New Staking Proposal

Proposals
1

Hi everyone,

We’d like to share some more details on the upcoming staking program as well as give some thoughts on the thought process behind things and then answer all of your questions!

General Design

We structured the design where stakers are able to stake PERP and receive sPERP in return. sPERP is a non-transferrable ERC20 token and is only used to represent your share of the pool

As is before, stakers are able to share in a percentage of the protocol’s trading fees as well as receive rewards from the unlocked DAO treasury fund (see https://gov.perp.fi/t/proposal-unlocking-perp-tokens-for-growth/245?u=tongnk for more details)

Once staked, the tokens are locked up and there is a 14 day cooling off period to withdraw. During this period, tokens do not accrue any rewards or fees. For example, if Alice initiates withdrawal of tokens on the 1st, she will not receive any rewards from that point in time. She is then able to withdraw the tokens on the 14th.

Proposed Initial Values

Initial Fee Split

For the initial fee split we would propose a 0% to start with. The reasoning behind this is that we’d like to continue to build out the insurance fund first and then after we reach a good level of stability then look to start increasing this value. (For those interested we are working on a report with Delphi Digital which defines what a good level of “stability” looks like and will share with the community once it is finalised.)

To compensate we would then like to propose having increased rewards

Rewards

We are proposing to have 150K weekly PERP distributed to stakers - this is >1M USD at the time of writing. Tokens are vested for 6 months

Similar to our liquidity mining proposal, we would also propose to have this staking program run for a period of 3 weeks as a trial and may modify or extend after seeing the results of the program

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Edit 1

Having talked to members of our community it seems that I should have provided some more information around why we are proposing a 0% fee.

As you may know we are currently working with Delphi Digital. As part of their initial recommendations based on modelling, they are suggesting that the insurance fund balance should be at least 5% of the open interest.

Open interest currently sits at around 32M meaning we should have about 1.6M in the insurance fund. The Insurance Fund balance is around 1.2M currently so we have about a 400K shortfall. This is also one reason why we wanted instead to have this as a 3 week trial. Ideally the insurance fund continues to grow and once it surpasses the 5% mark then we as a community should look at increasing the fee split to greater than 0%

Will also note that we chose to have the 150K PERP which is at the time of writing >1m in USD. This is significantly larger than the fees of the last 7 days (~300K) and we wanted to make it this way as we know that the community was looking for a higher fee split.

Again, this is all up for discussion but wanted to clarify a little bit more around the thinking and reasoning

3 Likes
2

I don’t like the idea of a 2 week lockup period in light of the price volatility. As the last week has shown, you will get a lot of angry messages on Telegram and Discord when people buy high to lock it up and not be able to sell at a loss if the price starts dropping. You should at the least give people the ability to withdraw at any time but at the cost of losing the vesting PERP that was accrued in the previous 2 weeks.

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3

A staking epoch has always been part of our design, and the purpose is to prevent a panic sell off during some kind of crisis. We will make it very clear to users that staking has risks as well as rewards - one risk being you will not be able to sell for min. 2 weeks after staking. Anyone who does not like this risk profile should not stake. Strong hands only :slight_smile:

1 Like
4

I don’t think it’s controversial to state the end-objective is at least 50/50 split of USDC income to stakers. That’s clearly a key part of many investors’ long thesis.

Given stability and insurance considerations I understand the rationale to replace the USDC income with PERP rewards as a trade off.

Therefore, as a proxy for dividend income the vesting then is hostile. Stakers are already long the bonded stake, then they also can’t use the income for six months (huge consequences in this market) plus they’re taking all the market drawdown risk. PERP may be trading at $1 again if there’s a correction.

So I would propose two streams of “rewards”:

  1. “synthetic” USDC component paid in PERP with no vesting. Ie whatever the 50/50 share of the USDC income would be.
  2. a vested component that’s more in line with DeFi subsidies to encourage long-termism from early risk-takers etc

This could be clearly articled in a schedule and the goal would be to phase out the “synthetic” USDC paid in unvested PERP with actual USDC income.

This way the team and whale investors are also committing on some level to the end-goal of USDC dividends.

2 Likes
5

Thanks everyone again for the feedback.

Based on feedback we’d like to propose a slight amendment to the proposal and would love to get feedback on this.

We’re proposing to move this into 2 stages:

Stage 1

This is the current stage where the fees from Insurance Fund is 0%. We still want to use this just to test and make sure all the functionality is working as expected before moving on to stage 2.

We also keep the total weekly 150K PERP rewards however we propose dividing it into 2 staking pools, one which is immediately claimable and the other which follows the original of being vested and unlocked in 6 months time.

We then split up the 150K rewards into two pools - staking pool 1 and staking pool 2 and then calculate the following:

total_fees = Take the fees earned in the weekly period

staking_pool_1 = total_fees * 50% // These are instantly claimable

staking_pool_2 = 150K - staking_pool_1 // These are claimable in 6 months time

So for stage 1, seeing as the fee distribution is 0 then the reward pool 1 fees will simply be 50% of the total fees earned in the week

Stage 2

The conclusion of stage 1 should occur when we have the following milestones that have been met:

  1. A risk framework which can help us determine what the distribution of fees should be. The 5% we currently have is a very initial start to the journey to understanding risk and the team and Delphi still need a bit more time to fully model out the risks
  2. Enough time has passed such that the engineering team are comfortable with the smart contracts

A Risk Framework Example:

The following is illustrative only but could be what a framework looks like:

  • If the total balance of the insurance fund is ≥ open interest * 5%
    • Then we set the staking fee to 35%
  • If the total balance of the insurance fund is ≤ open interest * 5%
    • Then we set the staking fee to 5%

This example is of course extremely basic but the idea is to illustrate that a stage 2 framework should incorporate the insurance fund and have sound risk modelling built in order to ensure that the system operates optimally

3 Likes
6

Why 35%, not 50%? Also, who can change these numbers? If governance later decides that the insurance pool is filled way enough can we change the staking fee to 90%+ ? In my eyes this has to be a given since the only reason to buy PERP is 1) to earn fees and 2) influence fundamental decisions which in turn enhance 1).

I agree with the 14 day cooldown period, because the reasoning makes sense. But why make the sPerp non-transferrable? Protecting the protocol from panic-unstaking makes sense but taking flexibility from investors “just because” does not make sense. Let people trade their sPerp if the want. It doesn´t harm the stability of the network. In fact it should increase the amount of staked Perp because people get an “emergency exit” through the secondary market. This is good for Perp.

I strongly agree with this. Make the rewards usable immediately, now and in the future. There are always people who want to HODL and there are people who are only interested in short term gains. Let the second group sell to the first group, no problem in that. That´s how free markets work, so why limiting the options of everyone?

Totally fine with this. How about using the USDC in the insurance fund to actually generate returns that go back into the fund? This increases the value way faster. If we use proven services like yearn.finance there is very little risk to it as well.
We can think this even further in terms of what assets the insurance fund should consist of in the future. 100% USDC may not make sense in the long run. Why not diversify over different stable coins and even sprinkle in renBTC/sBTC and ETH? With Uni V3 coming up, having multiple stable pairs could open up yet another income stream as we can choose the liquidity range very tightly, increasing the capital efficiency.

Probably that´s a topic for a whole other proposal but I´d just like to give a high level input.

3 Likes
7

Why 35% instead of 50%?

It’s just an example, we’ll have more discussion for stage 2 afterwards!

Why sPERP is non-transferrable?

There’re some technical restrictions and we want to make it as simple as possible for the first version. We can evolve sPERP in the future.
Though personally I think it’s better for the protocol - it sacrifices the composibility but also makes vampire attacker harder (like vcCRV, staked SNX…etc). However it’s open for discussion once it launch.

Improve the capital efficiency of Insurance Fund

Yes this is something we can do, but the priority of this is not very high comparing to other major issues we’re facing. The cost is relative high (the insurance fund is in XDAI) and the impact is marginal. We’ll focus on the the core issue first. More details will be discussed at the upcoming community call next week!

9

Thanks for the reminder that the insurance fund is held in Xdai. That does make yield generating more complicated as long as we don´t see widespread interoperability. So it makes sense to put this off until later.

Looking forward to the community call!

1 Like
10

Thanks,
everything sounds reasonable to me (as a PERP holder) and can’t wait to start staking.
Just one (already asked question):

Can you please comment further on "who can change these numbers" and “up to 90%” ?

thanks!

1 Like
11

I am adding this as a separate post.

Perhaps I am too late to make this proposal, but rather than:

I think it would make more sense to set this to 1%.

The idea being that 1% is sufficiently small to keep building the insurance fund, but at the same time it will give us a good idea of how the cash flow of the Perpetual Protocol will work in the next months.

What do you think? :slight_smile:

12

There probably needs more work to be done for what the % should be. But my gut feeling is that 90% is a dangerous level as if the insurance fund runs out of money it’s actually not good for perp holders as the system has to mint and sell perp tokens which obviously has downward pressure in price.

In regards to who actually can change the numbers it’s up to the community!

The team actually needs more time to thoroughly test the percentage which is why we opted to set it at a 0% to get staking live sooner.

13

Fair enough! Thanks for the answer!