Executive summary
In this proposal, we outline a program that would use the ETH and SWISE in the StakeWise DAO Treasury to incentivize up to 2M ETH in deposits into StakeWise Vaults from the new and existing clients of our partner node operators.
This program seeks to accelerate the B2B sales cycle, reward partner node operators for bringing business to StakeWise, and grow StakeWise TVL in the most cost-efficient manner.
Motivation
StakeWise V3 is a very unique product for crypto: it has a rare ability to attract both retail users and businesses, thanks to highly customizable staking setups with access to liquid staking.
Over the past few months, our team has been focused on selling StakeWise services in both of these segments. What we learned is that the retail side is very difficult to compete in without a restaking / airdrop angle, which is something we need to address. In contrast, the business side is showing huge promise thanks to the unique proposition of StakeWise V3.
The Vaults architecture is rated very highly by the leading operators in the space, who are starting to offer Vaults as a bundled package (Vault + operator nodes) in the new deals they pursue. They are also speaking to their existing clients about the opportunity to use Vaults for streamlining the staking UX and accessing liquidity on demand.
B2B cycles take months to complete, and with StakeWise V3 approaching 6 months since launch, the fruits of this side of the business are starting to show. The best thing about the B2B business is that TVL through these channels is of the highest quality and most sticky - far more valuable than mercenary capital attracted through airdrop campaigns. In short, it’s a slow process, but it is bound to be a fruitful one when it is completed.
This got us thinking: instead of focusing a potential incentives program on retail users, why don’t we find a way to make StakeWise V3 even more attractive to prospective business clients?
If StakeWise could accelerate its own and its partners’ sales effort by understanding clients’ migration pains, and made it a priority to solve them, it could bring significant new inflows into the protocol and further validate the strength of our Vaults architecture.
This is exactly what the StakeWise Incentivized Migration Program is about: its goal is to make it easier for both our partners and their clients to initiate staking through Vaults, or migrate to Vaults, in order to access new features we unlock for them and grow StakeWise TVL in the process. It also lets operators benefit from the success of this endeavor, and incentivizes them to sell Vaults more aggressively to new prospects.
In practice, we propose that the Incentivized Migration Program does three things:
- compensate any migrating clients for the ETH rewards they lose during validator exits and re-registration,
- cover the costs of setting up new validators for the operator, and
- issue a $SWISE bonus (vested) to the operator for every migrated / new ETH stake in Vaults.
Given our Treasury’s size and the expected cost of the migration process, this initiative has the capacity to bring up to 2M ETH into StakeWise Vaults by using up to 50M SWISE and 1,000 ETH. Should we reach this capacity, we will have put our Treasury to a very good use and significantly changed the market dynamics in our favour. See the details of the proposed program in the Implementation section below.
We initiated conversations with our partners about this very program in early April, and are now starting to see the first successful responses from clients. This actually prompted us to propose the program sooner, because we would like to have full certainty that the StakeWise DAO is on board with the program before more capital is committed.
To conclude, we believe that the StakeWise Incentivized Migration Program would allow us to accelerate the B2B efforts of our team and our partners, attract significant TVL, and make sure that our Treasury funds are put to good use. We now seek your support in making this program official.
Implementation
New Clients - StakeWise to reward partner operators with 25 SWISE for each ETH staked, up to a total of 1M ETH[1].
Existing Clients - StakeWise to cover the lost yield associated with the migration of 1M ETH[2], provide a 25 SWISE bonus to operators for each ETH staked, and cover the gas costs associated with spinning up new validators[3] for existing clients[4].
At current market prices, the max possible SWISE bonus for an operator over both the New and Existing Client programs is $2,000,000 paid in SWISE[5] for a total of 2M ETH staked.
Client reimbursements would be paid in ETH directly into client Vaults by passing the client’s address as the receiver parameter via the deposit function (see documents for more information). A single payment would be made by StakeWise on behalf of each client, with payments made at the end of each week.
ETH payments to operators would be made every 3 months to cover validator registration gas costs[3].
A vesting contract would be deployed by the StakeWise team every 3 months on behalf of operators for the total amount of $SWISE earned over the previous 3 months. This SWISE would be linearly vested for 3 months.
The team will periodically request ETH and SWISE from the DAO Treasury to process the payments.
Terms and Conditions
[1] The new client bonus is strictly for new clients of both the operator and StakeWise.
[2] Each successful deposit will receive ~10 days worth of staking yield assuming an APY of 3.5%, paid in ETH to the client’s Vault (i.e. 0.001 ETH per 1 ETH staked).
[3] The exact gas fees associated with validator registrations for all eligible deposits will be returned to the operator at the end of the program. Note, a maximum of 0.008 ETH will be paid per validator registration (representing the expected cost at 30 GWEI base fee).
[4] The ETH yield reimbursement and the validator gas cost reimbursement is strictly for existing clients of the operator that migrate to StakeWise. The operator must provide the old validator IDs for these existing clients.
[5] All operator Vaults are eligible. StakeWise reserves the right to cancel SWISE vesting contracts should:
- A client be identified as exploiting the program (e.g. looping staked capital via liquidity pools using the operator’s referral address), or
- Should mass unstaking of the operator’s client capital occur, defined as >50% of capital staked through the program being unstaked within 6 months.
Should vesting contracts be canceled, all previously vested SWISE will remain in control of the operator with unvested SWISE returning to StakeWise DAO.
Considerations
While the capacity of this program stands at a whopping 2M ETH, realistically we expect fewer inflows within the program. We propose that the StakeWise DAO keep the right to end the program at any time upon community discretion, in order to put the remaining Treasury funds to another use should the opportunity present itself.
Discussion
We invite all StakeWise DAO members to comment on this proposal as it represents a potentially significant growth opportunity for the protocol and requests a potentially significant amount of DAO funds.
We hope to wrap up the discussion in 7 days, so let’s hear everyone’s opinions and collectively figure out if this is the right path for the StakeWise DAO.
