Over the past couple months, Stader has been taking strides towards decentralization, and community-led governance.
Stader (SD) token is the native governance token for the Stader platform. It is an ERC-20 token in limited supply, capped at 150Mn tokens.
Today, we are happy to unveil the SD staking mechanism devised to enable a decentralized governance of the protocol.
The staked version of SD, called xSD, has governance power and will be entitled to a portion of the protocol revenue generated across the different chains Stader is live on, once approved by Stader governance. Further details regarding this revenue-sharing feature will be shared in a subsequent post.
xSD design is similar to Stader’s liquid staked tokens ETHx, MaticX, BNBx, HBARX etc. SD holders stake SD to receive xSD (at the prevailing exchange rate). Staking rewards are added to the smart contract periodically leading to xSD price increase vis-a-vis SD.
SD staking will be solely available on Ethereum mainnet for now.
xSD staking mechanism has four core features:
2.1 Real Yield: SD stakers receive a proportional share of protocol revenues (once approved by governance). A portion of protocol revenues is dedicated to buy back $SD from the open market and provided as rewards to the staking contract.
2.2 Exchange rate xSD:SD: Since the supply of xSD remains the same even with the staking rewards, the price of xSD increases vis-a-vis SD.
2.3 Governance power: Once SD staking goes live, xSD will be eligible for on-chain governance* (currently via Snapshot).
2.4 Unstaking: Users can redeem xSD and unstake SD at the current exchange rate. Unstaking will be allowed upon launch. The unstaking period is set at 7 days. This serves a double purpose:
- To enhance the security by allowing bigger time for response in case of abnormality,
- To reward long term holding and governance participation in Stader protocol
Security of user’s funds are paramount for us. Stader’s staking contract has been audited by a top tier audit firm, Halborn Security. Additionally, we will implement on-chain monitoring with our existing partners including Forta and Certora.
The following mechanism has its pros and cons, and they have largely been discussed with key community members. Here is a brief outline:
The staking yields given out are “Real Yield”, i.e. generated from real protocol revenues, instead of inflationary rewards.
It is potentially tax efficient** across several jurisdictions.
It is a model preferred by large SD holders/ institutions as they don’t have a mandate to provide and stake LP tokens.
SD being bought from the open market to distribute among stakers creates a positive buying pressure
- It incentivizes people for locking out their token out of circulation but it does not help increase the on-chain liquidity of the SD token.
- It does not incentivize longer-term locking by giving a non-linear increase of governance power / rewards (like the ve model does).
- Judging at existing projects having used it, the buyback mechanism does not necessarily bring a better price action to the SD token.
With the advent of ETHx, the team is finalizing designs regarding additional SD utility to be used as a bond by the node operators. More info on this in subsequent forum posts.
While the xSD model planned for Phase 1 is basic, it seems to have several benefits to Stader tokens holders as highlighted before. Team is actively engaging with several community members to design the roadmap for SD staking beyond Phase 1.
Would love to hear thoughts and suggestions from the community regarding SD staking details shared above.
Till here today. Do you want to shape the future of our staking mechanism ?
Join this forum and let us know your thoughts below !
*As any other multichain DeFi project, Governance is best executed if performed solely in Ethereum. We feel multichain governance is a frontier yet to be explored by the blockchain industry, and we choose to put our focus on growing our product suite and our user base at the moment. We however remain vigilant of new developments in this space.
**Not financial advice. Consult a tax professional.