As previously mentioned, Crescent employs a reward auction to tokenize liquid farming positions. The fee revenue generated from the underlying position consists of the two tokens used for trading by default. However, the farming reward provided as an incentive for the position can be in the form of CRE or an additional token from an external protocol.
While the module could directly swap these tokens into trading tokens and reinvest them, such a process could result in losses due to imperfections of automated swap logic and create vulnerabilities to potential MEV attacks. These attacks could disrupt the intended swap plan and reduce the profits of sb token holders. To mitigate these risks, it is preferable to competitively dispose of the reward tokens in the market at a minimal discount.
By allowing only the sb token itself as the quote token for the auction, we eliminate the need for additional reinvestment process. Instead of sending the accumulated rewards to the auction winner, the module receives a certain amount of sb tokens. These sb tokens that enter the module through the auction are immediately burned. Unlike a normal burn where the user withdraws the original two tokens while burning the sb token, in this case, only the sb token itself is burned. The module does not send any tokens elsewhere in response.
To clarify, participants in the auction are required to deposit two trading tokens in order to mint sb tokens for bidding. After the auction concludes, the winning bidder is determined, and the sb tokens they bid on are burned, effectively removing those sb tokens from circulation. As a result, the auction reward is automatically reinvested from the perspective of existing sb holders.