Alongside the overhaul of StakeWise’s liquidity strategy, StakeWise DAO requires a revised approach to liquidity incentivisation. Currently, the DAO votes on a monthly basis to assign SWISE from the DAO treasury across the protocol’s 3 liquidity pools. This vote takes 5 days - a 3-day voting period and 2 days of voting cooldown. Whilst this is a highly decentralized way to provide liquidity incentives, it is too inefficient to effectively incentivise the proposed new liquidity pools. Under the new liquidity strategy, the DAO will need to assign capital across various markets/platforms on a weekly basis and be able to adjust incentives on-demand based on market conditions. The StakeWise Liquidity Committee (SLC) is proposed to increase the efficiency of capital deployment whilst maintaining a decentralized approach that protects the DAO treasury.
The proposed SLC will have three responsibilities:
- Be the driving force behind StakeWise DAO’s liquidity strategy for mainnet and crosschain/L2s, advising the DAO on the latest developments and proposing strategy updates.
- Deploy incentives across the various bribing markets / AMMs.
- Monthly reports on the state of the DAO’s liquidity and how capital is allocated for incentives.
In order for StakeWise to be a leader in the liquidity space, it must have SLC members who are up to speed on all the latest innovations and market trends to advise the DAO on how best to position itself. The proposed SLC will consist of 8 members: 3 core team members (Dmitri, Kirill, and Jordan), and 5 community members who are true DeFi natives with an expertise in liquidity. The core team already has a network of liquidity specialists that would be ideal candidates for this role. Further details will be provided in due course on the prospective members, but it is important to first decide on the overall structure and role of the SLC, which is the focus for this proposal.
The DAO should compensate the community members of the SLC with a fixed monthly USD amount, paid in SWISE. A figure of $1k per month is suggested. Given how important liquidity is to the protocol and the significant costs involved, paying to have liquidity experts as advisors will likely save the DAO costs in the long-run and help optimise the trading efficiency of the protocol’s tokens.
The SLC will be subordinate to the StakeWise DAO and ultimately act on the liquidity strategy approved by the DAO. Each month, the SLC will propose a budget to the DAO based on the expected liquidity costs for the upcoming month. This budget will include a 10% capital buffer to account for intra-month market movements, plus the SLC compensation. These monthly budget proposals will follow the usual DAO voting process and send the approved SWISE to a Safe (previously Gnosis Safe) controlled by the SLC.
This Safe will be a nested 2 of 2 multi-sig, meaning both the signers are themselves Safe multi-sigs. The diagram below shows this architecture. One of the signers of the SLC Safe is a multi-sig controlled by the core team, where only 1 team member is required to sign. The other signer of the SLC Safe is a multi-sig controlled by the community members - a 2 of 5 multi-sig.
In order for a transaction to be processed from the SLC Safe, the SLC requires at least 2 community members to sign the transaction and at least 1 core team member. This set-up strives to find a balance between efficiency and security: the low thresholds of both signers reduce the overall number of signatures required to execute a transaction, whilst the nested multi-sig structure ensures that a transaction cannot be executed without the approval of a core team member.
The SLC is accountable to the DAO and must report on its performance after each month, detailing how and where capital was deployed and the rationale behind it.
The robust DAO governance process has protected the protocol and its treasury for over 2 years and should remain in place following the launch of StakeWise V3. The proposed SLC provides a path to improve the deployment of assets for liquidity incentives without sacrificing the safety of the protocol. The core team welcomes feedback from the community on the proposed SLC. Following this discussion, a Snapshot will be initiated to vote on whether the SLC is implemented and to elect the SLC members.