Arguments for a Locking Mechanism in Future Tokenomics @kiriyha @ottodv
I can understand the hesitation that some people have on potential locking dynamics based on examples they have seen previously. But to essentially dismiss the topic entirely I feel is to an extent, intellectually dishonest. Locking mechanisms can be anything we want them to be as we are the DAO that votes them into existence.
We all want StakeWise to succeed, and I think there are several benefits of incorporating a potential locking mechanism, while there are several middle ground compromises that exist as well.
I introduce a new taxonomy – xSWISE (your SWISE principle staking representation) & rSWISE (the SWISE rewards accrual) in which below, I hopefully remove some stigma and show the flexibility we have tailoring own tokenomic structure however we want. In the hypothetical below - I see rSWISE distributed at various rates based on a designation of staking time length (ex. 3mo, 6mo, 12mo) when initially staking SWISE to xSWISE. If a portion of the xSWISE is unstaked prior to that designated length, then the accompanying rSWISE is forfeighted back to the DAO treasury.
Potential Benefits of xSWISE staking with time locked rSWISE rewards
- Direction of rewards towards long-term holders of which I think we are all a part
- rSWISE as a token mechanism to increase marketing spend/TVL without creating immediate sell pressure
- We have large opportunity to utilize our treasury to incentivize TVL. While this comes with the normal risks of having those incentives immediately sold, distributions in rSWISE that vest over a certain period of time would not
- Limiting sell pressure on SWISE/xSWISE token more generally, as marginal xSWISE stakers are incentivized to remain staked so they don’t lose accrued rSWISE rewards (keeping them from emotionally selling when fearful)
Historical Critiques of Locked Staking Mechanisms
- Concept of being forced to sell if not staking
- Don’t think this is the case. Many protocols have staking mechanisms but many individuals who don’t stake still hold it for a variety of reasons.
- From a valuation perspective – only current cash flows are being directed to stakers, with the future cash flows (& the bulk of the valuation) still accruing to all token holders as they can join staking at any time
- Illiquidity for Stakers
- Generally, feel like the rev distribution is your payment for this illiquidity. But there are also ways to structure the locking where you can remove your principle (xSWISE) but forgo your accrued rewards (rSWISE)
- Merely a redistribution of voting power
- Can just take out voting power (or people can temporary convert in/out of xSWISE for voting) – we can make this work however we want
- Majority of Rewards directed to those who choose max lock option
- People can choose any area in the middle – locking half for 12mo max while keeping other half their position not staked. It’s doesn’t have to be an all or nothing thing
- We can also choose to have a portion (ex. 1%) to burn SWISE as well which benefits stakers & non stakers equally
- Rewards benefit biggest holders more than little guys
- Never really got this argument – the biggest stakers have the largest claim on assets – so any sort of staking will often mirror that same ownership %