Value Capture for SOV Staking

I agree with your view and I also would also be very interested in a further dialogue on the issue particularly with the “founders”.

I am staked for the longest time period allowed on the platform and am in no way looking at SOV as a get rich quick scheme but i have to be honest in the fact that i felt a bit disheartened when i found out that revenue sharing was including the founders share and not just voting power.

I do not pretend to know the answer to this issue but i am happy that the conversation has been started and will keep a close eye on it to see how it develops.

Cheers,
GH

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In my opinion the (most) pressing question on this topic is:

Why should anyone stake NOW?
Instead of just waiting (or doing something better with SOV - like LM) while the platform builds up and performs like we all want it to.

Also having in mind that voting power decreases by time.
Staking now is probably much less attractive/rewarding than in 1 or 2 years.
Nevertheless all of today’s early and long stakers put tremendous amount of faith and a good chunk of “security assurance” for other users in this early stage of the protocol

While it´s true that staking is a bet to the future, risk/reward would sadly suggest to wait it out, be liquid, or go into LM/LP.

Many community members (stakers) feel that they where presented different facts and staked for long periods upon that.

On top, the questions about founders shares are very valid, as it was communicated in exact opposite way.

Imo an ideal solution would (like Ingalandia highlighted) let early stakers accrue more rewards than staking at later point

I have very high faith in the team to find a balanced solution and i´m also glad that this topic is brought to discussion.

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I think @TM1 hits the nail on the head. The issue is the mismatch between revenue now and revenue later. My thinking around a RYN token was specifically to address this issue.

A different split of the current AMM proceeds does not address this issue.
Reducing the distribution to vested stakers only tackles this issue indirectly.

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I would stick to the SOV token only but grant some additional SOV as rewards where desired as it will accomplish the same thing with drastically less complexity.

There is enough complexity in the platform right now and it is much easier to grow the community with simple products. Maybe once the BTC Defi community is much more mature and the platform has built the trust of the community, the more complicated concepts can be gradually introduced.

For now, I think any new initiative must explain how it will increase the value of a) the SOV token and b) the value of staking.

Three things must happen:

  1. Greater differentiation between merely holding SOV and staking SOV (risk/reward tradeoff is not sufficient)
  2. Greater revenue into the platform
  3. More reasons to hold and/or stake SOV

Recommendation:

  1. Exclude unvested founders tokens from staking revenue share. As a free market guy, this pains me to say as it’s against every fiber of my being, but I can convince myself that there is a greater payoff in SOV token value by transferring this value to the marginal invester who we want to bring new money to the platform.

  2. Establish an amortizing floor APY%, such that an SOV subsidy would be paid to stakers over some initial period. Rate should be sub-market. I know the team will likely be against this, however:
    a) any of the proposals can be reduced to the fact that they are all subsidies, even the RYN token
    b) it is the simplest concept to understand for the investors we’re trying to bring over
    c) it sunsets
    d) it buys time to build the revenue streams, while rewarding the community who has other opportunities to deploy capital
    e) success begets success. if we can stabilize the SOV token value, and create more trust and enthusiasm in staking, it will have a snowball effect and trading, lending, etc will gravitate to the platform.
    Example of staking yield floor: 30 months, initial floor 3%, reducing by 0.1% every month
    In reality, if staking yields can’t exceed this floor within a year, it’s not going to bode well for the token anyway.

  3. Require either SOV hold or SOV stake to:
    a) get “full credit” on AMM promotions. i.e. hold of at least xxx SOV to earn full 100% payout; otherwise you only earn 75% payout.
    b) receive lower borrowing rate
    c) more ideas??? fundamental concept is that you don’t HAVE to hold SOV to earn from the platform, but you earn the maximum if you do.

  4. Other revenue streams?
    a) Can we monetize the governance platform for tokens that want to use it?
    i.e. small monthly fee for marketcap, fee per SIP handled by Bitocracy, etc.
    b) ?

There is not one solution, it’s going to take a lot of singles, but I’ve got great confidence in the community to implement the best solutions for all.

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@magicmike this is an awesome post, with lot’s of great ideas! I will need to chew on this.

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Just a note to say that since this discussion, I’ve learned that there has been work to exclude unvested (locked) tokens from any FISH rewards, and that may be the source of the confusion I and others had. @exiledsurfer was kind enough to take credit for a communications mistake, but I believe the FISH rewards decision is the most likely root of this kerfuffle…

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Brilliant post.

Huge support. You echo my thoughts brilliantly. If we can up the revenue earned from staking, we boost the value proposition of the token, so number goes up, which ultimately benefits the vested holders (more than the revenue share they forego, I believe).

Apart from that, the only thing that makes any sense for SOV staking is that it earns the shares described in the tokenomics paper. Again going with simplicity, then a share in everything makes the most sense. @exiledsurfer already covered this brilliantly in his post. My only comment is that for swaps, we need to be conscious towards the LPs, lest we take too large a cut an LP becomes unattractive.
( Tokenomics | SOVRYN june 17 2021).

I’m stoked to see the progress on this topic.

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I think that adding an additional revenue token adds to much unnecessary complexity and there are better ways to increase the staking benefits. I think the proposal to only reward voluntary stakers with generated fees is a good one. However, it’s difficult to change on the technical side, because the Staking Contract does not differentiate. We will look into it.

There are 2 additional things I’d like to mention:

  1. Currently not 80%, but 100% of the revenue goes to the stakers
  2. Only margin trading, borrowing and lending fees are distributed at the moment. Swapping only generates feed for the LPs, not the protocol. This should have changed a long time ago, but did not. We will push on that, so we have the regular trading fees on all trades, not just margin trades.
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And what about the voting fees, are those distributed?

Honestly, I do not agree with the voting fees. I mean a fee to vote? It does not seem very democratic. Especially for those who have staked away thousands for a few years to be a part of the Bitocracy.

I suggest stakers should not be required to pay a fee to vote, or at least put some minimums together that allow for fee-free voting, ie- If you stake x dollars for y amount of time, you pay 0 fees to vote.

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This is the kind of friction fees can create when not aligned with value. If we continue to compress gas costs (which are a part of the contract process) and enhance staking value - the real cost of the voting fees drives to zero. I think we go back to distribution of a small portion of the upside - you would not even notice the voting expense.

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If you’re referring to the voting fee then this is what’s up:

To vote, you have to transact your voting power on the blockchain. For a miner to write your transaction into a block, you need to give 'em a gas fee. This is not a fee for Sovryn protocol.

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Not sure I agree with the other point you made, but this is something that I think makes sense.

It might take a long time for the network to grow to a point where staking rewards are even single digit APR, even after accounting for staking reward related changes in the near future. In the meantime, it would be good to have an option to borrow BTC (for example) against our “unproductive” SOV stake at low rates. Max LTV can be limited to as low as 15-25% to keep liquidation risk minimal.

EDIT: To Ingalandia’s original point - Sounds v tempting at first glance, but

(a) I do not like the idea of adding an additional token to a space (BTC Defi) where many already view tokens in general or SOV specifically with skepticism and
(b) I do not understand how any “present value of future revenue” token will not cannibalize SOV one way or another.

Like someone else said, we need to keep things simple for the foreseeable future until the market shows us it’s ready for more complexity.

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Gotcha, thx for clarifying. :+1:

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I stakied as long as possible because i dont want to lose all my funds in ethereum casino vegas type gambling…and in my own opinion and gut feeling i am in a place where all of the revolutionary thing in crypto all started…dyor nfa just my filipino opinion i am nobody though

Great discussion and ideas to enable the platform attract new eyes while retaining the current stakers. Where do we go from here? How and what do we implement? Regardless of the solution we propose and/or vote, I’m afraid that the founder’s unvested tokens carry a significant weight & can potentially outvote all of the staker’s vote combined (If a SIP is announced) which is not democratic or a decentralized way whatsoever (Note: I have utmost respect for the founders that came up with great ideas but I am looking out for the long term stakers like myself therefore being objective)

@Ingalandia - as an OP, what do you recommend as next steps? Can we formalize a solution into a SIP?

Thank you!
Usman

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General SIP outline here, they usually start with informal forum convos like this.

Also on last community call it sounds like there is intention to remove vesting shares from the bitocracy fee share. I was very encouraged by this. However, it’s not an immediate and easy fix in the code because the smart contracts currently don’t differentiate it. So the devs are looking into, but I suspect it’s a change on the horizon.

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Redistributing revenue now for revenue later is financial chicanery. What behavior would this incentivize?

The idea of SOV is to coordinate economic activity for a variety of stakeholders. Early supporters are incentivized with the expectations of future income to hold onto their SOV. It is 100% okay for people to hold liquid SOV and not stake. I’m a fan of Sovryn’s announcement of loot drops for lending. That makes sense, incentivizing behaviors that align staking with revenue. While it isn’t ideal that liquidity mining receives so much loot, it is clearly the main attraction of any dex. It exposes more people, including myself to Sovryn. Charging a fee on it isn’t practical at this time. Has anyone seen the twitter post showing a 2-4% base APY? Most of the APY is tied in SOV which is great! It means liquidity miners aren’t as incentivized to just dump SOV. Charging a fee on liquidity mining at this point is time is asking to flatten the adoption curve. On the other hand, redistributing loot drops to revenue-generating activities is a great idea!

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Stake terms need to be more transparent and detailed, bottom line. Feels kind of scammy that they are not. I, and many others, would have never staked had the exact details and value projections been there. I was excited about SOV… but then I discovered the reality behind staking.

The best thing that could happen is for the team to update tokenomics and be more transparent about staking. They should technically allow a week long window for the misled to unstake, that way we could lend instead or go the LP route. And if the team thinks I’m wrong about the misleading language and dissatisfaction of many stakers, then a week long unstaking period will have no affect as no one will unstake. Right? :wink:

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