SLURP-20 | reSDL VIP Delegation

SLURPs
1

Abstract

It is proposed to create a reSDL staking VIP Delegation Vault mechanism that allows SDL stakers to deposit their reSDL NFTs. This will enable third parties to leverage the combined priority of these NFTs to stake LINK through the Priority Pool. In return, reSDL owners will receive a fee (e.g., 1%, subject to discussion) of the stLINK provided in return from LINK staked via the smart contract, in addition to their regular rewards.

Rationale

This proposal aims to maximize the value and utility of reSDL NFTs by offering a new revenue stream. The fee incentivizes reSDL holders while promoting broader participation in the LINK staking process.

Motivation

This proposal emerges from community-driven discussions addressing two key concerns:

  1. Decreasing LINK in the Priority Pool: There’s been growing worry about the dwindling LINK in the Priority Pool.

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  2. Increased Incentives for reSDL Holders: Community members have frequently discussed enhancing incentives for reSDL holders. ( Check TEMP CHECK 2 | Increasing Community Pool delegation fee to reSDL stakers)

The proposed reSDL staking VIP Delegation Vault mechanism tackles both issues while democratizing stLINK access.

Additionally, this mechanism would simplify staking for users through an intuitive UI, bypassing the complexities of the priority pool and stakedotlink protocol. This makes it more composable and easier for third-party protocols or DAOs to integrate. Importantly, no core protocol changes are required, allowing it to be built permissionlessly on top.

However, it’s crucial for stakedotlink to implement this solution due to the governance influence held by reSDL NFTs, mitigating risks if third parties were to build it. Furthermore, there is a clear incentive structure, as community are paying a fee to LPs plus slippage, plus premium, while many reSDL holders don’t fully utilize VIP mode.

Specification

VIP Delegation Vault Mechanism:

  1. reSDL NFT Staking:
  • reSDL holders can deposit their NFTs into the VIP Delegation smart contract.
  • reSDL NFTs will continue to receive their regular rewards.
  • Additionally, they will receive a share of accumulated stLINK rewards from LINK staked via the Priority Pool through VIP Delegation.
  1. LINK Staking:
  • Any user can deposit LINK into the Priority Pool through the VIP Delegation smart contract.
  • Users can claim stLINK rewards once their LINK has been staked.
  • A 1% fee of the stLINK rewards will be allocated to reSDL NFT holders.
  1. Share Model Example:

Initial deposits

  • Depositor A: Owns 900 ppLINK
  • Depositor B: Owns 100 ppLINK

After staking 100 LINK through the Priority Pool:

  • Depositor A: Owns 90 stLINK - 1% fee (0.9 stLINK) = 89.1 stLINK + retains 810 ppLINK
  • Depositor B: Owns 10 stLINK - 1% fee (0.1 stLINK) = 9.9 stLINK + retains 90 ppLINK
  • Fee: 1 stLINK

It’s my understanding that operation gas fees would be paid by users when calling functions (no maintenance expenses). Hope core Devs can share som light about if there’s a any technical misunderstanding about how reSDL NFTs and Priority Pool dynamics work, and the complexity of developing this.

Conclusion

This reSDL VIP Delegation built on top of stakedotlink’s existing platform presents numerous advantages. It enhances flexibility by allowing VIP status to be transferred seamlessly, offers an additional layer of security through controlled delegation, and promotes increased engagement and loyalty within the community. By implementing this mechanism, we can provide a more dynamic and user-friendly experience for everyone.

Furthermore, this initiative will open the doors of stLINK to a wider audience, significantly boosting PR efforts. The increased accessibility and inclusivity will not only enhance our brand image but also contribute to the growth of the Priority Pool and the total value locked (TVL) in the protocol.

I do not foresee any significant drawbacks to this approach. The potential benefits far outweigh any minimal risks, which can be mitigated through robust design and implementation.

Eager to receive feedback from and look forward to incorporating your insights and suggestions to refine and perfect this mechanism.

3 Likes
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Considering a majority of the priority pool link is now pending deposit on behalf of non-resdl holders, this slurp breathes new life into the resdl nft and offers the public the same benefits with an extremely marginal cost. Considering this fee is lower than the average slippage fee to swap link to stlink on curve, I give this proposal a resounding YES!

3 Likes
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The way I see it, this proposal has a major plot hole. It encourages every SDL staker with their LINK already staked to stake their reSDL NFTs in the VIP Vault in exchange for a fee.

However, if everyone does the same, literally nothing changes.

Let me clarify: the system is already built in such a manner that, by default, when non-SDL stakers manage to stake their LINK using the Priority Pool, they are already paying a fee to all SDL stakers (that’s where SDL fees come from). This feels like an over-engineered solution to a problem that has already been solved by default.

I’m not entirely sure this is the best use of the team’s resources or their engineering team’s time (new contracts developments, audits, etc.).

I remain open-minded and willing to change my mind if I see compelling arguments in favor of this proposal. However, for now, I am against it.

2 Likes
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Thanks for putting together this well thought out proposal @Ari.

I’m sorry to say though, as this is something we’ve talked about internally for years, it is an impractical solution with too many technical caveats.

The main issue being: it is impossible to give the user stLINK and take an ongoing fee from that user of their rewards. Either the user would have no LST in exchange, or any LINK staked via SDL delegation would have a 2nd LST.

The simplest and feasible solution would be that a % of all LINK staked would be directed to non-reSDL holders and then SDL stakers would receive a fee. That was already proposed here and I replied to that with my reasoning against it.

@Sinbua raises great points and it’s something we’ve mentioned before. Indirectly, the fee from LINK staked to the SDL pool is the “delegation” fee, it’s just that the pool has not yet exhausted the LINK from SDL stakers to make that a reality.

I do agree on the points around the liquidity in the Priority Pool. Although, unless we don’t see a liquidity rush when LINK from SDL stakers is completely exhausted, then I personally have no concerns.

In addition, the point around team time is a very valuable one. Don’t underestimate the time and cost for implementation of features that involve building out completely new contracts. There’s engineering time that incurs opportunity cost, and with any new contract that holds significant assets with some complexity a private audit from a single firm will cost 30k+ USD. If you add a public audit on top of that and use a second firm, it can easily be north of 100k.

For those reasons, I will be voting no on this proposal.

5 Likes