Title: SAUCE Buyback Allocation Update: Balancing Rewards, Burn, and Growth
Author(s): SaucerSwap Labs
SaucerSwap Voting Interface: TBA
Related Discussions: N/A
Submission Date: June 28, 2025
Introduction
SaucerSwap Labs proposes a revised allocation for SAUCE token buybacks to ensure long-term protocol sustainability, incentivize holders, reduce token supply, deepen liquidity, and support ongoing development. This new structure balances rewards for stakers with key infrastructure needs and aligns with current trends across leading decentralized exchanges (DEXs).
Background
SaucerSwap currently routes 100% of buyback-acquired SAUCE to single-sided stakers via the xSAUCE pool. While this model effectively rewards long-term holders, it does not allocate resources to other areas critical to the protocol’s growth—such as liquidity, development funding, or deflationary pressure.
Industry leaders like GMX, PancakeSwap, and Osmosis have adopted hybrid tokenomics frameworks that combine staking incentives with deflationary mechanisms, dedicated development funding, and protocol-owned liquidity (POL) strategies. These models have proven effective at building resilient, capital-efficient ecosystems.
To align with these best practices, SaucerSwap Labs recommends a more balanced structure for SAUCE buybacks moving forward.
Rationale
The revised allocation achieves four primary goals:
1. Maintain Competitive Staking Yields
Staking rewards remain the largest allocation (75%), keeping xSAUCE yield attractive relative to alternatives like HBAR native staking and other Hedera-based DeFi products. This helps retain long-term holders and supports SAUCE’s role as a productive asset.
At the current TVL and average buyback rate (~$2,000/day), staking APR will adjust from ~5.07% to ~3.8% under the new structure—still above most Hedera-based DeFi yield options. Should protocol volume increase, staking APR would be expected to increase proportionally.
2. Introduce Sustainable Deflation
A portion of bought-back SAUCE (12.5%) will be permanently removed from circulation. This creates deflationary pressure. While the absolute burn volume may be modest initially, the visibility of consistent token burns can build long-term confidence and support.
3. Reinforce Protocol Liquidity (POL)
7.5% of buybacks will be used to seed and deepen protocol-owned liquidity in SAUCE-related trading pairs. This improves trade execution quality, reduces slippage, and anchors the token in real, protocol-backed market depth.
4. Support Continued Development
5% of buybacks will be directed to a development fund managed by SaucerSwap Labs. This ensures operational continuity and reduces dependence on finite vesting schedules or the DAO treasury. The modest allocation maintains optics while still contributing meaningfully to core engineering, security, and product growth.
Allocation | Percentage |
---|---|
SAUCE Stakers (xSAUCE pool) | 75% |
Token Burn | 12.5% |
Protocol-Owned Liquidity | 7.5% |
Development Fund | 5% |
- Buybacks will continue to occur via the existing system, drawing from protocol fees and other designated funding sources.
- Token burns will be executed daily, with public tracking and transparency dashboards (i.e., burn-tracker built into the Stake page of the SaucerSwap web-app, and an updated Discord Buyback Bot to report daily burns).
- POL will be deployed strategically to deepen key pairs (e.g., SAUCE/HBAR, USDC/HBAR, etc.), improving user experience and trade efficiency.
- Development funds will be swapped to stable assets or HBAR as needed to fund ongoing operations.
Benefits to the DAO and Community
- Incentive Alignment: Rewards users while funding growth and reducing supply.
- Liquidity Depth: Improves trading quality and price resilience during volatility.
- Deflationary Narrative: Aligns with market expectations of proactive circulating supply management.
- Operational Sustainability: Reduces reliance on emissions or Treasury allocations post-vesting.
Communication and Transparency
- A public dashboard will be implemented on the Stake page to track burn totals.
- Governance may revisit allocations based on protocol growth, user feedback, or market conditions.
- SaucerSwap Labs commits to ongoing reporting and transparency around execution.
Conclusion
This revised buyback allocation represents a strategic evolution of SAUCE tokenomics—designed to reward holders, strengthen the protocol, and support long-term sustainability. The 75 / 12.5 / 7.5 / 5 structure aligns with leading DeFi practices while preserving SaucerSwap’s unique positioning in the Hedera ecosystem.
We respectfully request the community’s support for this proposal and look forward to continuing to grow the protocol together.
Voting options
For: Approve the new SAUCE buyback allocation
Against: Retain the current 100% allocation to SAUCE stakers