[SWIP-5] Distribute Protocol Fees Among SWISE Holders

Following a round of discussion in the original thread, the core StakeWise team has identified the need to advance further the proposal to distribute the protocol fees to the SWISE holders. This is an updated version of my original proposal which I developed together with @kiriyha.

Here we elevate the stage of discussion to phase-2 i.e. a forum poll and outline the key aspects of this proposal for your consideration.

Motivation

The core motivation behind this proposal is to make holding SWISE more attractive and potentially increase its value in the short term. The ability to earn ETH by holding SWISE is expected to incentivize such behavior.

As suggested by the opinions raised in the original thread, one requirement to become eligible for rETH2 distribution is to hold at least 1000 SWISE in an ETH address. This will reduce the risk of negligible amounts accruing to SWISE holders i.e. waste of rETH2. No clawback is currently planned, but it can be voted on ad-hoc by the community later on.

The main benefit of increasing the attractiveness of SWISE long-term is the reduction in selling pressure that follows SWISE inflation. It will make such emissions cheaper for the protocol, also benefiting the holders in the process.

Following an internal analysis, the team said it believes that the protocol fee distribution would not deplete the resources available for marketing, hiring, and growth, but potentially increase them by upholding or growing the value of SWISE in the protocol’s treasury. When it comes to covering the costs of running the protocol before any distribution takes place, the StakeWise team believes that no such action is necessary as long as the costs in question can be recouped via being a node operator in StakeWise v2. The corresponding proposal will be submitted soon.

As a final comment, in order for the community to fully benefit from this initiative, we must create and (potentially) incentivize a new SWISE pool. Such a proposal has been put forward by @dreth in this thread, which we encourage everyone to read and comment on.

Specification

The implementation of this proposal must account for the following criteria:

  1. The timeline of distribution of rETH2 must be predictable
  2. SWISE deposited into whitelisted smart contracts (e.g. lending protocols, liquidity pools, etc) must continue receiving rETH2
  3. Only SWISE in circulation (ie unvested, unlocked, and distributed) must be eligible for receiving the protocol fees
  4. Only holders of 1000 or more SWISE should be eligible for receiving the protocol fees
  5. The rETH2 amount will be distributed based on the points that are calculated from the user’s SWISE balance and the duration it was held since the last rETH2 distribution. So that the user who bought SWISE right before the distribution will receive less than the one who bought the same amount 10 hours before.

Poll

Should the DAO begin distributing the protocol fees to SWISE holders according to the outlined specification?
  • Yes
  • No, I disagree with the specification/terms
  • No, I disagree with the concept

0 voters

10 Likes

Even though it hasn’t seemed like I fully agree with @mbaneca1, I really do like the push to make this proposal happen and I absolutely commend you on the efforts @mbaneca1

I have concerns, but I’ve personally liked the proposal from the start, more specification in this case is better \o/

5 Likes

As a SWISE holder I like this proposal. At protocol level, however, I see negligible impact unless the two conditions I describe below are met.

As I noted in the original thread, (1) we should do something to add more SWISE holder (marketing, marketing… marketing). Maybe some skilled DAO members can volunteer to produce materials (GIFS, Videos, etc.) that the rest of us can share in our social media feeds.

Looking at 1000 SWISE threshold - very reasonable in my opinion, I was shocked to find out that only 659 (including smart contracts) out of 1507 holders will qualify. Again, on a personal level, this is great for those that qualify; but I am not so sure about the majority of SWISE holders that will be left out.
(2) Probably setting up a SWISE liquidity pool or, at least, bring back incentives for the one that exist will give these fellow holders opportunity to increase their holdings and meet the threshold (without been subjected to massive slippage). This will also encourage those sETH2 holders (1095+ of them at time of writing) that decided to not touch SWISE to get involved.

3 Likes

Great work Stakewise team. This will make holding SWISE even more compelling

3 Likes

Good Proposal, let’s make Swise more attractive for holding

3 Likes

While I voted yes, I’m VERY interested in hearing contrarian opinions as well!

2 Likes