Hello friends, degens, freaks and others, Waffle here to pick your mind.
I wanted to open this topic to discuss Staking module, as we have been debating about PoL, SHD issuance and bond ideas, So I’d rather share my thoughts as my brain has been melting these last months from my DeFi endeavours in other ecosystems.
Food for the mind about staking: ApeCoin & the death of staking - Cobie
Food for the mind about the veModel: The Pillars of Tokenomics & The ve Token Model
Inspiration from Joe Tokenomics: Trader Joe: The Tokenomics Overhaul | by Trader Joe | Medium
CurveWar introduction thread: https://twitter.com/SalomonCrypto/status/1541235113920532482
We are all looking forward to the deployment of Shade Protocol, with its different modules such as Bonds, ShadeSwap… And staking.
I believe this is a crucial module as it will define the use cases of SHD Tokens, but also its value capture, demand and sustainability.
First of all, the staking itself on old-generation protocols would be as such:
- User buys SHD
- User deposit SHD in a staking contract
- User earns rewards (SHD dillution? bad), voting power etc… and probably dumps whatever he receives as rewards
For anyone wanting to dive deep into the ve-model concept, I added an interesting link at the beginning of this post explaining the details of the mechanism The Pillars of Tokenomics & The ve Token Model
For the lazy others: The longer you stake (and lock) your SHD, the faster you earn veSHD. And the more veSHD you have accumulated, the more share of voting power and revenues you are owed.
If you unlock or unstake your SHD, you lose ALL your veSHD.
veSHD has no max supply, while it gives you a share to the protocol revenues and voting power. If you have accumulated 20% of all veSHD, you would earn 20% of the staking revenues and have 20% of the voting power.
I repeat, If you unstake, you loose all your veSHD.
Timelock is important:
Staking SHD to earn veSHD is great, but what if you wanted to lock your SHD for a long period, because you are a committed Shade Warrior and you also understand that Shade Protocol is here to impact the DeFi landscape for the long-term?
Option should be given to lock your staking position for a period, from 4 months to a year, to accrue your veSHD balance faster. The longer you have locked, the faster your veSHD will accrue.
In the case of Curve (CRV), users can lock their CRV for up to 4 years.
Some will call it madness, but the majority of CRV is locked… FOREVER (and owned by another DeFi protocol…keep reading…)
One of the main points I would suggest at this first step would be to consider an optional staking mechanism asking the user to stake an LP position, instead of single side SHD tokens. Depending on the needs for liquidity, process would be as follow:
- Protocol considers the need for deep sSCRT-SHD liquidity
- User pairs his SHD with sSCRT market brought
- (Optional: Above step is doable on the staking page through a contract call UI)
- User deposits the LP token in the staking module
- User starts earning staking rewards ?
The above staking system would deepen the liquidity of SHD, depending on the needs of the protocol. We would imagine the above being modulable, adding a different staking module depending on the liquidity needs.
The above will start to make sense with what follows…
TraderJoe, which took inspiration from Curve, provides boosted incentives to veJOE holders when farming on the DEX.
As such, it rewards long-term stakers by offering them a multiplied yields on the LP reward pools: Where a regular farmer would have a 1x yield, another user that has been accumulating veSHD could have a yield multiplied by up to x2.5, depending on his share of veSHD.
The above numbers are extracted from the veJOE medium article, and are for reference
This mechanism also incentivise other Yield Farming protocols to start accumulating JOE to offer boosted yields to its users. Convex owns the majority of CRV and controls the protocol by governance.
Could we imagine ButtonGroup incentivising users to provide SHD to their protocol, locking them forever and offering the best yields in the ecosystem, based on ShadeSwap while taking off SHD from circulation forever?
Degen Hopium my friends, puff puff and pass
My last point would be regarding value capture of SHD token. Something that I would like us to avoid is dilluting SHD by rewarding stakers with newly minted SHD.
“If you don’t know where the yield comes from, you are the yield.”
There are a few ways of providing revenues to stakers and in our case, I would suggest to distribute a small share of the swap fees to veSHD holders.
In the case of TraderJoe, a swap fee of 0,05% is applied to each trade on TraderJoe, converted at the end of the day in USDC and distributed to JOE stakers. This has allowed JOE stakers to earn approximately 20% APR paid in stable, but fluctuating in correlation with volumes: Joe Stake | Trader Joe Analytics
My suggestion would be to apply similar fee, 0,05%, in parallel to any fee that would be integrated to Shadeswap aiming at growing the Treasury, swap it to SILK and distribute it to long-term holders (veSHD holders ).
- Incentivise long term staking for veSHD generation
- Distribute ShadeSwap revenues to veSHD holders
- Add buy pressure to Silk
- Healthier peg
Let’s dream a little and take this a little further:
One thing that is happening on healthier DeFi ecosystems is bribes for protocol governance
This is why the majority of CRV is locked forever: Convex, another protocol, owns the majority of it and controls the CRV pool emissions.
They receive bribes from other protocols to vote in a way or another… Crazy right… But it can go even deeper, check the last thread on the CurveWars if interested.
Imagine now that ButtonGroup wants to see BUTT thrive with deep liquidity on Shadeswap. For this it would need incentivised BUTT-SHD pair on Shadeswap, but in our exemple, the SHD emission on that pool is set to 50 SHD per day.
We can imagine BUTT distributing BUTT to veSHD holders for them to vote a higher emission on the BUTT-SHD pool, to attract even deeper liquidity…
We far from the above, but setting up the right tokenomics and mechanics for SHD now can set the protocol in stone forever as a pillar of private DeFi
puff puff pass the hopium
So let’s see how all this staking module presents for the average user:
User @Ranger_Ranger wants to stake his SHD, and earn advantages for his dedication to Shade Protocol
- The DAO consider it needs to deepen its liquidity on the SHD-sWBTC pair, and opens a staking vault for SHD-sWBTC pair, so user pairs his SHD with wBTC before locking it
User locks his SHD (or LP) for 1 year
User earns veSHD at the fastest pace, earning his share of ShadeSwap fees among other advantages, and has accumulated governance power. His fidelity is rewarded.
Liquidity is deeper on selected SHD pairs if the LP option has been chosen
A share of SHD could be locked… forever
In the end, long time believers are rewarded and a long-term vision is set for a healthier growth of the protocol.