SD staking mechanism (xSD)

I’m not familiar with how other LSD Governance staking models operate. I think any system that generates protocol revenue and shares a portion with stakers of the native token will be hot in the next bull run if done correctly. I am not 100% sure that buying SD and adding to the pool is the right method though. If the fees generated are converted into stables and distributed as rewards, to me this would be an indisputable superior model, as the rewards are clear and visible (real), whereas, during longer periods of sustained rewards selling pressure, there needs to be a way to incentivize people to want to stake. I think having rewards in a stable coin would be far superior than having to manually buy SD and add to a contract periodically.

2 Likes

Thanks for the elaborate post. Really like the pros vs cons analysis you have shared @jackswiths Could you please share what the bytemasons team is building? We are close to finalising validator related tokenomics on ETHx and there might be an interesting synergy.

2 Likes

Very interesting. But it’s necessary to mention that it seems like you miss the point of “real yield”.
Real yield is when you receive rewards in stables, value that can’t be decreased over time, can’t be dumped, crushed, erased, not depends on market conditions, not creates selling pressure.
All fhe models if buy backs of the same governance tokens - failed.
Whale’s wallet will accumulate SD rewards much faster than retail investors. Sell the tokens to takes the profits of real yield.
This is not a good model.

Stader’s rewards is coming from stakers, as operational fees.
That’s meant Stader will have to sell the ETH, MATIC, NEAR, APTOS and other native coins. Than buyback the SD and only than send the SD to xSD pool to increase its value.
Don’t it seems like too much operations? How often will you do the harvesting of fees? Daily? Weekly? How many gas fees will it cost?
If it’s going to be daily it’s high cost of converting and will lower the real yield.
Monthly - SD can be dumped in price and stakers will receive even less rewards.
On the other hand, you are already collecting the native tokens as fees, why don’t you distribute this coins as real yield. This is a real share of your rewards. But instead you will sell the native coins to buy back the SD.
It’s like if I buy McDonald’s shares and they will distribute hamburgers as dividend.:rofl:

Look at the example of MintDAO.
Sharing 75% of revenue in USDC for governance token holders. This is real yield.

Holding and staking governance token to be rewarded in governance token is kinda ordinary staking model there is no real yield.

2 Likes

Is MintDAO available in the US? As per my knowledge, giving yield in stable (or non-staked token, non-SD in this case) would deem SD as a clear security token and as we have seen security tokens haven’t had best time in the market. Yes, Stader is DeFi and they can block US traffic, but is it smart to leave out biggest market in the world?

2 Likes

No need to ban US citizens. US citizens can receive rewards in ETH or any other staked token/coin.
Now let’s be honest, more and more projects on market don’t give a sheet about SEC’s opinion.
Thу corruption of SEC is so clear and visible that many big players not influenced by SEC’s prohibitions.
SEC day’s are already over, FREE market can be build only where no corrupted institutions ruling it,
and that’s not only my opinion ;D

1 Like

Thanks a lot for key suggestions on the forum regarding SD staking and xSD design. Capturing below are key areas of suggestion and my thoughts below:

  • Giving yield in other native tokens
    • This is a great suggestion. We have liquid staking contracts across 6 chains as of now. With Eth, Aptos launching soon, it will be 8. Each of the L1 community would prefer to receive yield in their own native token.
    • It becomes a bit impractical to do this as we need to manage and account for rewards in 8+ different chains (e.g. overheads etc.). Would also add susceptibility of rewards to bridge related risks etc.
    • A potential option could be to do an on-chain vote on the top 2/ top 3 tokens to receive yield.
  • Giving yield in stable coins
    • This is an interesting suggestion and we have had an initial consultation with one of our legal counsels. Preliminary assessment is this may pose a risk of construing SD as a dividend-paying security.
    • However, they are doing a deeper diligence again. We should have a final assessment in a week or so.
  • Liquidity based staking
    • On-chain liquidity is one of the important areas we are focusing on. Immediate changes are
      • 1.) Moving POL to Uniswap v3
      • 2.) Building deep liquidity on Balancer for SD <> ETH pool
    • We will bribe and continue to incentivise on-chain liquidity. Adding a veBAL type of token as the only way to receive SD staking rewards exposes us to any Balancer related smart contract risks. Apart from Balancer and their ecosystem projects, are there any other protocols that utilize this model?
  • In case of xSD, SD buyback timing
    • If we choose to go ahead with the xSD model, this could be a combination of daily buys/ opportunistic buys during the dips.

Key action items for the team include the following based on the above suggestions:

  1. Hear community’s feedback on the suggestions shared here and go for on-chain vote (if necessary)
  2. Further assess Bytemason’s and ve-LP models with relevant community members.
  3. Get back to community with final assessment on yield in stable coins

Responses to key questions about Stader’s overall revenues and expenses.

  • Revenues: As of current prices, Stader’s protocol revenues are around 1.1 Mn USD.
  • Expenses: Team expenses along with marketing etc. are approx 300k USD/ month
  • Rewards expenses: Please refer to the post here for monthly rewards budgets
    SD Token Emissions Budget- January 2023
6 Likes

So I assume we are going to have a vote, if (big IF) it’s a green signal from legal counsel about paying rewards on xSD in any other token than SD.

2 Likes

Thanks @Amit for this great breakdown. Appreciate it. And look forward to more updates.

“A potential option could be to do an on-chain vote on the top 2/ top 3 tokens to receive yield.”
I’m a huge fan of this. In my opinion the community has to be realistic about what is a good balance of not flying too close to the sun with wanting exactly what’s good for them but the team risking problems(SEC regulations coming who knows when, plus you’re locking yourself to Circle who is the issuer of USDC) with closing themselves off from their biggest market currently, the USA, and also seeing what is best for the design and efficiency of the protocol and the costs associated for their business to run in profit enough to be able to keep expanding the ecosystem.

Even if Stader made a big splash with starting to pay in real yield on just the Ethereum network only (ETHx) to start off. See how it goes and slowly expand to the next biggest revenue network after that. Slowly release it. Learn as you go. But start off with ETH. Have a slick staking page showing APR and other stats. Compare it to the staking page of frxETH. It could be simplified more. Made more user friendly. Less is more.

There is no doubt though that the real yield narrative is extremely hot right now. I don’t see it going away. I’m basically investing in a company that’s paying me dividends. I can comfortably hold through any market condition as I know this will indefinitely keep paying me. Protocols not a LSD but that are currently doing real yield: GNS / GMX / BFR / GOVI / CAP + more. 2 of those are actually forks(only the staking part is forked) of GMX. I’m just trying to make the point that the potential here is massive for the competitive LSD landscape. Who else is doing true real yield? No one. Someone will be the first. And whoever is will be the one to forever be able to say: “we were the first LSD protocol to offer real yield.”

3 Likes

You can find some information about Reliquaries here : Reliquary — The new chef in town? | by 0xSkly | Beethoven X | Medium

There are some other articles about it, and I’m sure Justin Bebis would be happy to answer any quetsion you have.

The tl;dr : allowing user to deposit a position into an NFT (no lock at all) to earn staking rewards ; the longer the tokens are staked, bigger the share of reward they receive.
The revenue share received is calculated on a time weighted basis, allowing users to add to the position, remove from it, split an NFT, merge two NFTs, etc.

Very flexible (also the curve is flexible), no lock, and rewarding long term positions to remain in the NFT while still allowing users to trade it.

Lot of future use cases will be possible, way more than with a locked position. (You can imagine the separation between yield and principal easily)

Hope it helps, and would be very happy if this solution was at least looked at.
We have to stay innovative, no repeat the past.

3 Likes

What do people think of month long minimum lockups of xSD to earn the yield (ETH/ETHx if possible)? SD no lock for governance and xSD locked for yield. I’m fully for it. No technical knowledge on the matter but I would assume it would simplify things a lot with not letting people have an unlimited of times to stake/unstake.

Not a fan of tiered lockups where for full yield you have to do 4 years and it steps down all the way to 1 month let’s say for 1/10th of full yield, 1/4 for 1 year for example (made up numbers). PREMIA has a model like this I think, as many others.

Might bring more serious participants to the protocol. Ones that are more devoted to the platform. Makes it more sticky. Makes people maybe consider governance more. Maybe follow the Twitter account more. Random thoughts. If I can get in and out of something I care less about something that I am married to.

2 Likes

Hey, @TD86 thank you for sharing with us your ideas.
Locking models were discussed earlier in other topics, and there is more members against the locking model.
I’m now of them. Locking is against Stader’s vision of liquid staking.
It’s a killer of portfolios, locking never can be profitable.

2 Likes

@WaXTeP Definitely best for end user to have non locking. I was thinking of it more of as being a concession. That if it took that to finally push it over the edge to get ETH/ETHx rewards then I would be willing to consider it. No locking would be fantastic. The combo of that + real ETH yield would get a lot of attention.

2 Likes

Except for the locking model, the idea of being rewarded in native tokens that are staked with Stader is amazing and I love it much.
It’s can be really considered as a real yield. Have a look.

2 Likes

Every protocol has rewards in native tokens. Doing the same thing won’t make SD stand out.

2 Likes

Thanks for your respons Amit, super cool to know you are reading this as well and also taking part in the discussion :smiley:

^This could be super… It’s real yield, voted on by the community, has a positive effect marketing-wise, and a is nice path going forward in decentralization.

Giving yield in stable coin
Maybe a stable coin can be a (non regulatory risk) option if it’s not one of the ‘dollars’? (USDC/USDT). For example; Redacted Cartel is launching (Q1) a stable coin, called ‘dinero’. This coin is over-collatorized by staked ETH. Something like that could maybe be an option?

2 Likes

Oh, can you show some examples of LSD that rewards in native tokens and why exactly Stader can’t compete with them?

Cause I can give you dozens of projects where governance tokens earned by the same staking governance tokens were sold so hard and fast that the price went 90% down so the rewards from staking simply were devalued. Let’s start with ICE (Popsicle Finance). The price went to 61$ and then back to today’s 0.4$. How many happy investors holding and staking ICE today in the hope to see the price go back at least to few bucks :smiley:

WHITE the same picture…

You see earning governance tokens, is not a real yield, that’s why GNS / GMX / BFR / GOVI / CAP choose other methods.

2 Likes

@Jens DINERO could be a long time away before becoming tested and mainstream. DAI by Maker is an option. Currently only has 4% of total market share for stablecoins. FRAX hasn’t cracked 1% yet but has a very interesting vision.

2 Likes

@WaXTeP me and you are saying the same thing I think. Stader having governance only can still compete with all LSD protocols. All depends what the market values as best growth potential.

Some governance only do well, some don’t. I don’t think it had much decision power… until just now. The ones that come out with it at least have a boost of extra potential.

2 Likes

True… they say Q1, but indeed… those things can take some time.
Anyway, I am sure there are more options like DINERO, probably that I am not aware off. But wanted to mark that something like that could be an option :slight_smile: (or indeed Dai/frax)

And also my experience isn’t that good with rewards in Native tokens/market buys… (pathdao, Pokt).
In the end I think “assumption” that 90% would be super happy with rewards in ETH as alternative of a stable coin.

2 Likes

Agree with Jens, dont like the rewards to be in SD, chances are big that users sell the rewards and create a spiral down pricing…
Think it would be a good idea to have some choice between eth and stables or a mixture if possible.

6 Likes