SD Tokenomics Reboot - The Roadmap

Synopsis

Stader is gearing up for a mega tokenomics reboot powered by 4 key levers that will target the below aspects of the SD token economy:

  1. Resolving the low float, high FDV dilemma
  2. Optimizing the circulating supply
  3. Enhancing token utility

The Tokenomics reboot will be followed by a major product expansion highlighting bold new direction(s) for Stader’s future, unlocking the path to 10X growth.

Stader’s Business and Revenue Growth

Over the last 3 years, Stader has seen phenomenal growth as a business currently clocking $700 Mn+ in TVL. Starting from a hackathon, it has gone on to become the largest LST on Polygon and Hedera. ETHx, Stader’s LST on Ethereum, grew 600%+ in less than a year of launch and is currently holding the 4th highest TVL on Eigen Layer amongst ETH LSTs. 85,000+ stakers trust Stader with their funds. This growth has helped us to strengthen our business finances and has increased our ARR to $2Mn.

With the intention of integrating this business growth closely to our tokenomics, Stader is proposing a Tokenomics Reboot as below:

Step 1: Resolving the float/FDV dilemma with SD Mega Burn

To address the concerns around high FDV and low float, Stader is burning 20% of its total token supply i.e. a total of 30Mn $SD, reducing the overall SD supply from 150Mn $SD to 120Mn $SD. This burn amount was proposed based on extensive evaluation of token requirements under the rewards, ecosystem & DAO buckets while estimating for business needs for the next 10 years. The Mega Burn has been approved by the DAO with a 99%+ quorum and shall be executed on the 25th of June, 2024. You can learn more about the SD Mega Burn here.

Step 2: Optimizing the circulating supply via SD buy backs & reward capping

  1. Quarterly SD Buybacks
    A significant part of any Tokenomics is to sustainably manage the circulating supply of its token. Stader is hence proposing a regular strategic buyback of SD for long-term sustainability of its tokenomics. Every quarter, 20% of Stader’s revenue will be deployed for this buyback. As Stader’s TVL and revenue grows, this lever will further strengthen the SD Tokenomics. Details on this buyback and proposed utilization of the bought SD will be shared in a forum proposal and are subject to community governance.

  2. Reward caps
    At Stader, we are very mindful that growth should be fueled by sustainable costs. As the business has matured over the last 2 years, our reward requirements have gotten significantly streamlined. Assuming a relatively gradual increase in emissions with increased TVL and stronger tokenomics, Stader will calibrate its reward emissions to ensure that TVL growth is faster than the scale up in rewards. The rewards committed for growth will be subject to DAO governance and voting.

Step 3: Strengthen token utility via insurance coverage

An integral part of the SD tokenomics is building utility for the SD token. The first major use case was launched with our Ethereum LST ( ETHx ) where permissionless node operators need to bond a minimum of 0.4 ETH worth of SD per validator. This was followed by a first of its kind product innovation via the ‘SD utility pool’ which allowed SD holders to earn 35%+ rewards while enabling SD borrowing for permissionless validators. These two initiatives have resulted in a cumulative lock up of ~12% of the SD circulating supply.

To further strengthen SD utility, Stader is proposing utilization of SD in the utility pool for providing insurance cover against slashing of its permissioned node operators. The permissioned NOs will service this via a minimum fee. The increased pool utilization and additional fee for this new use case will result in higher rewards on SD deposited in the pool, sthereby providing higher value accrual for the delegators. Detailed proposal on this will be shared with the community to invite their views.

Product Expansion

While Stader shall continue to expand within the LST ecosystem, it is also evaluating exciting new avenues of growth that will allow it to capitalize on bold new business opportunities. Ideas under review currently include, but are not limited to, RWA, Bitcoin staking space driving both increased market presence & business growth.

Call for Feedback

The above roadmap provides a comprehensive view of the multi-pronged growth strategy that Stader is proposing across tokenomics optimisation & exploring new avenues for expansion. Similar to the SD Mega Burn already approved, each of the above initiatives shall be submitted for community’s thoughts & vote.

We welcome your thoughts & views on the above suggestions so as to ensure that the proposals submitted incorporate the same.

2 Likes

Very solid roadmap. This makes me very excited for Stader and SD’s future.

I think the quarterly SD Buybacks and the burns would really go a long way to bring value to SD tokens and mitigate or even solve the 0.4 ETH SD bond dilemma for ETH validators.

Thanks for this roadmap, it shows the engagement of the team to support the $SD token value.
I have a few questions about the plan :

  • Do we have an idea (even a rough one) of the amount of $ that the buybacks would represent ? How much on average is 20% of Stader’s revenue ?
  • What will Stader do with the tokens baught back ? Burn them or redistribute them as rewards in any way ?
  • Why is the slashing insurance only for permissioned NOs and not for permissionless NOs ? Is it a technical limitation ?

Thanks again to the team for this work, you promised a plan and you delivered !

Hi Geeno,

Thanks for sharing your thoughts. Please find below the answers to the questions asked:

  • Do we have an idea (even a rough one) of the amount of $ that the buybacks would represent? How much on average is 20% of Stader’s revenue ?
    Stader is currently averaging an ARR of $ 2 Mn. This translates to buy back of 400k USD worth of SD at 20% of revenues.

  • What will Stader do with the tokens baught back ? Burn them or redistribute them as rewards in any way ?
    Team is evaluating a few options including

  1. Burning
  2. Using them as rewards or providing LP
    Detailed post will be shared with community seeking suggestions/ opinions.
  • Why is the slashing insurance only for permissioned NOs and not for permissionless NOs ? Is it a technical limitation ?
    Slashing insurance is already provided by Permissionless operators as they bond 4 Eth and at least 0.4 Eth worth of SD tokens.

Request you to review.

This means 400K$ per quarter or 1.6M$ per year, this is a big effort from the team. Thanks !

This money could be used to create promotional incentives to attract more node operators.
I’m sure we could onboard plenty of NOs if we attrack them with a perspective of boosted income. By example, NOs may be interested to migrate on our stack if the revenue is better : changing is a risk and this risk should be rewarded.

We’re live for almost a year and we’ve proven our seriousnes. This new reputation and boosted revenue may be a key combination to attrack more NOs. More NOs means more $SD demand and in the end, everybody wins.

400k USD buy back at current revenue figures is per annum and not per quarter as ARR is 2 Mn USD.

At present, Stader’s permissionless validators use $SD tokens as slashing insurance.

Extending this practice to permissioned node operators can enhance their alignment with the protocol’s growth and bolster overall protocol security.

I think overall it’s a good move.

It’s indeed good to see all node operators following the same ruleset !