SLURP-38 | Protocol Owned Liqudity as a means to distribute Treasury and Facilitate NOP selling

SLURPs
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Abstract - I believe a Protocol Owned Liquidity contract available is best for Stake.link to implement as a means of:

  1. Supporting our own DeFi Lps
  2. Acquire alternative assets for our treasury
  3. As a means to distribute treasury
  4. As a means to facilitate node operator selling
  5. As a means to abstract the complexity due to Institutional Interest in priority.

I will expand on each point. This is by no means set in stone this is to JAR you! The community, The core contributors, and the Node operators into thinking outside the box and perfecting past schemes in DeFi.

Rationale -
Protocol owned liquidity schemes, such as those found most popularly at OHM, allow new entrants to buy into the protocol at some discount while their tokens are “bonded” (basically vested) for X amount of time. In the past, these schemes were easily gamed or hyped up for massive pump and dumps… enter SDL. ReSDL fundamentally supports this due its “locked” nature. In tandem they can provide the best known ‘scheme’ for Protocol Owned Liquidity we have seen out of DeFi.

In this instance, we can create a contract that allows a set amount of SDL to be placed in it. SDL can then be purchased at a slight discount (numbers to be determined so i will use placeholders) where a 5-10-15% discount can be given to those whose SDL will be placed AUTOMATICALLY into the staking pool as reSDL for 2-3-4 year options ONLY. This scheme will not take any purchases that do not lock 2 years minimum to prevent mercenary behavior. This contract can be “loaded” up with any amount of SDL (50k,100k,200k) as the treasury needs money or as we see fit to bolster our DeFi positions. This contract can be modified to allow Node operators to sell as well. Initially i would say if there are multiple sources of SDL in the contract the treasury should be 70-85% of every sell or more to ensure its not abused by any party involved.

  1. ** Supporting our own DeFi Lps **:
    A healthy protocol requires healthy aligned long term liquidity. This proposal seeks to bolster our DeFi Liquidity of stLINK and SDL LP’s. stLINK is integral and the widespread integration of it is key to our success as a protocol. SDL liquidity is meh at best. This will allow the protocol to take the funds from selling SDL and buy our own LP tokens to be permanently locked and earning for the treasury. Even beyond this, additional proposals can be made to ‘stack’ DeFi tokens (eg: AAVE or CRV) to incentivize our pools with CRV emissions, or to just stake AAVE in a show of respect, giving our treasury external revenue and a symbiotic showing to our future flywheels in DeFi.

  2. Acquire alternative assets for our treasury :
    As it stands right now, if the protocol needs money for anything we must sell SDL. Selling the main token in our treasury can directly impact our overall treasury via price drop / market cap drop, and can also lower our liquidity depth. Adding these new contracts can avoid the liquidity pools and negative impact of selling for expenses. These assets initially could be only LP tokens or stLINK. As stLINK is our main offering and earns passive income, we can begin to build a treasury in assets that do not impact our market cap when expenses arise.

  3. ** As a means to distribute treasury ** :
    Not only does this allow us to sell for expenses, but all prospective buyers requiring a 2-3-4 year lock means we ONLY attract new community members or people who are looking for a LOT of priority. This essentially lets us distribute the treasury to the best possible candidates, long term aligned community/ institutions.

  4. ** As a means to facilitate node operator selling** :
    It is my current understanding that Node operators do not have the best selling practices to be long term aligned. There is no other way to put it. This week we witnessed a node operator selling on metamask swap for a 15% fee to metamask… If node operators are willing to take a 15% fee they should have no quals distributing tokens at a 5-10-15% discount to long term protocol supporters. Now i know this may bring up some questions about how they work, sell, do they even care? Alas, crying never fixed anything. This pool can facilitate proper long term aligned behavior. Nops could be able to deposit and get a portion of their SDL sold in every transaction (at a % to be determined to ensure the treasury is the main focus here).

  5. ** As a means to abstract the complexity due to Institutional Interest in priority ** :
    Believe it or not, institutions will need to vie for priority as they begin routing customers through us or offering LINK staking to their clients. This will abstract all the complexity away while facilitating large purchases that otherwise would pump and dump the market and beget mercenary behavior. As it stands our volume is nowhere near 100k daily on the SDL pool. Large purchases without bolstering our liquidity (via LP purchases) are not very beneficial long term for anyone except those looking to sell for higher. This isn’t intended to abstract the market away from SDL. There should 100% be limits on the amounts able to be purchased through the contract per month.

CONCERNS :

  1. Price feed
    Without a price feed we must come up with a mechanism such as: Average price for the last 45 days, to prevent mercenary behavior and gaming a single price feed. With our volume so low this leaves the contract up for mercenary attacks unless we do a time weighted average pricing scheme of several weeks or even months. This will ensure it cannot be gamed.

  2. ** Will anyone even use this??**
    The biggest question is will anyone even buy SDL? Our outreach is still leaves much to be desired. Our total daily volume on our SDL LP is never very high either. Every period we “load up the contracts with SDL from the treasury” it should be paired with some sort of marketing campaign or awareness. We need to do these things in tandem. Of course, after the first attempt we will have a reasonable idea of demand for this program. The good thing is these contracts won’t cost too much outside the audit and will last forever. With Swissborg and SR both on board already institutions will come. Thats a given, let’s make it easier by abstracting some complexity.

The pool doesn’t always have to have SDL in it available to buy 24/7. Every time we want to load it a slurp would need go through. Only allowing nops to take advantage of the pool WHILE treasury has SDL in there at a higher % will also stop this from becoming a NOP glory hole.

Any and all comments and ideas are welcomed. This is not an official final draft but is meant to shake your brain guys. This IS a successful protocol. We need to start abstracting things and making it easy as possible for people to join us. We will need more treasury funds too, Node operators taking 15% hits on sells… I see this as a win for community, treasury, node operators and interested buyers.

  • Michael
4 Likes
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Big fan of this idea as I think it supports the long term health of the protocol. I hope we get some comments in here from people more familiar with POL because we need something. Everything is going right with SDL as a protocol with the primary exception being the token. I think this addresses some of those issues nicely, mainly providing NOPs an avenue to sell their tokens to long term aligned holders.

3 Likes
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GM Michael! Thanks for writing this up. I like the idea and especially to give a discount on secondary SDL with timelock. Discount should be proportional to the timelock (i.e. 2 years lock gives discount 5%, and so on).

Few things to think on:

  1. Differentiation to buying reSDL NFTs on OpenSea or similar. Right now the same can be brokered through OpenSea without the need for additional Smart Contract complexity. Discount can be evaluated on specific buys. The questions is who are the buyers and what do they prefer? My first inclination is we should probably work on promoting the secondary NFT market more and use this as a first use case.
  2. Implementation cost need to be in line with usage and benefit. Will try to get a rough estimation on this and see whether it makes sense economically. Also, we need to keep opportunity cost in mind for dev time.
  3. Legal implications need to be checked

So far so good - will need some more time to think on this.

Best,
J

3 Likes
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Really appreciate this SLURP—it tackles some of the core needs the protocol is facing around treasury management, liquidity, and institutional alignment. I wanted to offer a complementary (and possibly more lightweight) version of the same idea, framed around the concept of a ‘protocol-native “Priority Pass” marketplace for reSDL NFTs’.

Instead of building a separate bonding mechanism, we could surface and structure what’s already happening on-chain: the locking of SDL into reSDL. A ‘native reSDL marketplace’ on the Stake.link site—where time-locked governance positions are displayed as tradable NFTs—would directly address the same five goals you’ve outlined:

  1. Support DeFi LPs by enabling fee capture from every trade, which could be directed to LP bootstrapping.
  2. Acquire treasury assets (in stables, ETH, stLINK) without selling SDL on the market—buyers pay into the protocol for reSDL access.
  3. Distribute treasury in a permissionless but lock-aligned way, with only long-term participants acquiring discounted governance.
  4. Facilitate NOP selling by letting node operators list long-term positions at discounts, reaching real buyers rather than dumping into thin books.
  5. Abstract complexity for institutions by giving them a one-click, legally friendly route to staking priority and SDL governance access without swapping or staking.

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Numbers not real
This model doesn’t require new bonding contracts, avoids emissions or vesting logic, and fits naturally with our current reSDL structure. And importantly, it creates a ‘one-stop-shop UX’ where users can instantly understand staking priority, APRs, lock durations, and governance power—something no external bonding contract or Uniswap market can provide.

Would love to hear thoughts on whether this could be a leaner first step toward achieving the same goals you laid out—maybe even a staging ground for a full POL model down the line.

Edit:
Inspiration for this post came from:

As it is clear, the learning curve for SDL mechanics are quite steep for the uninitiated. This is a monetizable way of onboarding new users.

1 Like