3 into a new product category.
GM liquidity incentives
When the audited GMRewardVault is live, the HBAR/USD GM program will receive 1,500 of the 5,000 MasterChef allocation points for an initial 90-day epoch.
At a $0.01232 SAUCE price and $1 million of GM TVL, the modeled fee-plus-emission APR is:
| Annual position-action notional | Organic GM fee APR | MasterChef reward APR | Modeled total APR |
|---|---|---|---|
| $25 million | 0.97% | 12.32% | 13.29% |
| $100 million | 4.13% | 12.32% | 16.45% |
| $200 million | 8.32% | 12.32% | 20.64% |
Potential support from the POL + Incentive Reserve is not included in these figures. These are modeled returns, not promised yields. GM holders remain exposed to trader PnL, WHBAR/USDC inventory performance, smart-contract risk, liquidations, oracle and keeper performance, and withdrawals.
2. SAUCE emission reduction and MasterChef realignment
How MasterChef allocation works
MasterChef mints SAUCE for liquidity programs at a protocol-wide emission rate. Those rewards are allocated by assigning each top-level destination a point weight, with all allocations summing to 5,000 points.
The current top-level allocation is:
| Destination | Current points | Current share |
|---|---|---|
| V1 farms | 788 | 15.76% |
| V2 LARI | 2,314 | 46.28% |
| DAO | 1,898 | 37.96% |
| Total | 5,000 | 100% |
The DAO allocation supports CEX liquidity and V3 inventory under Skynet’s management, among other governance-approved uses. It is, however, underutilized relative to its current 37.96% share. This proposal retains a smaller flexible DAO allocation while directing more of the reduced emission budget toward active liquidity programs.
Proposed emission rate
| Parameter | Current | Proposed |
|---|---|---|
| MasterChef emission rate | 126.83904 SAUCE/min | 63.41952 SAUCE/min |
| Additive devcut | 10% of emission rate | 10% of emission rate |
| Gross MasterChef emission rate, including devcut | 139.522944 SAUCE/min | 69.761472 SAUCE/min |
| Annual point-allocated emissions | 66.67m SAUCE | 33.33m SAUCE |
| Annual gross MasterChef issuance | 73.33m SAUCE | 36.67m SAUCE |
| Approximate terminal period | Mid-September 2027 | Early November 2028 |
This would be the first major SAUCE emission-rate reduction since V2. It approximately halves annual gross MasterChef issuance and extends the remaining emission runway by roughly fourteen months without changing SAUCE’s one-billion-token maximum supply.
Staged MasterChef allocation
Before the GMRewardVault is live, the future 1,500-point GM allocation will be split temporarily: one-third to V1 and two-thirds to V2. This cushions V1’s currently low aggregate yield without ignoring that V2 continues to account for most trading activity and fee production.
| Destination | Interim points | Share |
|---|---|---|
| V1 farms | 1,200 | 24% |
| V2 LARI | 3,500 | 70% |
| DAO | 300 | 6% |
| HBAR/USD GM | 0 | 0% |
| Total | 5,000 | 100% |
Once the audited GMRewardVault is live:
| Destination | Final points | Share | Annual SAUCE at proposed rate |
|---|---|---|---|
| V1 farms | 700 | 14% | 4.67m |
| V2 LARI | 2,500 | 50% | 16.67m |
| DAO | 300 | 6% | 2.00m |
| HBAR/USD GM | 1,500 | 30% | 10.00m |
| Total | 5,000 | 100% | 33.33m |
The GM allocation begins as a 90-day epoch. Any renewal or adjustment should use realized GM TVL, liquidity retention, organic fee yield, SAUCE price, trader PnL, reward concentration, and GM drawdown.
The existing buyback-funded HBAR reward recipients remain unchanged: V2 SAUCE/HBAR and V2 USDC/HBAR continue to receive the HBAR program at a 50/50 pool-level split. These rewards are separate from the SAUCE LARI point allocation and are not included in the aggregate SAUCE reward APR estimates below. The amount distributed in HBAR continues to vary with the buyback-funded budget.
Devcut destination
MasterChef also mints an additive devcut equal to 10% of the emission rate. The devcut therefore falls automatically with the proposed emission-rate reduction, from 12.683904 to 6.341952 SAUCE per minute.
MasterChef sends the devcut to the SaucePaymentSplitter. Under the current operating split, 30% is routed to Mothership/xSAUCE and 70% follows the existing non-staking distribution path. This proposal changes only the Mothership tranche:
| Devcut destination | Current | Proposed | Annual SAUCE at proposed rate |
|---|---|---|---|
| Mothership / xSAUCE | 30% | 0% | 0 |
| Protocol burn destination | 0% | 30% | approximately 1.00m |
| Existing non-staking route | 70% | 70% | approximately 2.33m |
| Total | 100% | 100% | approximately 3.33m |
At the proposed rate, the redirected tranche burns approximately 1 million newly minted SAUCE per year. The modeled reduction to xSAUCE APR from this redirect alone is only approximately 0.22 percentage points.
This is an issuance offset, not a market buyback. The SAUCE is minted under the configured schedule and then transferred to burn, reducing effective circulation without changing the projected terminal period. Before execution, the live splitter payees, shares, release mechanics, and administrative controls will be verified so the existing non-Mothership recipients remain unchanged.
3. Unified BrewSaucer
Current structure
The V3 Launch Economics proposal established two parallel downstream policies:
| Current source | xSAUCE | Development | Burn | POL + incentives |
|---|---|---|---|---|
| V1/V2 fee switch + HBAR native staking | 50% | 10% | 10% | 30% |
| V3 net fees | 30% | 60% | 10% | 0% |
That structure reflected the expected differences between incentive-dependent AMMs and a V3 order book supported by maker rebates. The later V3 calibration proposal left the routing unchanged.
Perpetuals now add a third liquidity model. GM liquidity receives its fee share upstream, while the market may require temporary SAUCE incentives during bootstrap. Adding another source-specific output policy would make the system harder to understand and govern.
Proposed structure
Each product will resolve its own upstream obligations and then send eligible value into one SAUCE buyback allocation.
| Source | Value entering Unified BrewSaucer |
|---|---|
| V1 | Protocol fee-switch share of V1 swap fees |
| V2 | Protocol fee-switch share of V2 swap fees |
| V3 | Taker fees less maker rebates and applicable trader discounts |
| HBAR native staking | Rewards earned by HBAR held in the WHBAR contract |
| HBAR/USD perpetuals | Protocol residual after GM compensation, xSAUCE discounts, and any activated affiliate payout or approved reserve contribution |
| Destination | Share | Purpose |
|---|---|---|
| xSAUCE / Mothership | 40% | Revenue-backed value accrual for stakers |
| Development Fund | 30% | Audits, infrastructure, maintenance, integrations, and continued product development |
| Burn | 10% | Permanent supply removal of purchased SAUCE |
| POL + Incentive Reserve | 20% | Existing HBAR rewards, V1 and V2 liquidity support, GM incentives, and other governance-approved programs |
| Total | 100% |
V3 will continue to rely on maker rebates rather than SAUCE incentives. Unified BrewSaucer will accept approved source senders and route purchased SAUCE directly to the four destinations.
The 20% POL + Incentive Reserve supports the existing HBAR reward program and preserves flexibility for time-bounded V1, V2, or GM liquidity support. This RFC does not change the HBAR recipient pools or their 50/50 split. Deployments from the remaining reserve continue to require the applicable governance mandate.
Figure 1. Current and proposed revenue routing, MasterChef emissions, staged point allocation, and devcut treatment.
4. Expected economic effects
Lower issuance and additional burn
| Metric | Current | Proposed |
|---|---|---|
| Annual gross MasterChef issuance | 73.33m SAUCE | 36.67m SAUCE |
| New annual devcut burn | 0 | approximately 1.00m SAUCE |
| Effective MasterChef circulation addition before other burns | 73.33m SAUCE | approximately 35.67m SAUCE |
| Approximate terminal period | Mid-September 2027 | Early November 2028 |
The existing 10% revenue-funded BrewSaucer burn remains in place. The approximately 1 million SAUCE devcut burn is additional to that buyback-and-burn stream.
V1 and V2 LP yield: 90-day fee APR and SAUCE reward APR
The table below separates the two principal APR components:
- Fee APR is an approximate trailing-90-day, version-level rate: LP fee revenue over the window is annualized and divided by current TVL. The estimate uses Q2 daily averages for the May 25-June 30 portion of the window and observed Q3-to-date data through August 22.
- SAUCE reward APR is the annual dollar value of the applicable top-level MasterChef allocation, using a $0.01232 SAUCE price, divided by current protocol TVL. It is a calibration measure, not the APR of every pool.
| Version | Policy phase | 90-day fee APR | SAUCE reward APR | Estimated total APR |
|---|---|---|---|---|
| V1 | Current | 1.46% | 1.46% | 2.92% |
| V1 | Interim | 1.46% | 1.11% | 2.57% |
| V1 | GM live | 1.46% | 0.65% | 2.11% |
| V2 | Current | 13.87% | 5.51% | 19.38% |
| V2 | Interim | 13.87% | 4.17% | 18.04% |
| V2 | GM live | 13.87% | 2.98% | 16.85% |
Fee APR is held constant across policy phases because this RFC changes emissions, not AMM swap fees. The figures are aggregate version-level estimates and should not be read as the return available in every pool or to every LP. V1 reward APR depends on each farm’s weight and staked liquidity. V2 fee APR depends on active range and capital efficiency, while reward APR depends on each pool’s LARI weight and eligible active liquidity.
The pool-specific HBAR rewards paid to V2 SAUCE/HBAR and USDC/HBAR are excluded from this aggregate table and remain unchanged. The interim 1,200-point V1 allocation is intended to soften the immediate impact on V1 while GM infrastructure is being completed.
xSAUCE APR and utility
The proposal affects xSAUCE through three channels:
- the lower MasterChef emission rate halves the devcut;
- the remaining 30% Mothership devcut tranche is redirected to burn; and
- the dominant V1/V2/HBAR BrewSaucer sources move from a 50% xSAUCE allocation to the unified 40% allocation.
Using the August 2026 model inputs, the annualized xSAUCE contribution from the affected flows is estimated to move from approximately 5.6% to 4.1%, a reduction of roughly 1.5 percentage points. The devcut redirect itself accounts for approximately 0.22 percentage points of that change.
This is partly offset by stronger utility. xSAUCE will provide tiered fee discounts in perpetuals, as it does in V3, and xSAUCE will receive 40% of eligible purchased SAUCE from every approved revenue source, including future perpetuals residuals. Actual displayed xSAUCE APR will continue to vary with protocol revenue, SAUCE price, and the Mothership balance.
Protocol sustainability
Protocol sustainability under this framework comes from several reinforcing mechanisms:
- Lower emissions reduce the amount of newly issued SAUCE entering circulation each year.
- Fee recycling converts V1, V2, V3, HBAR staking, and future perpetuals revenue into SAUCE purchases.
- xSAUCE allocation gives stakers revenue participation and fee utility.
- Burn removes both bought-back SAUCE and newly minted SAUCE.
- POL and incentives recycle part of protocol revenue back into productive liquidity without increasing the MasterChef emission rate.
- Development funding supports audits, infrastructure, maintenance, integrations, and future product work.
The 30% Development allocation helps extend the protocol’s operating runway, but 70% of bought-back SAUCE remains directed to xSAUCE, burn, and liquidity support. As protocol usage recovers, those revenue-backed flows can grow without increasing the emission rate.
5. Activation and governance
The proposal may be ratified before the perpetuals market is ready.
Initial activation
Following approval:
- reduce the MasterChef emission rate to 63.41952 SAUCE per minute;
- retain the additive 10% devcut and redirect its existing 30% Mothership tranche to burn;
- activate the interim 1,200 / 3,500 / 300 MasterChef point allocation; and
- activate Unified BrewSaucer at 40% xSAUCE / 30% Development / 10% burn / 20% POL + Incentive Reserve.
Perpetuals activation
After the HBAR/USD market, Chainlink path, keepers, fee accumulator, incentive controller, and GMRewardVault are deployed and audited:
- seed the DAO’s $100,000 GM position;
- launch the market at 2x maximum leverage and $100,000 OI per side; and
- activate the final 700 / 2,500 / 300 / 1,500 MasterChef allocation for an initial 90-day GM epoch.
Governance remains responsible for leverage increases, OI increases, fee policy, MasterChef points, BrewSaucer destinations, market upgrades, and signer changes. A narrower emergency role may pause the market, enter reduce-only mode, lower leverage or OI caps, or disable a failing oracle or keeper path, but may not increase risk or redirect funds.
Key trade-offs and risks
- V1 and V2 SAUCE reward APRs decline after the emission cut, with a larger reduction once GM rewards activate.
- The modeled contribution to xSAUCE APR declines by approximately 1.5 percentage points, although xSAUCE gains additional fee utility in perpetuals.
- Development and incentive allocations are not permanent token sinks and may return to circulation.
- GM liquidity is exposed to trader PnL, inventory movement, smart-contract risk, liquidations, and withdrawals.
- A 2x leverage cap reduces risk but does not replace reliable oracles, keepers, OI limits, stress testing, and emergency controls.
- SAUCE price, TVL, volume, and active liquidity can materially change every APR estimate in this RFC.
- The changes activate in stages so the emission and routing updates do not depend on the perpetuals contracts being live.
Voting options
For — Approve the HBAR/USD perpetuals launch parameters, 50% MasterChef emission-rate reduction, staged MasterChef point allocations, devcut Mothership-tranche burn, and Unified BrewSaucer policy described in this RFC.
Against — Do not approve the proposed changes.
Abstain — Participate in quorum without expressing support or opposition.