SDIP#4 : Introduce dynamic SDT reward adjustments for Strategies and Staking

Important:

  1. The DAO will have until ~6 PM UTC 30/06/2021 (2 days) to contribute changes to this proposal.
  2. Voters need to hold xSDT in their wallet before the snapshot for this vote is triggered at block 12,737,327. (There are no penalties for withdrawing from the palace).
  3. On-chain voting on whether this proposal should be implemented as specified above will occur on our signal here. The vote will run for 48 hours from 6PM UTC 30/06/2021 until 6PM UTC 01/07/2021.
  4. If passed, the proposed changes in SDIP #4 do not apply to the PPS LP. The PPS LP will continue to receive 0.8 SDT/block for the foreseeable future.

Summary:

Stake DAO is looking to aggressively expand our number of strategy offerings in the near future. To accommodate this shift in gear, we are proposing that the Stake DAO protocol begins to distribute SDT dynamically to each strategy in response to changes in TVL and APY, including protocol staking (Staking-as-a-Service).

This dynamic distribution is the first step towards democratized allocation of governance rights based on the value provided by them to the DAO. This will be based on weekly snapshots every Tuesday to monitor holdings and base APY. Run rate revenues will be published on a weekly basis, as well as the new SDT allocation. The objective of doing so is to provide the best APYs in the market for a given risk profile — ultimately ensuring the Stake DAO platform offers the most competitive yields at all times whilst streamlining SDT distribution to those that provide the greatest value to the DAO.

To achieve this, Stake DAO will allocate two layers of SDT to each strategy — one base, one fluid. The base layer is designed to ensure all Stake DAO strategy participants earn governance rights. The dynamic layer of SDT will be allocated to strategies in accordance with their revenues for the DAO (performance fees). For the first time, delegators (SaaS stakers) that are actively contributing to DAO revenues will be eligible to receive SDT.

N.b.

i) The PPS is not in the scope of this proposal and will continue to attain 0.8 SDT per block (via Balancer LP), any changes to the PPS allocation will also require on chain voting.

ii) Changes to total SDT emissions (currently 4 SDT/block) is not in the scope of this proposal and will not be changed without a vote.


Motivation:

The purpose of SDT incentives has always been twofold: to distribute governance rights to active Stake DAO platform users and to incentivise the flow of capital towards the most profitable strategies.

As Stake DAO increases its number of strategies, the DAO will need to be extremely agile to ensure inflation is utilised efficiently.

This proposal would enable the DAO to adjust its reward allocation on a weekly basis to respond to broader ecosystem changes whilst reducing lead times. Ultimately this makes Stake DAO more secure and more competitive.


Specification:

Example of weekly allocation based on current snapshot

TVL (USD) Net APY before rewards DAO weekly perf. fees (USD) Competition max APY Layer 1 incentives (SDT/block) Total incentives (SDT/block) APY after rewards
Strategies
Passive USD 8,207,530 7.5% 2,083 8.5% 0.03 0.11 11.8%
Passive EUR 24,249,002 18.2% 14,895 19.7% 0.12 0.81 28.8%
Passive BTC 8,223,539 3.8% 1,044 4.3% 0.02 0.06 6.1%
Passive ETH 2,824,294 6.0% 572 6.8% 0.01 0.03 9.4%
DEV 8,005 4.8% 1 n.a. - - 4.8%
Passive BTC (BSC) 31,305 5.7% 6 n.a. - - 5.7%
Passive USD 3pool 1,753 6.1% 0 n.a. - - 6.1%
Passive USD fusd 8,487 8.3% 2 n.a. - - 8.3%
Polygon USD 29,106,010 9.3% 9,151 n.a. - 0.50 14.7%
Protocols
Polygon 183,101 58.2% 82 n.a. - - 58.2%
Tezos 732,530 5.5% 31 n.a. - - 5.5%
Solana 9,865,680 6.7% 509 n.a. - 0.03 7.7%
Nucypher 6,328,827 48.3% 2,345 n.a. - 0.13 54.8%
Livepeer 1,655,641 22.1% 281 n.a. - 0.02 26.0%
Cosmos 1,569,235 9.1% 109 n.a. - 0.01 11.1%
Elrond 4,533,569 29.0% 1,009 n.a. - 0.05 32.5%
Kyber - 10.0% - n.a. - - 0.0%
Total 97,528,510 32,120 0.18 1.75

As of 22 June 2021 | Does not include B2B figs

In practice similar data will be published every Tuesday signalling the distribution of SDT. Changes as per the table above will be implemented on a Thursday.

The community can challenge the signalled changes by commenting directly on the signalling post for that week. If there is significant community demand, the proposed changes will be taken to a formal governance vote with no changes taking place until the community is satisfied.

For:

  • Supporting capital inflows in most profitable Stake DAO strategies.
  • Ensuring strategies competitiveness versus Stake DAO’s key competitors
  • Rewarding LPs that generate higher revenues for the DAO on a relative basis.

Against:

  • Reducing governance rights for less profitable strategies.
4 Likes

Great proposal, a couple questions

  1. Since the revenue for the dao varies depending on other factors than TVL, can we make revenue the key
  2. I thought the emission was 5 per block at the moment?
  3. Why is the perp not included? I’m happy about it but would like to understand the rationale.
  4. Has the matic TVL dropped so much? How can the apy be 58% I think this is wrong.
  5. Why does the rewards’ total not add to 4 SDT?

@defier, thanks for taking a look, i’ll try to answer these below.

  1. Essentially, TVL and, in some respects, APY will influence revenue; it is correct as you say that income/revenue is the most important for the computation of SDT allocation. It will absolutely be the “bottom line”.

  2. The emissions were 5 SDT/Block following the launch of the PPS but were updated to 4 SDT/Block following SDIP #1. At this time, we were migrating to “α” governance, so it wasn’t super clean and could’ve been clearer. Current incentives are as per SDIP #1.1.

3 & 5. The PPS isn’t included in the dynamics since it’s relatively unique in how it works. To a point, if someone locks their CRV with us semi-perpetually (since there is a “tax” to exit early) IMO it makes sense to have an element of permanence repatriated to the depositor. The PPS allocation can, however, still be changed through governance at any time.

The SDT allocation is equal to 4 by including the above and also incentivising SDT liquidity on DEX.

1.75 Strategies
1 Uni
0.25 for Sushi
0.2 for Cometh
0.8 for PPS

  1. This APY is in regards to SaaS for Polygon (aka Matic). Delegators can still achieve around 50% APY through the validators. Currently, we have ~$7m in delegations to the Polygon Network Validator.

I really like the idea,
Juste a quick question : I understood that SDT emission for the PPS is fixed but what about emission for LP positions ? Can we imagine them to be dynamic too ?

Hi, I have a bunch of questions:
Why is Kyber TVL “-”?
Why is DEV competition APY “n.a.”? And why is it so low on Stake DAO? It’s ~28% according to Stakes.social in general and specifically 28% for Bunchy. SD is the second largest staker.
Why is USD 3pool competition APY “n.a.”? E.g. Convex has 7.5%.
And I could go on and ask about every protocol, look through their validator explorer and ask why’s there n.a. when there are clearly other validators that pay non-zero amounts to their delegators.
Who’ll have the power to change the parameters? I assume it’s too cumbersome to do a multisig change every week. (OT: Actually who is on the SD multisig?)
How will the fluid portion be reallocated? By eyeballing it or using an algorithm?
Thanks.

Trial with strategies and staking, could expand to LP if it works to the interests of the DAO

The above is just for example purposes to convey the concept.

Multisig controls all such changes members include myself, Julien B, Q and 3 others.

Computation based on revenues + competition determines the fluid part

1 Like

The SDIP #4 vote is live