This proposal outlines a plan for updated tokenomics for StakeWise (SWISE) that will kickstart a revenue share for the protocol and reduce the volatility of SWISE governance token through consistent buying demand via SWISE buybacks. The goal of this proposal is to introduce for discussion an approach that we believe best positions StakeWise for long-term growth. We feel these suggestions are in the long-term interests of the StakeWise community and can be pursued along with the v3 protocol upgrade.
Following the teams recent plan for StakeWise v3 – we have updated our previous forum posts here & here and we suggest you read them if you have not done so already. We will speak generally, while v3 is finalized, as the exact fee amounts are subject to change.
We propose a new taxonomy – xSWISE (your SWISE principle staking representation). We suggest that 80% of current DAO revenue (in ETH) be distributed to users who stake SWISE (creating xSWISE) constituting Distributed Protocol Revenue. xSWISE acts as a 1-1 claim on SWISE, allowing stakers to continue to vote in governance of the protocol, thus not changing any dynamics to the current governance framework.
xSWISE would be a similar approach to the xMPL Model (for Maple Finance). With MPL, revenue, in the form of new loan origination fees (in USDC or ETH) is used to buy MPL on the open market. The MPL that is acquired is then distributed to stakers. The MPL approach has led to 47.3% of outstanding circulating supply being staked (supply sink) while creating a consistent bid in the open market for MPL (which stabilizes pricing) which is then redistributed to xMPL stakers at arguably undervalued levels.
For SWISE - the benefit of this approach is that staking yields will correlate inversely with the price of SWISE:ETH with a higher amount of SWISE repurchased & distributed to xSWISE stakers the more discounted SWISE is in the open market.
We also propose that rewards accumulate in a separate token rSWISE. There is flexibility in tailoring the tokenomic structure (could simply accrue revenue into xSWISE), but we feel there are benefits to having revenue distributions solely disbursed into rSWISE.
We believe it is a cleaner functionality to stake and have revenue distribution segregated. Having a separate staking and revenue distribution token also allows the protocol to place some control / limits on users who unstake before their staking period ends. The protocol could burn these rSWISE in this event or feed them back into the treasury. This would create a “soft lock” design to negate any negative perception of users SWISE being indefinitely staked “locked up”. rSWISE would give users the additional benefit of having more simple tax reporting on distributed revenue.
rSWISE rewards will continue to accrue and will be available to claim after 3 months. For, example if Steve stakes 100 xSWISE – rSWISE staking rewards accrue in real time (based on DAO Revenue & SWISE:ETH ratio). After 4 months, rewards from the 1st months he staked are available, after 5 months rewards from both the first and second months are cumulatively available. Steve is free to unstake xSWISE at any time, but would essentially forfeits the last 3 months of staking rewards (which are subsequently burned/retired from circulation).
We believe that an accrued “soft locked” rSWISE mechanism will allow the DAO to be much more aggressive with our marketing through rSWISE incentives. This approach structurally ensures certain ROI benchmarks are hit and reduces certain tail risks highlighted in the forum previously (ex. StakeWise Referral Program).
We are not endorsing any specific marketing initiatives with this proposal but only endorse the rSWISE mechanism to give us another tool in our tokenomic toolkit for whatever initiatives the DAO/team does decide on in the future.
Other Revenue – Modest Buy/Back Burn & DAO Governance Fund
Out of the remaining 20% DAO Revenue – we suggest that 10% goes towards a SWISE buyback and burn mechanism (similar to Apple’s share buyback) which will modestly reduce the total supply of SWISE over time and compound returns for the token price as more SWISE is burned/retired the more discounted the price of SWISE:ETH (as we are seeing now).
We propose that the remaining 10% of protocol revenue fees go to the DAO Governance Fund, we suggest reviewing a budget in conjunction with the SWISE/SWAT team, across things that are long-term accretive to the $SWISE community with the goal of elevating StakeWise to be mentioned in the same breath as RocketPool and Lido. Priorities here could include:
- Appointing a marketing arm to help support/decide on allocations involving direct-to-consumer community building, sponsor podcasts (ex. RocketPool & Bankless)
- Exploring a Balancer pool for a SWISE:sETH2 pair (& SWISE:osETH when v3 launches) that leverages the staked xSWISE in staking pool for additional protocol yield
- Various Grant Programs (Dune Analytics, Twitter Bot updates for sETH/osETH deposits, etc.)
- Treasury Diversification (ex. whether or not to buy CVX to incentivize sETH/osETH:ETH gauge weights can be voted on)
- Exploring opportunities to expand StakeWise liquid staking across additional POS chains