SLURP-47 | Proposal for the Introduction of stPOL - Liquid Staking for Polygon

SLURPs
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Abstract

This proposal outlines the introduction of stPOL, a new liquid staking token (LST) for Polygon (POL) within the stake.link ecosystem (following SLURP-39). stPOL will allow users to stake their POL tokens, contributing to the security of the Polygon network and earning rewards, while maintaining liquidity through the stPOL token. It aims to offer competitive rewards by combining native Polygon staking rewards with a significant share of MEV (Maximal Extractable Value) revenue. stPOL will be aligned with the existing stake.link framework, including enhanced utility for SDL stakers. Foundational KYC/KYB for the SDL DAO is complete, and the first validator by LinkPool is already operational.

Motivation & Rationale

Polygon is a prominent blockchain network requiring staked POL for its security and consensus. Traditional POL staking often involves locking up assets, reducing token holder liquidity and utility. The introduction of stPOL addresses this by:

  • Offering Competitive Yield: Creating an attractive staking option for POL holders through a blended reward rate enhanced by MEV.
  • Expanding the stake.link Ecosystem: Introducing a new LST product diversifies stake.link’s offerings, potentially attracting more users and value to the platform.
  • Benefiting SDL Stakers: A portion of the revenue generated from stPOL will contribute to SDL stakers, enhancing the value proposition of holding and staking SDL.
  • Demonstrated Progress: Significant foundational work has been accomplished, including the completion of KYC/KYB procedures for the SDL DAO, establishing a compliant operational framework. Furthermore, the initiative has secured its first validator, demonstrating tangible progress.
  • Providing Liquidity: Enabling POL holders to participate in staking rewards without sacrificing the ability to utilize their capital in other DeFi protocols.

Specification / Proposal Details

stPOL is a liquid staking token (LST) that represents staked Polygon (POL) tokens within the stake.link protocol. Users deposit POL and receive stPOL, A rebasing token.. The stPOL framework is similar to stLINK and is aligned with the broader stake.link ecosystem through SDL staking.

  • Staking Chain: Staking POL to mint stPOL will initially be available on the Ethereum mainnet.
  • Platform Access: Initially, staking through stPOL Validators will primarily be facilitated via the stake.link platform.
  • Future Accessibility: The long-term vision includes integrating stPOL with wallet interfaces, and Polygon’s native staking UIs to ensure broader accessibility, similar to how SDL contracts can be accessed via different domains. We will also review and expand stPOL in Polygon’s DeFi landscape if possible.

Reward Mechanism & Accrual

  • Projected Reward Rate: stPOL is projected to offer a blended reward rate of approximately +5% post-fee.
  • Reward Sources:
    • Native Polygon Rewards: Standard Polygon block rewards and transaction fees (estimated at ~4% APR).
    • MEV Revenue Share: A significant portion (projected at 20%) of the Maximal Extractable Value (MEV) collected by stake.link’s Network Operators (NOPs) participating in Polygon validation.
  • Accrual Method: stPOL is a rebasing token. As POL rewards accrue from staking, the stPOL balance in a holder’s wallet automatically increases. This increment reflects earned rewards and is backed 1:1 by staked POL held by the stake.link protocol. Rebasing is expected to occur regularly (e.g every two days, similar to stLINK).

Fee Structure: A total fee of 16% will be applied to the rewards generated from stPOL staking. This fee is distributed as follows:

  • SDL fee: 10% (to benefit SDL stakers/DAO)
  • CC fee (Core Contributors): 3%
  • DeFi-Pol fee (Polygon-focused DeFi initiatives/operations): 3%

MEV (Maximal Extractable Value) Contribution

  • Definition: MEV refers to the profit validators can make by strategically ordering, including, or censoring transactions within a block.
  • Importance for stPOL: The projected 20% MEV revenue share from validators is crucial for achieving the competitive blended reward rate.
  • Sustainability: Analysis indicates the model remains robust and reward rates are sustainable as long as the MEV revenue share per validator is over 15%.

Withdrawal Process

  • Withdrawal can be initiated and will be fulfilled considering the native unbonding period for POL staking which is 82 checkpoints corresponding to roughly ~3-4 days

Validator Set & Onboarding

  • Initial Validator: LinkPool, a Core Contributor to SDL, has been granted a validator slot and will serve as the first validator for stPOL. Their validator is operational and can be viewed here: https://staking.polygon.technology/validators/181.
  • Expansion of Validator Set: The stPOL validator set can be expanded to include other existing SDL Network Operators (NOPs) as well as NOPs not currently part of SDL.
    • Process: Interested NOPs must submit a formal SLURP or governance proposal via the talk.stake.link forum.
    • Consideration: Proposals will be evaluated based on their technical merit and, critically, on the economic feasibility of onboarding additional NOPs. The primary goal is to scale the validator set sustainably without diluting the competitive reward rate offered to stPOL holders. This ensures that expansion benefits the protocol and its users.

Benefits

  • Enhanced Liquidity for POL Stakers: Users receive stPOL, a liquid token that can be used in other DeFi protocols while earning staking rewards.
  • Competitive Rewards: The blended reward model, incorporating native rewards and MEV share, aims to provide a highly attractive yield compared to other LSTs or direct staking.
  • Strengthened stake.link Ecosystem:
    • Diversifies product offerings.
    • Increases Total Value Locked (TVL).
    • Provides direct financial benefit to SDL stakers through a share of the stPOL fees.
  • Increased Security for Polygon: Facilitates broader participation in Polygon staking by lowering liquidity barriers.
  • Operational Readiness: Completion of SDL DAO KYC/KYB and the launch of the first validator demonstrate a commitment to compliance and execution.

Risks & Considerations

  • Smart Contract Risk: As with any DeFi protocol, there are inherent risks associated with smart contracts. Two independent audits have been performed on the core contract base and the specific POL strategies by Zellic and Cyfrin.
  • MEV Dependency: The projected competitive reward rate is significantly dependent on achieving the targeted MEV revenue share (20%, robust above 15%). Fluctuations in MEV opportunities or NOP performance could impact actual rewards.
  • Market Adoption Risk: The success of stPOL will depend on user adoption and integration within the broader DeFi ecosystem.
  • Validator Set Management: Ensuring that the onboarding of new NOPs maintains economic viability and reward rates will require careful governance and analysis.

Next Steps / Call to Action

We propose that the stake.link community and DAO:

  1. Discuss the merits, risks, and details of this stPOL proposal, acknowledging the progress already made.
  2. Provide feedback on the proposed structure, fee model, NOP onboarding process, and future potential roadmap.
  3. Formally approve the stPOL initiative and its operational framework as outlined by the Council.
  4. Upon positive governance decision to launch, market, and scale efforts for stPOL.
6 Likes
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Love to see the expansion beyond stLink. Great work team. Is there a simple explanation on the difference between “validator’s stake” and “total stake” on the Polygon validators link?

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Nice expansion, sounds like a great move. There doesn’t seem to be a big LST for POL yet. stPOL has some potential here being a first mover while boosting rewards for SDL stakers. Fully support this!

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Really appreciate the great work on this proposal.. I definitely support it

Just to confirm: validators earn base staking rewards directly from the Polygon protocol, like any regular validator.. is that right?

Had 2 quick thoughts:

  • While there’s no hard cap on how much POL a validator can stake, which definitely helps.. I imagine we’d want to see more validators join the stPOL NOP set to strengthen decentralization and resilience. I’m curious if this setup is likely to attract new validators. Also, am I right in thinking existing validators can’t simply migrate? It would require new POL to be staked, correct?

  • On the other side, it’s likely worth shaping a growth strategy for stPOL. DeFi integrations, awareness efforts, and liquidity incentives could go a long way. The 3% for DeFi-Pol is a solid start, though I wonder if it’s enough to drive momentum early on.

Would love to hear what others think!

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I’d like to hear a bit more about the advantage of this LST, through MEV.
Where does the 20% projected MEV come from ? Do we have searchers to back this up ?

Very excited about this protocol,as I strongly support diversification of the protocol’s revenue stream.

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Total stake is the stake that delegators do including our own stake on the node. And validator’s stake is the stake that LinkPool did to the node as self stake.

RE: profitability and how we differ from other POL LSTs - it is important to remember that there’s a lot of infrastructure backing stakedotlink - from LinkPool with physical centers to the other 14 node operators we collaborate with, it opens up the option to create an LST that can outcompete on yields to stakers.

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We would very much like to see more validators join stPOL, especially those out of the 15 that are already established on POL and can incentivise existing delegators to migrate their stake and receive a higher reward rate. Existing validators wouldn’t need to migrate per say, rather the stPOL LST directs stake at those validators. Although, for this to happen we would need to align with that validator on the economics, the delegation fees and the move of their MEV share to the LST.

Then if that happens, it’d be a case of working with that validator to market and get their existing delegators to migrate over to stPOL.

Agreed. There’s a lot of effort to build relations to make this a reality, as a higher reward rate will only attract the TVL if stPOL has awareness in a new market.

The 20% projected MEV comes from contacts who are familiar with how much MEV is made by the existing validators. MEV is highly volatile and very much depends on chain activity, so it’s not guaranteed and can fluctuate heavily.

We wouldn’t need the searchers, the validators are connected to the large relays which then forward on the transactions from searchers when blocks are being produced, to which then the validator earns a fee.

4 Likes