Inb4 @candide
First and foremost, I want to express my appreciation for the team’s dedication and hard work on advancing stake.link. The introduction of native LINK staking withdrawals is a significant milestone that will greatly enhance the protocol’s functionality and user experience. However, the reimbursement request outlined raises critical questions about financial governance, resource allocation, and transparency. Below, I offer a detailed response.
1. Treasury Sustainability and SDL Reimbursement
The proposal requests reimbursement in SDL tokens for audit costs, with the assurance that the SDL tokens will not be sold in secondary markets for at least 6–9 months. While this demonstrates a commitment to preserving token value, several key considerations arise:
Why SDL Over USDC? The treasury holds both SDL tokens and 250,000 USDC from the OTC sale in SLURP-27. Opting for SDL tokens instead of USDC impacts treasury dynamics differently, particularly given the significant reduction in SDL reserves (from 40.91M SDL in July 2023 to 25.15M SDL today). Why was SDL chosen, and does this align with long-term treasury strategy?
Market Impact Risks: While the lockup period mitigates immediate sell pressure, it does not eliminate concerns about the potential future impact on SDL token value. More clarity on how this decision aligns with the protocol’s broader financial goals would strengthen the proposal.
2. Core Contributor Allocation and Operational Budget
In SLURP-8, the community approved SDL tokenomics with a specific allocation for core contributors:
The audit for native LINK staking withdrawals, a critical protocol feature, should reasonably fall under this operational budget. While it is acknowledged that audit costs can be difficult to predict, proactive planning could have mitigated the need for retroactive reimbursement. If costs exceeded the annual allocation:
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Why wasn’t supplemental funding requested earlier? Engaging the community in advance would have ensured alignment and avoided governance friction.
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How was the 1M SDL operational budget utilized? Transparency on this allocation is essential for the community to evaluate the necessity of additional funding.
3. Audit Cost Transparency
Audit costs are notoriously hard to estimate, particularly for complex features like native withdrawals. However, transparency is key to maintaining community trust and ensuring alignment on financial decisions. The SLURP-34 proposal should provide:
A full breakdown of audit expenses incurred for native LINK staking withdrawals, including firm-by-firm cost details (e.g., Cyfrin and CodeHawks).
An explanation of any unexpected increases in costs and how similar issues can be addressed in the future through better planning.
This transparency is crucial for the community to make an informed decision on the reimbursement proposal and to identify areas where cost management can improve.
4. The Role of the MetisEDF Grant
In SLURP-28, the team announced securing 1,500 METIS tokens from the Metis Ecosystem Development Fund (MetisEDF) to support auditing costs for native LINK staking withdrawals and native Metis staking deployments.
This was a celebrated win for offsetting operational expenses. SLURP-34’s request for an additional $200,000 raises key questions:
How were the 1,500 METIS tokens allocated? Were they fully or partially used for auditing, and if not, why?
Why was the MetisEDF grant insufficient? If it didn’t cover audit costs, why wasn’t this communicated earlier?
Without clear accounting, this overlap creates the perception of duplicative funding, which undermines trust.
5. The High Priority and Long Development Journey of Withdrawals
Native LINK staking withdrawals are undeniably a high-priority feature. The feature’s development over the past year reflects its complexity and importance to the protocol. The audits conducted by Cyfrin, CodeHawks and others (?) are critical for ensuring security and usability. The proposal highlights key benefits:
De-risking liquidity shortages: Withdrawal functionality protects users from reliance on Priority Pool or Curve liquidity.
User confidence: Audits safeguard user funds and enhance protocol reliability.
The high priority of withdrawals justifies the costs incurred. However, prioritization demands proactive financial planning. The extended timeline should have provided ample opportunity to estimate costs and address budgetary shortfalls in advance.
6. Constructive Path Forward
To address SLURP-34 and strengthen governance moving forward, I propose the following steps:
- Provide Detailed Transparency:
A breakdown of the 1M SDL operational budget from SLURP-8, detailing how it was used and why additional funding is needed.
A report on the allocation and usage of the 1,500 METIS tokens from the MetisEDF grant, explaining any gaps.
A full breakdown of audit costs for native LINK staking withdrawals.
- Clarify SDL Reimbursement Strategy:
Explain why SDL tokens were chosen for reimbursement instead of USDC. What impact will this decision have on treasury dynamics and token value?
How will the 6–9 month lockup period mitigate potential risks to SDL markets, and are there additional safeguards planned?
- Improve Audit Cost Planning:
Establish baseline cost estimates and thresholds for audits of core protocol features.
Propose supplemental funding to the DAO in advance if costs exceed thresholds.
- Strengthen Treasury Stewardship:
Reserve the DAO treasury for strategic, forward-looking initiatives while ensuring operational expenses are primarily managed through core contributor allocations.
Limit retroactive funding requests to exceptional circumstances.
- Enhance Communication:
Commit to engaging the community early for major expenses. Transparent and timely proposals help build trust and ensure alignment with the community’s priorities.
Final Thoughts
The stake.link core team has demonstrated exceptional dedication and perseverance in advancing the protocol. Native LINK staking withdrawals represent a significant improvement for the protocol and its users, and the audits conducted were essential to ensuring their security and success. However, the retroactive nature of this reimbursement request highlights areas where governance and financial planning can be improved.
By addressing these concerns and committing to more proactive communication and planning, stake.link can continue to thrive as a community-driven and resilient protocol. Thank you for your hard work, and for taking the time to consider this feedback thoughtfully.