A Conservative Liquidity Pilot: Routing Fixed sdCRV Volume via 3 Protocol’s GuildSwap.
1. Executive Summary & Core Proposal
This proposal outlines a low-volume, 12-month pilot wherein Stake DAO allocates a fixed weekly quantity of ~25,000 sdCRV sourced from its treasury portion of Curve revenue distributions to 3 Protocol’s GuildSwap mechanism. In exchange, Stake DAO receives GUILD (the protocol’s sovereign settlement currency) and 3Fi (governance equity).
The volume is intentionally constrained to serve as a structural proof-of-concept. Combined with independent weekly GuildSwap activity, this pilot is expected to route approximately 33,000 sdCRV weekly into 3’s allocation architecture. This initiates a deterministic revenue cycle that compounds over time, while providing Stake DAO with a predictable, non-dilutive channel to convert a portion of treasury-held value into sovereign currency and protocol equity, without affecting regular depositor distributions.
2. Understanding Stake DAO’s Revenue Flow & The Opportunity
Stake DAO’s current revenue distribution operates via two distinct channels:
Channel A: Vote-Market & Alt-Token Rewards (0% Fee)
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All rewards received from vote markets and auxiliary tokens are converted to sdCRV.
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100% is distributed to sdCRV depositors as yield.
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Depositors typically sell to realise gains, creating recurring open-market sell pressure.
Channel B: Direct crvUSD Distributions from Curve (15% Fee)
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Stake DAO controls ~15% of locked CRV supply, receiving proportional crvUSD revenue.
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Current Curve distributions: ~100k–200k crvUSD/week → Stake DAO receives ~15k–30k crvUSD/week.
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Allocation of this portion:
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Two-thirds (~10k–20k crvUSD): Directed to liquidity incentives (“bribes”) for sdCRV/CRV pools.
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One-third (~5k–10k crvUSD): Directed to Stake DAO’s treasury for strategic deployment.
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The Pilot Ask:
We propose that Stake DAO allocate a portion of the treasury-directed one-third (e.g., ~5k–10k crvUSD equivalent in sdCRV per week) to acquire sdCRV and route it via GuildSwap to 3 Protocol. This approach:
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Leaves Channel A (depositor distributions) completely unaffected.
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Uses capital already earmarked for treasury strategy, not operational yield.
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Represents a fractional, low-risk test of a new capital deployment pathway.
By routing this volume through GuildSwap, Stake DAO can:
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Convert treasury-held sdCRV into GUILD (stable settlement currency) and 3Fi (protocol equity).
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Remove that volume from open-market sell pressure, creating a consistent, non-disruptive demand sink.
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Participate in a closed-loop system where routed liquidity actively funds peg-defence and treasury-fortification mechanics.
3. The 3 Protocol Allocation Architecture
3 is engineered to generate and recycle liquidity through transparent, on-chain allocation rules.
The proposed sdCRV flow integrates directly into this architecture:
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Acquisition & Settlement:
GuildSwap references sdCRV at the prevailing CRV market price, executing settlement in GUILD. Concurrently, a proportional 3Fi governance equity allocation is distributed per the protocol’s emission schedule. The acquired sdCRV becomes Protocol-Held Assets (PHA), generating continuous yield. -
Yield Routing via the Redirect Variable (RV):
PHA yield auto-compounds PHA positions until a mint threshold is reached. At this threshold 3NFTs are minted, this pivots PHA yield logic from compound to cashflow. All future PHA yield associated to 3NFTs are converted to (or retained as) crvUSD, which then enters RV logic. A portion automatically services the Settlement Pledge (1 GUILD = 1 crvUSD trust floor), while surplus routes to the Reserve. -
Capital Recycling & PACT Formation:
The Reserve converts surplus crvUSD to ETH, fortifying The Vault (GUILD’s long-term backing) and distributing ETH to Purpose-Oriented Distributors (PODs) based on VW3 weight. The Liquidity Booster POD (Stage 4 feature) accumulates ETH, internally converts to crvUSD and used exclusively to purchases Adolescent PACTs (New PACT formation). -
Arbitrage & Peg Defence:
At maturity, Adolescent PACTs convert to Aged PACTs and transfer to the Treasury. The crvUSD from the initial PACT purchase routes to the Arb. Master Node, funding Arbitrage Engines. These engines provide capital for any market participant to exit sdCRV at peg, conditional on an Arb. Fee paid in GUILD. This creates a decentralised, self-funding mechanism to absorb sdCRV sell pressure while continuously routing GUILD back to the Treasury. -
Recursive Compounding:
Acquired sdCRV increases PHA yield. GUILD fees accumulate to mint additional PACTs.
Mature (Aged) PACTs permanently establish a lending supply floor within the Single-Sided Lending Pool (SSLP) (Stage 4 feature), generating revenue for 3Fi holders.
4. Strategic Utility of Received Assets
Upon receipt via GuildSwap, GUILD and 3Fi function as active allocation instruments rather than passive reward tokens. Their architecture enables Stake DAO to direct capital toward parameters that reinforce Curve ecosystem stability and protocol sovereignty:
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3Fi → VW3 Governance Weight:
Staking 3Fi generates non-transferable VW3. This weight can be programmatically allocated to specific Purpose-Oriented Distributors (PODs) or Arbitrage Engines. For example, directing VW3 to the sdCRV Arbitrage Engine increases its crvUSD allocation during PACT maturation cycles, directly funding liquidity that absorbs sdCRV sell pressure. Allocation to the Liquidity Booster POD (Stage 4 feature) accelerates ETH accumulation for new PACT formation, compounding protocol revenue capacity. -
GUILD → Aged PACT Formation:
10,000 GUILD can be deployed to establish an Aged PACT position. Upon establishment, the position immediately qualifies for ETH revenue distributions routed through the Creditors POD. This converts stable capital into a yield-generating protocol commitment without exposing it to secondary-market volatility or debt-based liabilities. -
Programmable Alignment:
This architecture converts routine treasury volume into structured influence while retaining treasury liquidity pathways. Stake DAO retains full custody and may deploy these assets to fortify intrinsic backing (Reserve Booster POD), fund development and audit pathways (Developers POD), or directly support Curve derivative stability. All routing is transparent, rule-based, and executable via standard wallet interactions.
5. The Unencumbered Thesis: Phased Trajectory
3’s design intentionally separates short-term trust floors from long-term sovereign backing.
The protocol evolves through three deterministic phases:
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Phase 1: Bootstrap & Settlement Floor.
Initial currency issuance operates against the hard-coded Settlement Pledge. As PHA yield accumulates, the RV automatically increases the Settlement allocation, ensuring the trust floor scales with loose (unbacked) GUILD. Surplus revenue routes to the Reserve, converts to ETH, and accumulates in The Vault. -
Phase 2: Equity-Backed Transition.
As The Vault balance scales, GUILD transitions from pledge-dependent to progressively backed by vaulted ETH. Reserve Requirement Curves (RRCs) mathematically reduce reliance on the pledge while The Vault fortifies. The currency becomes increasingly fortified by earned equity, moving toward sovereign backing. -
Phase 3: Sovereign Reserve & SSLP Integration (Stage 5).
Upon opening the Stage 5 Reserve Exchange Window, Aged PACTs become convertible to Vault ETH. Exchanged PACTs transfer to the Treasury balance sheet. Each PACT carries a claim to 10,000 GUILD within the SSLP (Stage 4 feature). Because the Treasury will not settle against its own obligations, these GUILD units become unencumbered, zero-liability monetary primitives. Simultaneously, the Treasury’s SSLP position generates lending/liquidity revenue, which flows back to 3Fi holders based on VW3 governance weight. This completes the transition from a trust-bridged instrument to a self-sustaining, equity-backed sovereign currency.
6. Conservative Sizing & Behavioural Alignment
This proposal is explicitly designed for minimal risk and measurable validation:
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Volume Control:
The proposed ~25,000 sdCRV/week represents a target allocation from Stake DAO’s treasury-directed crvUSD. This amount may fluctuate at Stake DAO’s discretion based on treasury strategy and risk parameters. It is a controlled parameter test, not a capital reallocation. Our hope is that as Stake DAO and its community begins to witness the benefits of a long-term alignment partnership; through measurable peg support, treasury growth, and community engagement, the community may naturally seek to increase these weekly allocations over time. -
Protocol Stage Acknowledgment:
3 is currently in Stage 3 (Capital Formation Layer, live on main-net, pre-audit). This pilot leverages only active Settlement mechanics and transparent GuildSwap logic. No exposure to unreleased or unaudited components. -
Behavioural Shift:
The current reward model incentivises immediate liquidation by depositors. This pilot introduces a structural holding incentive for treasury capital: GUILD provides a stable settlement floor, while 3Fi represents sunset equity in a revenue-generating treasury. Over the 12-month window, participants observe the compounding effect of structural retention versus cyclical selling. -
Exit & Transparency:
All flows are on-chain. Stake DAO retains full custody of received GUILD/3Fi, with the option to hold, deploy in the SSLP (Stage 4), or exit via the Settlement Pledge.
7. Implementation Path & Verification Transparency
This pilot is structured as a low-impact parameter test. All operational mechanics will adhere strictly to Stake DAO’s established forum guidelines, voting procedures, and treasury management protocols. We defer entirely to the community and core team for timeline, parameter validation, and execution cadence.
On Technical Transparency & Validation:
As 3 is currently in Stage 3 (pre-audit), core contract code remains private pending external security review. However, we offer three layered channels for independent verification:
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Public Documentation:
All protocol mechanics, formulas, and economic logic are documented at docs.3.finance, including the Redirect Variable calculation, Reserve Requirement Curves, and GuildSwap settlement logic. -
Developer Access:
I (as architect) and my lead developer is available for technical Q&A with Stake DAO’s engineering or treasury committee to clarify implementation details, architecture decisions, or expected on-chain behaviour. -
Observable Output Verification:
While source code is private, all economic outputs are fully on-chain and measurable. Stake DAO can independently validate protocol behaviour by:-
Monitoring the beta.3.finance dashboards for real-time metrics: total GUILD issued, bonded GUILD balance, and settled/burned GUILD.
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Applying the publicly posted RV formula to calculate the expected allocation percentage to the Settlement Contract versus the Reserve.
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Observing harvest events on-chain and comparing actual crvUSD flows against the mathematically predicted split.
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This “black-box verification” approach, validating output against published formulas, is the same method I use internally to audit my development team’s work, prior to external audits. It provides rigorous, formula-based assurance without requiring source-code access.
Should the proposed volume align with Stake DAO’s risk framework and governance cadence, on-chain routing can commence immediately following standard authorisation. We welcome technical review from the Stake DAO engineering and treasury teams prior to any community vote, and will provide full transparency on routing mechanics, settlement flows, and on-chain dashboards throughout the pilot period.