- Yes, lfg
- No, discuss further
Name: [RFC] Build Avalanche Liquid Staking for Wonderland
Scope: This RFC is the next step from the Liquid Staking proposal DAO discussion, highlighting the key points raised in the discussion, clarifying issues and changes we’ve made based on community feedback, as well as answering some additional questions to help move the proposal forward.
Previous [DAO Discussion]: [DAO Discussion] Avalanche Liquid Staking Proposal
Objective: Diversify Wonderland treasury revenue streams by adding liquid staking to our portfolio, in line with Dani’s 2022 vision for the Frog Nation
High Level Overview:
Frog Nation is growing rapidly: Popsicle Finance is launching on Polygon, and the are proposals on the Abracadabra forum to expand to Harmony and Polygon. Andre and Dani tease us daily about Fantom; Sushi is coming to Avalanche with the charge led by frogs; and we have the upcoming launch of the sports betting platform.
It’s been a wild ride the last few months, but it’s nothing compared to what 2022 holds in terms of growth and diversification for every frog lucky enough to be here. We consider ourselves among them, which is why we are excited to see how liquid staking fits into Dani’s vision.
As proof of stake chains grow (and new ones launch every day), liquid staking becomes an even more critical base component to keep capital flowing while also maintaining democratisation of these chains.
We couldn’t possibly explain better than @Liscivia_honey_DAO how this benefits users of these L1 protocols and how it benefits the Frog Nation, and we encourage you to read their forum post and Twitter thread.
Low Level Details:
We won’t rehash the entire proposal here as there is already a lot of detail there.
Instead, we’ll highlight the most discussed points and respond to feedback. If you haven’t read the initial proposal or the DAO discussion, we’d encourage you to do so now – the community discussion has been super in-depth.
Reminding ourselves “why liquid staking” and “why Avalanche”:
- Avalanche’s staking TVL is over $12B. Staking requires a minimum staking period of two weeks and a minimum staked amount of 2,000 AVAX for a validator (at current prices around $200k USD) or 25 AVAX for delegation.
- Staked AVAX is illiquid until unstaked. Creating a protocol to free up the liquidity users would normally have locked up in staking will help DeFi on Avalanche to boom even more.
- The annual staking reward on Avalanche is 9.82%. Based on Avalanche’s current market cap of $25.7B, the total addressable market for staking is roughly $2.5B per year.
- Lido, one of the largest liquid staking solutions, offers liquid staking on both the Terra and Ethereum chains (but not Avalanche). Adoption is currently 17.6% and 13.4% of staking users respectively.
- If we can capture 5% of the total addressable AVAX staking market (approximately 8% of existing staked supply), this means gross staking rewards of $125M per year.
- If Wonderland take a 10% fee for running the liquid staking service, Wonderland’s gross revenue would be $12.5M per year.
- At a more aggressive market share, 20% of the addressable market, Wonderland’s corresponding gross revenue would stand at $50M per year.
Technical details of the project can be found in the original proposal in the DAO discussion. As requested, we’ve included a more detailed breakdown of the timeline we’ve been following and where we expect to go from here.
- Research: Q3-Q4 2021
- Initial technical specification: Q4 2021
- Protocol development: Q4 2021-Q1 2022
- Fuji testnet deployment and audit: February 2022
- Mainnet deployment: March 2022
- Avalanche protocol development: March 2022 onwards
- Maintenance, improvements, upgrades, and support: ongoing
- Protocol development for Fantom
We’ve taken on board feedback regarding compensation from the discussion and especially want to thank @shrop_99_degen for their thoughtful engagement and counterproposal on this.
As a result of community feedback, we’d like to lay out a slower, more granular comp structure:
- $1 million MIM up front as a retainer and for development costs
- $2 million MIM on delivery
- $1 million MIM at 1% market share
- $1 million MIM at 2.5% market share
- $1 million MIM at 5% market share
Overall, this amounts to less than 1% of the Wonderland treasury for delivering a fully fledged liquid staking solution for not just one, but two chains.
For comparison, Shard Labs were paid $12M in token grants to build Lido for Polygon, just one chain. The “payback time” at 5% market share is around 6 months. We think this is an incredible opportunity for Wonderland in nascent liquid staking markets where it’s still anyone’s game.
One question that came up often in discussion was around the 4 year time frame mentioned in the original proposal’s revenue share and the break clause, discussed further in this post.
It was never our intention to lock down the DAO for a long time, but rather to show that our incentives were aligned for the maintenance and improvement of the product for many years to come. As a result of feedback received, we’ve reduced the proposed revenue share:
- 25% revenue share for the first year
- 20% revenue share for the second year
- 15% revenue share for each year thereafter
- 90% back to the stakers
- 7.5% to Wonderland for providing the service
- 2.5% to our team for ongoing maintenance (falling to 2% and then 1.5%)
We also hear your feedback about the break clause. We succeed or fail together, and we want our ongoing agreement to reflect this.
We’re pleased to have presented the first of what we hope are many proposals by teams eager to build with Wonderland to extend the reach of the Frog Nation.
We hope we’ve covered the points raised in the DAO discussion, and in the absence of more discussion points, we’re looking forward to moving to a vote.