[DAO Discussion] Avalanche Liquid Staking Proposal 🔺

[j_rana]

@MMD

is it that the understanding that the depth of STAKED-AVAX market will be good enough to absorb large dumps without much slippage?

Great question – and that’s exactly right. What you’re describing (the value of stAVAX falling relative to AVAX) effectively represents a huge (and delta-neutral) time-based arbitrage opportunity for large AVAX holders.

Large / long-term AVAX holders (such as 3AC, and potentially Wonderland itself) would benefit from these, and such arbitrage should easily absorb these fluctuations.

Even in other markets where the staked asset is itself illiquid (e.g. ETH2 staking) we see the peg remains robust. With Avalanche staking, the smallest period before unstaking is only two weeks, which is short enough that we don’t anticipate any liquidity issues.

[Randy]

How is this good when they could stake a stable coin for 20 percent and not worry about volatility of avax? That’d bring in more money than the 7 percent staking of avax and wouldn’t haven’t to give a cut to them. Just doesn’t seem like a good idea when you can double that safely with a stable coin

[Mambo]

Very interesting proposal. thank you for submitting. My comments below:
-please provide more info on the team, including track record and who they know/are working with at Ava Labs. Any Ava Lab references would be very helpful here.
-4 years too long. suggest rolling 12 month terms with renewals based on certain agreed KPIs/milestones being met
-75/25 split low for frogs. suggest 85/15 from the outset
-Personally prefer the $6mm (50% upfront/50% upon delivery) option, however need to be satisfied $6mm is not too high
-suggest identifying key personnel in their team and incorporating “key man” provisions
-confirm/articulate any synergies that may exist with other projects in our ecosystem (abra/popsicle/sushi). i.e. how does this proposal feed into our ecosystem?
-overall, the returns of this proposal should be compared to returns that the treasury is currently generating to ensure this is higher.

Many thanks

[MMD]

There is no staking on AVAX in this…This proposal is to create a platform where staked AVAX can be traded (for the lack of a better word) thus providing liquidity for AVAX stakers. Currently AVAX stakers have to be locked for a minimum period of 2 weeks (there are longer stakes as well)…
By creating a platform for AVAX stakers, this proposal aims to provide liquidity to the staked avax holders for a fee (10% of the AVAX staking rewards taht is currently at 9.8% annual)…The platform (Wonderland owned) will provide the market place for the staked AVAX for 1% (approx) fee…The external dev team that will develop and maintain the platform will take 0.25% (for first 4 years, 0.15% after that) as their service charge…

The cost of developing this platform will be about $6 mil…returns on this platform (assuming we are able to get $5 billion staked avax interested) is about $9 mil annual…

Note: 62% of AVAX are staked

So the right question to ask would be,
Will 5% of AVAX stakers like the idea of giving 10% of their return for the benefit of having the possibility to UNSTAKE ANYTIME without any staking period?

It’s like a property insurance, we pay the premium for some coverage.

[UggItsThisGuy]

You bring up a good point.

@MMD

The cost of developing this platform will be about $6 mil

I’m curious how long it would take to create this platform, and when does the contract start paying out?

[sirius136]

I want to provide my thoughts,

First, we must realize that $6 million is only 0.75% of Wonderland’s treasury.
Using this ratio to exchange 1.5% of revenue ($12.5 million), and have the opportunity to expand to other chains, this is an excellent opportunity.

Yes, for every little frog, this is a lot of money, but for a frog nation, there is really nothing.

The second point is that some people are very skeptical about being on the anonymous team. This is indeed a problem. We gathered here because of daniele, so naturally we disagree with anonymity.
But the anonymous team will be the main operation of defi in the future, which is full of business opportunities and fraud. Fortunately, we have Daniele and Sifu have already done pre-trial against each other,
So anonymity is only relative to us.

If the other team is willing to disclose more, can gain more trust, but I personally feel that this is not necessary. Because I am also setting up DAO myself, everyone is almost anonymous, but this does not hinder the operation of the project.

The third point, although the 75/25 ratio may be dissatisfied, I am more concerned about how big reward it can be in the future. The 75/25 distribution of 0 profit is meaningless. The 75/25 profit of 1B is far better than the 95/5 profit of 1M, appropriate incentives for both sides, contributes to a better future.

The fourth point is that the four-year buyout contract is indeed too long. I would recommend a review every year. The review will automatically renew unless the quorum is over 4% and the number of objectors is greater than 85%, and the direct performance of the contract for 4 years should be retained. possible.
Although I believe in Daniele and Sifu, people will change. Therefore, to provide a more stringent way of relief, I think it is also a kind of vigilance for both parties.

[Liscivia_Honey_DAO]

Guys I see a lot of frogs still don’t get the full benefits of Liquid Staking for the whole ecosystem, they are MASSIVE

Here’s a thread on the argument:

Liscivia.ΞTH 🍯(∞) (¤, 🎩)

To synthesize what’s in the thread:
Liquid staking is the future of L1 tokens because of:

1. need for decentralization
2. price stability and dex liquidity
3. composabiloty of yeld

Every L1 POS chain will move to liquid staking to improve on the aforementioned.
How will it empower the frognation?

1. sushi gets the best incentives for L1staking derivatives/MIM pools
2. people move delegations from CEX to wonderland’s Liquid staking
3. sushi gets the deepest liquidity
4. massive capital influx into wonderland’s treasury
5. broader MIM adoption (and also deepest liquidity)
   … And the virtuous cycle goes on (go like and retweet the thread to read more about this vision)

Also Liquid staking tokens can be collateralised on abracadabra:
Deposit L1 liquid staking tokens as collateral > borrow underlying L1 token > lock into wonderland’s Liquid staking service > put back as collateral > keep folding like this to get amazing leveraged staking rewards with close to 0 liquidation risk.

This is gonna really be amazing

[j_rana]

@Mambo

confirm/articulate any synergies that may exist with other projects in our ecosystem (abra/popsicle/sushi). i.e. how does this proposal feed into our ecosystem?

@Liscivia_Honey_DAO’s post above gives a fantastic summary. I don’t think I can articulate it better than the man himself:

Daniele 🐸✊

I think the biggest value (aside from to the Wonderland treasury) is in democratising access to staking. As per the proposal, the minimums for Avalanche staking are often high relative to most users’ wallets.

This presents a great opportunity to bring new users into the Wonderland ecosystem, reward them (via liquid staking) for doing so, and hand them liquid assets with which they can invest in other Wonderland properties.

For instance, you could earn yield on your stAVAX in Popsicle, borrow MIM against your stAVAX in Abracadabra, and LP for the AVAX/stAVAX pair on Sushi, all of which compound Wonderland’s revenue.

I imagine this is the way the puzzle pieces fit together in Dani’s mind.

[snapdot]

It’s win win for time and avalanche

[UggItsThisGuy]

I don’t think the general consensus is that liquid staking is a bad idea, it’s the way it’s being presented here that’s giving folks second thoughts. You don’t have to read to far into the discussion thread to see all of the concerns regarding: terms, duration, compensation, proof of concept, vetting of the team, etc…

I agree, this could be huge, but we need to be careful and not charge ahead just because we want to do something. Let’s make sure that Dani and Sifu’s hard work to date is rewarded instead of tested.

[ThusSpokeZarate]

Adding to this I think it’s really important to try to put yourself in the shoes of new retail investors.

Most of them are too far down the learning curve to be ready to participate in a DAO, farming, etc. They want the next opportunity not the old ones. They want passive income that can actually improve their lives, not to become master traders and crypto analysts. Liquid staking on AVAX and FTM eliminates entry barriers and makes all that possible.

The Wonderland/Frog Nation vision is the most “meta” thing there is in crypto right now. This is just one piece of that puzzle. Accelerating network effect is how you win, not by obsessing over short term price action.

[Teejayb007]

100% approved! Together Frog stronk

[KarePan]

Highly import point to make, not everyone understands what liquid staking means, and there was clearly an intent to bring to awareness this subject to the community. No need to dish any contribution to the discussion.

Have that said, it is clearly stated by Dani himself since last december how he views this opportunity and how fundamental it is for the ecosystem.

[MMD]

What’s the next stp? What needs to be done to take this proposal to the next level?

[KarePan]

Alright, we are taking too long here before moving to an RFC. And I truly believe we are beyond asking ourselves if this is the right play, as many times Dani tweets about this has been brought up.
Also I have to remind that within the vision for the ecosystem this DAO is meant to compete with VCs as Dani has tweeted few times. This is our first move acting like a VC!

Daniele 🐸✊

So, moving this to RFC section we can put behind 4 year concern as @j_rana already addressed, but few highlights are:

@j_rana

Here’s how we think about it: it aligns our incentives to help grow, maintain and improve our contributions to Wonderland. If our product manages to make $0 for Wonderland, then our revenue share is 25% of zero! We want to make revenue, so we’re economically incentivised long-term to keep growing the marketshare of Wonderland’s liquid staking.

@j_rana

We see ourselves as an additional external team contributing to Wonderland core.

@j_rana

Some commenters have suggested 1 year contracts – incentives for this are misaligned. We’d be incentivised to ship code, not caring about scalability, code quality or future performance knowing that in 1 year we’re potentially kicked out anyway.

Also no need to further discuss the split share (75/25) as I think it is pretty clear that this incentivizes further the team to deliver quality and maintenance of the platform, also it is already proposed it will eventually fall to 15%. The proposer also extensively shared the modelling compensation to arrive on those numbers, here:
( [DAO Discussion] Avalanche Liquid Staking Proposal 🔺 - #135 by Shrop_99_Degen )

In my view trying to summarize community concerns here, what really needs to be taken to RFC are:

1. Better denominate a break clause

2. Proposer already agreed in a KPI grant model with a 3M upfront, formally discuss the parameters for it (reminder that 6M is 0.6% of the treasury, and a value made within days)

3. Decide whether the grant will be in MIM or TIME

4. Include a Clear timeline with milestones (this, in some way, links to KPI)

5. If proposer, as suggested by @g_bcn , is open to include specific terms and conditions for the “team” to provide post-launch services to Wonderland – i.e. ow fast should issues be resolved, penalties, etc. (kind addressed in the level of commitment accounted for the modelling compensation)

[Shrop_99_Degen]

@KarePan

2. Proposer already agreed in a KPI grant model with a 3M upfront, formally discuss the parameters for it (reminder that 6M is 0.6% of the treasury, and a value made within days)

I do think the $6 million is low to us, but at the same time it’s very high compared to other deals. I would like to consider a smaller cost of $1-2 million for development cost. This would be a nice annual salary for any Dev and doesn’t include the revenue share.

And then as we hit certain market share/revenue, we can pay out “bonuses” to the dev team. For example:

@Bishop

$1 million up front and for delivery
$1 million once 1% of market cap is reached
$1 million once 2.5% market cap is reached
$2 million once 5% market cap is reached

And we could even extend this kind of bonus structure to higher market shares. Maybe every 5% captured, an additional bonus of $1 million.

Note: once a market share milestone is reached, it has to be maintained for a certain amount of time before being completed. E.g. 2-4 weeks.

@KarePan

3. Decide whether the grant will be in MIM or TIME

They are open to being paid out in TIME, but seems they would want a higher amount relative to MIM. 50% more. This may be a little too high a difference IMO.

@KarePan

5. If proposer, as suggested by @g_bcn , is open to include specific terms and conditions for the “team” to provide post-launch services to Wonderland – i.e. ow fast should issues be resolved, penalties, etc. (kind addressed in the level of commitment accounted for the modelling compensation)

They will be 100% responsible for running and maintaining the platform. Their incentive to make it work is the revenue share and market share bonuses I described above. But having a ‘penalty’ of some sort for an error on their part may be worth looking into. After reading other similar deals, that’s not something I’ve seen before, so I’m not sure how to implement. I have done some contract audits early in my professional career, but I cant for the life of me remember how these issues were handled.

[Made_in_Italy]

Hi everyone,
I agree and I accept the proposal.
Take care and stay safe.

Alessandro

[Ahriaz]

Love this idea, go for it!

[NalXes]

Just for clarification since it was discussed a bit in discord.

@KarePan

5. If proposer, as suggested by @g_bcn , is open to include specific terms and conditions for the “team” to provide post-launch services to Wonderland – i.e. ow fast should issues be resolved, penalties, etc. (kind addressed in the level of commitment accounted for the modelling compensation)

What they were referring here is not really about a penalty, but more common understanding. A service-level agreement (SLA) is what it’s normally referred as. The team works on it all the time, but when X happens, these are the reasonable timeframe to have that fix, etc, etc. Not sure if this is very common in crypto, but seems to be a pretty standard thing for dev team providing a service to another party.

Not sure if that’s how you understood it, but figure I’d reply anyway so other people sees this.

[Shrop_99_Degen]

Yeah, SLA was what I figured, but it’s not something I’ve seen in any other deal like this at least. And I think the incentives are enough for them to fix anything ASAP. However, if they do start to underperform and we have issues with the platform that are unacceptable we have the break clause…

This is something I haven’t touched on, but the $10 million is excessive. I think this should be completely scrapped. No other deal has this type of clause that I can see. They could easily develop the product, neglect it, leaving us forced to pay the $10 million to cut ties with them.

This is a major red flag for me. In fact, it is the reason I would vote No on this proposal.