StakeWise Referral Program

[Jstar]

Summary

The core team is frequently in discussions with wallets and other potential partners to integrate StakeWise’s staking service within their platforms. The topic of a referral program is commonplace, especially with other staking providers offering rewards for these types of integration. This proposal will explore a referral program of our own in order to facilitate further StakeWise integrations within the space.

Motivation

The aim is to create strategic partnerships which drive TVL growth and create increased value to SWISE holders.

The flywheel is well defined: TVL drives integrations and exposure, which drives further TVL.

Specification

The proposed referral program will reward partners through the following terms:

Pay up to 1% of the $ value of ETH staked via referrer, paid in SWISE. SWISE rewards are calculated monthly based on the ETH/USD and SWISE/USD 30 days time-weighted average price (TWAP). The minimum reward amount is 5 SWISE and the maximum reward amount is 250 SWISE per 1 ETH staked. Each referrer is subject to a 1,000,000 SWISE cap. Once this cap is reached, SWISE rewards will cease and a new agreement will need to be entered. StakeWise maintains the right to cancel the program at any time should the pre-agreed conditions change.

Only whitelisted protocols will be able to join the program with initial agreements curated by the core StakeWise team. The DAO will have the final say however, with a vote required to pay out the referral rewards on a monthly basis (further details below). Each partnership will have pre-agreed conditions which need to be met in order for the program to continue.

Example reward payments

To highlight the relationship between all the variables, the below table assumes 100 ETH is referred to StakeWise through a partner in 1 month:

The $ value of referrals depends linearly on ETH price, with the ETH/SWISE price determining the amount of SWISE per reward period. As SWISE increases in price with respect to ETH, the $ cost of the referrals stays the same, but the amount of SWISE paid out decreases. And vice versa for when SWISE underperforms vs ETH.

The referral program is designed to scale alongside our protocol. As the price of ETH rises, the cost of the referral program increases, but our protocol revenues also increase. As protocol TVL increases, the fundamental value of SWISE (theoretically) increases with respect to ETH, which will reduce the amount of SWISE emitted by the program.

The max SWISE per ETH set to 250 protects against StakeWise giving away excess SWISE should SWISE underperform vs ETH. We are very near this 250 limit at current prices. As the positive flywheel effect comes into play, we expect the cost of this program to decrease over time.

Currently, a partner would earn 1M SWISE in referrals if they provide ~4k ETH TVL.

Deposit Tracking

ETH staked through partners can be tracked in multiple ways:

• Mike has developed a fantastic plug-and-play widget, allowing protocols to easily integrate StakeWise liquid staking within their Ul. This widget handles the tracking of deposits for each protocol that has it implemented.
• Protocols that integrate directly with our smart contracts have the ability to pass a unique address when calling ‘Stake_with_referrer’.
• Protocols can direct users to our DApp via a referral URL, again referencing a unique address as provided by the protocol. The URL takes the form of: app.stakewise.io/?depositReferrer=’referrer_wallet_address’.

A public Google Sheet will be created to track the referrals from each specific address/partner.

Method of Distribution

On the 1st of each month, the SWISE referral rewards for the previous month will be calculated for each partner. A snapshot will then be submitted to transfer the total monthly SWISE rewards from the community treasury to the respective partners. The DAO will always need to approve adding new names to the referral program.

Risks/Considerations

Deposit Cycling - it is very difficult to identify users who cycle their deposits: stake ETH → receive the referral rewards → un-stake via the secondary markets → re-staking and receiving further rewards. This kind of activity will not only abuse the referral scheme to earn excess SWISE rewards, but it can also have a negative impact on sETH2 peg stability.

The best way to solve this problem is to ensure the entities who receive the referral rewards are different from those whose ETH contributes towards the referral. There is always a risk that the entity receiving the rewards colludes with a third party to exploit the system however, and this is precisely why this program will be kept closely safeguarded. Only trusted entities will be allowed to enter the program. StakeWise will always retain the right to cancel the program for any partner, or altogether, should there be any concerns about it being taken advantage of.

Initial Program Partners

The team has preliminary agreements with three entities for the program should the DAO agree to proceed:

• MyEtherWallet (MEW) - full rewards program for the native staking integration of StakeWise within their wallet.
• Babylon Finance - full rewards program for whitelisting StakeWise staking as an eligible strategy within Gardens.
• Zengo - 25% rewards program to add StakeWise as a recommended DApp within their DApp browser. To be upgraded to the full program following a full native staking integration.

Given these integrations are already in place, we propose the referral rewards are backdated to when the integrations went live, should the DAO be happy to proceed with the referral program.

POLL

We would love to hear your feedback on this proposal and indicate your views via the below poll. A snapshot vote will be created in the coming days to formalise this proposal on-chain.

Should StakeWise implement the referral program for partner projects?

• Yes, in its current form
• Yes, but with adjusted terms
• No, a referral program is not necessary

[porcupine]

Has an analysis been done on the theoretical effect on the price of SWISE as a result?

[brianchilders]

While not an official program partner with StakeWise, I would like to ask the StakeWise DAO to also consider the community-driven website (https://launchpad.eatsteakbewise.com/) to be eligible for the Referral Program.

What is the purpose / vision of the community website?
The StakeWise Community Launchpad website aims to help provide quick access to resources in the StakeWise ecosystem for pool stakers and DeFi mavens. Also, just recently, the community site has started to source market information about StakeWise tokens into the page, helping LP providers and pool stakers make informed decisions. The goal of the community site is not to replace the official StakeWise website and materials, but to complement them.

Implementation
The website would leverage the referral URL to direct users to the DApp as a MVP (minimum viable product). A unique wallet address would be created for this endeavor if approved by the DAO. The website would set a future roadmap for implementing the widget directly into the page. When it comes to testing, I would test the integration link to ensure that it works, with transactions that would not exceed in $500 USD in total value (sum of all transactions) in testing.

Other thoughts
As the author of the community website, I have been asked if I accepted tips to keep the site running - and traditionally I have turned them down due to the cost of “another transaction”. Being able to implement this idea/proposal with the DAO’s approval (please note that if this does come to a proposal, I would abstain from the vote), would enable people who use the community site to “provide a tip” without having to do a separate transaction and help grow the TVL of the pool.

Regardless of the type of feedback I receive on this idea / proposal, I will continue to run the community site and oracle; and generate YouTube videos as it’s a true pleasure to serve the StakeWise community.

Thank you for your consideration,

-brian

Red.Beard (Discord)

[Jstar]

It is not something that is easy to model per se, but it is certainly something we have considered. A few points to mention here:

1. We will make every effort to align ourselves with quality partners that not only meaningfully increase StakeWise’s exposure, but those who are unlikely to just dump our token. The right partners will have a vested interest in holding our tokens to maintain exposure to StakeWise’s growth.
2. To put the cost of this program into perspective, we are currently issuing 6M SWISE per month in liquidity incentives. If we were to pay out 6M SWISE in referral fees we would bring in ~25k ETH and thus increase our TVL by 33%. Given the importance of growing TVL and our exposure during this pre/post-Merge period, the costs to the protocol feel justified.
3. The program is designed to scale with our protocol, reducing the SWISE emissions as we grow and thus reducing the ‘cost’ of the program over time.

[Jstar]

I would personally be in favour of supporting the community dashboard by allowing entry into the referral program, but would be keen to hear the thoughts of others on this before adding it to the initial partners list

[dreth]

I personally believe it is a well designed program despite potential short-term sell pressure on SWISE.

Later on, the program can be modified to replace SWISE emissions for rewards on the referral program to giving the referrer an entitlement to a portion of the 10% fee of the referred, perhaps as a payment, 5% of the 10% fees from staking could go to the referrer. Rewards for referring are nice, but it’s even nicer to allow the creation of passive income for future referrers in an ETH-denominated asset like rETH2 (from that portion of the fees) as opposed to creating further inflation on SWISE.

At the moment though, I would fully support this as it is.

@brianchilders

While not an official program partner with StakeWise, I would like to ask the StakeWise DAO to also consider the community-driven website (https://launchpad.eatsteakbewise.com/ ) to be eligible for the Referral Program.

I also support the community dashboard

[brianchilders]

I think the points that @Jstar makes regarding this program are key. In addition to the LP program, the referral program will be another strong opportunity to help grow TVL during this period of time.

-brian

@Jstar

• We will make every effort to align ourselves with quality partners that not only meaningfully increase StakeWise’s exposure, but those who are unlikely to just dump our token. The right partners will have a vested interest in holding our tokens to maintain exposure to StakeWise’s growth.
• To put the cost of this program into perspective, we are currently issuing 6M SWISE per month in liquidity incentives. If we were to pay out 6M SWISE in referral fees we would bring in ~25k ETH and thus increase our TVL by 33%. Given the importance of growing TVL and our exposure during this pre/post-Merge period, the costs to the protocol feel justified.
• The program is designed to scale with our protocol, reducing the SWISE emissions as we grow and thus reducing the ‘cost’ of the program over time.

[ottodv]

Haven’t read everything in detail yet, but do favor a referral program. In fact I proposed such a thing back in October 2021: Referral rewards

In my proposal I suggested sharing 20% to 40% of the protocol fee on a daily basis, I think that’s far safer than a percentage of the value of staked ETH in Swise. Safer because such a percentage cannot exceed what the protocol gains from staking.

Also paying a percentage of the protocol fee, a referrer could accrue rETH2, just like stakers do. There’d be no need for us to part with Swise, although we could provide an option to make the claim in Swise.

Currently staking returns about 4% annually. The protocol fee is going to be around 0.4% annually, if we pay out 1% as referrer it will take the protocol 2.5 years to earn that back via protocol fees.

I don’t think we should pay so much. In my opinion it should be less than 50% of the protocol fee, so that we gain from it as well.

[brianchilders]

slaps forehead - yes you did propose such a thing last year (and I even responded to it).

@Jstar - I love the additional detail that @ottodv went into the implementation details. Also other community members added some additional great thoughts as well.

[Jstar]

@ottodv

I don’t think we should pay so much. In my opinion it should be less than 50% of the protocol fee, so that we gain from it as well.

Whilst I completely agree that we should have protocol profitability front of mind, there are two points to raise here:

1. We need to grow TVL in order to reach a critical mass. Take MakerDAO for example, they have expressed a strong interest to on-board sETH2 to help with ETH staking diversification, however the integration is currently paused due to lack of TVL. Key integrations, such as Maker, will bring sETH2 utility on parity with stETH, which is a must to be competitive in the liquid staking market. It cannot be underestimated how much brand recognition and respect these integrations will bring StakeWise. Once we get a couple of 100k ETH under our belt, we can re-evaluate such programs to prioritise revenues and sustainable growth. Until then, we need to push for TVL even if it means ‘paying’ to do so to get the growth flywheel going. There is a strong argument that every $ paid in referrals today would pay for itself in future protocol revenues once we reach critical mass.

2. We are in direct competition with Lido, who currently offers a 1% referral on ETH staked. StakeWise provides stakers with a higher yield than Lido and is a prime candidate to assist with ETH staking diversification, but the fact is that protocols that are already integrated with Lido will not consider adding alternatives unless it makes economic sense for them to do so.

@ottodv

I proposed such a thing back in October 2021: Referral rewards

The idea of a permissionless referral program is certainly interesting and we should reignite the discussion on this topic. I like the fact that it will reward ‘everyday’ stakers and not just protocols. I like the fact your proposal can be integrated easily within to our current model (paying out the rewards on a daily basis in rETH2 via the farms page, ready to be claimed).

One thing to highlight is that stakers would likely just create a referral link for themselves to stake at a reduced fee and have no intention of referring others. Maybe this is not a problem though given the goal here is TVL growth and not revenues (for the short term at least). Issues will arise during the post validator withdrawals phase however, where it will be very difficult to track whether or not someone un-stakes natively and hence whether a referrer should stop receiving their rewards. It would mean this type of program would likely need to stop once withdrawals are enabled. For now though, all TVL is locked and we can guarantee that any referrals remain within the protocol.

I would love to hear what others think about this permissionless program and whether there could be room for both types of program (permissionless and permissioned) to run in parallel?

[brianchilders]

@Jstar

Until then, we need to push for TVL even if it means ‘paying’ to do so to get the growth flywheel going. There is a strong argument that every $ paid in referrals today would pay for itself in future protocol revenues once we reach critical mass.

100% - You have my backing / support on this.

@Jstar

We are in direct competition with Lido, who currently offers a 1% referral on ETH staked. StakeWise provides stakers with a higher yield than Lido and is a prime candidate to assist with ETH staking diversification, but the fact is that protocols that are already integrated with Lido will not consider adding alternatives unless it makes economic sense for them to do so.

Agree 100% - this should not be thought of a small “hey use my link” and we get $5.00 off our next purchase. This should be thought of an incentive for DeFi applications to integrate with the StakeWise protocol.

@Jstar

The idea of a permissionless referral program is certainly interesting and we should reignite the discussion on this topic.

This too!

@Jstar

Issues will arise during the post validator withdrawals phase however, where it will be very difficult to track whether or not someone un-stakes natively and hence whether a referrer should stop receiving their rewards. It would mean this type of program would likely need to stop once withdrawals are enabled. For now though, all TVL is locked and we can guarantee that any referrals remain within the protocol.

I want to propose to the DAO that we get this set up for at least two months. Yes this may go beyond post merge date, but it’s going to take some effort by the team to get this going and speaking candidly, I believe we really should start looking at making this a formal proposal soon so we can get traction on this. Maybe we set this for one month and plan to extend as needed?

[ottodv]

@Jstar

We need to grow TVL in order to reach a critical mass

Totally agree with this.

I need to spend some more time thinking about it all, and not just react based on my previous views. There is clearly a need to increase TVL and a constraint by which we don’t want to overpay either.

[ottodv]

This is a prime example of the kind of thing that an open referral program can do. As the one I suggested to share up to 50% of the protocal fees with any referrer, so that anyone who creates any content for Stakewise can get to earn something.

[ottodv]

It’s important to start by noting that we do not know how successful any referral program is going to be. That’s one reason why I am not particularly thrilled about starting with one that overpays from the outset, while we haven’t even tried one that doesn’t overpay. Maybe one that doesn’t overpay works just fine? I which case why overpay?

As I already noted above paying 1% upfront, means that the protocol has to wait 2.5 years to recover that, i.e. 2.5 years before it becomes profitable for us. In this space 2.5 years is an eternity.

Paying upfront gives us no guarantee that a staker will stay for the longer term, they can sell their share in the pools at any time.

What if these referrer stakers just buy via the pools, we gain NO TVL at all, we’ll just be giving away 1% in swise for no TVL gain at all.

Furthermore I do not like to pay in Swise to corporations who sure as h*ll have zero loyalty to our project - their only purpose is the milk the max out of us for their own financial benefit.

Sharing protocol fees with referrers is a far more straightforward system, it avoids a number of pitfalls. For one referral awards stop as soon as a staker sells their stake. It’s therefor more rewarding to send us long term stakers.

I’d propose to first try a system that does not overpay.

A referral system with two tiers:

One an open tier for everyone. A referrer gets to collect 50% of the protocol fee over a period of 2 years, for anything the referred party (eth address) stakes during those 2 years.

A second permissioned tier: Such a referrer get to collect 100% of the protocol fee over a period of 3 years for anything the referred party (eth address) stakes during those 3 years.

That last option could very well end up earning them more than 1% - if a staker does continue to hold their stake for so long. But it wouldn’t be upfront.

Such permissioned referrers would thus be incentivized to send us potential long term stakers.

---

I can think of some other alternatives too:

Give everyone who adds TVL (i.e. doesn’t buy via the pool), approx 0.5% in Swise.

The swise ends up with stakers, not with corporations.

We could run a project like that with 5m swise, see what happens…

[Jstar]

@ottodv

we haven’t even tried one that doesn’t overpay. Maybe one that doesn’t overpay works just fine? I which case why overpay?

This referral program has been in the making for months based on countless discussions with potential partner protocols/wallets. We have explored multiple structures for the program, including the revenue share model you suggested. The bottom line is, if we want to integrate StakeWise with certain protocols/wallets, then the level of compensation required is what we have proposed.

If we do not go ahead with the program as described then the Babylon team will no longer stake with us. They have already made this clear - their goal is to maximise returns for their users and this would come from staking with Lido given they are a part of the Lido referral program. MEW is also unlikely to integrate us further. StakeWise is currently only on the web version of MEW and their team have been waiting for the referral program to go live before doing the dev work for the mobile app (where the majority of the flows would come from).

If we do not want to target such ‘corporations’, then we can certainly explore an open referral program like you suggested. We need to make a decision on this proposed program though as we have protocols lined up and waiting for a decision on this. Do others (@brianchilders @dreth ) share the same view as @ottodv (i.e. do not target corporates and instead focus solely on an open rev share program)?

If so, then I suggest we pay out the pre-agreed partnerships based on the amount of ETH staked so far (either from the team’s SWISE allocation or the community treasury) and let these partners know asap that we will not be moving forward with the program as previously stated.

Just a few quick extra comments:

@ottodv

What if these referrer stakers just buy via the pools, we gain NO TVL at all, we’ll just be giving away 1% in swise for no TVL gain at all.

This is not possible. Partners would only receive rewards by minting fresh staked ETH and adding to our TVL.

We also want to avoid any program which tracks whether a user un-stakes and hence should no longer be eligible for rewards. The program should be as simple as possible and tracking if users un-stake is not a straight forward task.

[ottodv]

@Jstar

the pre-agreed partnerships

@Jstar

This referral program has been in the making for months

@Jstar

let these partners know asap that we will not be moving forward with the program

Unless I missed it, the community has not been informed of any “pre-agreed partnerships”, nor been asked months ago if this was a road we’d like to go down.

You can’t just put some fait-acompli in front of the community, that the community did not at least green light, then threaten to fall on your sword if the community doesn’t immediately agree with your proposal.

@Jstar

Do others (@brianchilders @dreth ) share the same view

We need to hear from others, not just from me, so I hope we’ll get some feedback from other community members.

TVL

If we do want to go down the path of distributing Swise for TVL, it doesn’t really matter who we give the Swise to does it. I think we could give it a try by simply giving everyone who adds TVL 0.5% in Swise (i.e. staking not buying on Uniswap). We can put up a budget for it, like somewhere between 2m and 5m swise. Run it for 1 month max.

See what happens, and learn from it.

Maybe after that we do conclude that we need a program like you suggest after all. Maybe not. Maybe this is a cheaper way to “buy TVL”?

[Jstar]

@ottodv

Unless I missed it, the community has not been informed of any “pre-agreed partnerships”

This was referenced in the main post under the ‘Initial Program Partners’. For good order, we have been clear with these potential partners that any referral program needs to be vetted and approved by our community.

A key goal for us is to get StakeWise integrated with projects across the ecosystem, something which I think everyone will agree is important. We have spent the last several months pushing for such integrations and have presented the suggested referral program based on these discussions. This is certainly not a fait-acompli and apologies if my previous post came across that way. I was trying to convey that the terms of the proposed program are what is required should we want to target said protocols/wallets and included a couple of examples as to why.

Let’s wait to hear what other community members think

[dreth]

I think the program is (mostly) OK, but I also really like Otto’s idea of testing for a period of time to see if meaningful TVL growth occurs and then re-evaluating and reassessing whether it is long-term profitable or not to continue with it in its current shape.

I strongly agree with @Jstar that we need more partnerships with projects across the ecosystem, but I think @ottodv has very valid and reasonable concerns that I partly share. My wonder is whether the ‘free market’ of crypto will actually do the work of increasing TVL by itself if the program is left fully open for anyone to participate or if we go with partnerships head-first the benefit will be higher.

Partnerships are good not just because they integrate the protocol into applications/wallets, but also because they make some much needed marketing noise. Despite this, is the cost reasonable? idk, I’m not sure how much it really costs to finance the work that these partners will put into integrating stakewise, how much it will cost them and how much it should cost stakewise.

I would go with the program as it is if it’s possible to commit to an initial amount and then reduce it if we deem it ineffective.

Another thing to consider is the relatively dull and boring state of the market. There’s lots of market participants still, but activity has gone down meaningfully and not much we do will cause strong ripples across the market beyond SWISE price appreciation, something which I’ve recently noticed has catched the attention of some people.

Anyway, from my view I think both @Jstar and @ottodv have perfectly valid and compatible opinions on the matter and a combination of both ideas (if possible) would probably be the best.

[brianchilders]

@dreth

I would go with the program as it is if it’s possible to commit to an initial amount and then reduce it if we deem it ineffective.

I like this idea. We can always set an expiration on the incentives program.

@Jstar

A key goal for us is to get StakeWise integrated with projects across the ecosystem, something which I think everyone will agree is important. We have spent the last several months pushing for such integrations and have presented the suggested referral program based on these discussions.

This is an area where I feel like StakeWise needs to improve. Integrations. We have to start somewhere. I think this is an excellent opportunity to do so. We can do a trial run, and revisit to see how the program is progressing. Would a three month trial run be of interest to both potential integration parties and the StakeWise community? Candidly we can review at 1 month and if needed call an abort, but I’d like to see the program run for at least 3 months. I don’t feel like enough data could be gathered in one month (I really don’t feel like we can gain data over 3 months either, but that’s a different story.)

@dreth

My wonder is whether the ‘free market’ of crypto will actually do the work of increasing TVL by itself if the program is left fully open for anyone to participate or if we go with partnerships head-first the benefit will be higher.

I think this is a great opportunity for us to find out. We should attempt to do partnerships (e.g. with Babylon) and if such partnerships don’t work out then we can try something else.

This is just an initial post - I just got back from an extended family weekend wedding - so catching up on all that is StakeWise. I might refine my thoughts as I chew on this some more, but wanted to get a response out since it’s been 3 days already.

[brianchilders]

@Jstar

This is not possible. Partners would only receive rewards by minting fresh staked ETH and adding to our TVL.

This is the KEY to any incentives program. It has to mint new SETH2 and should not be obtained by “swapping”.

Hopefully the referrals program coding logic will force “stake new eth” and not do autorouting (e.g. to pools if it’s cheaper)?