Temp-Check | SLURP 25 [AMENDED DRAFT 2]

Meta Discussion
1

Abstract:

Since the launch of the Priority Pool just under one year ago, the stake.link protocol has consistently delivered for its community and broader LINK token holders. Upon the closing of LINK Staking v0.2 Priority Access in early December 2023, stake.link staked the maximum LINK available via the Node Operator Staking Pool, 1,125,000 LINK.

From late December when LINK Staking Withdrawals began until now, the Priority Pool has enabled the protocol more than double this amount, reaching 2,614,710.26 LINK staked through stake.link, achieving an impressive ~5.81% LINK Staking Dominance. This accomplishment underscores the effectiveness of the Priority Pool and the collective efforts that went into its development, maintenance, marketing, and usage.

The Priority Pool has proven itself as not only the most efficient and user-friendly way to stake LINK in LINK Staking v0.2, but has also laid the foundation for future use cases that include Chainlink’s expansion to other price feeds and Chainlink products across multiple blockchain networks, as well as staking products beyond the Chainlink Network such as Metis Liquid Staking, which the protocol plans to be fully deployed in Q3 2024.

Because of this success, the Priority Pool has been depleted due to the sheer amount of LINK it has staked. In other words, it’s more than accomplished its job, and through this temp-check, we focus on implementing new measures to ensure optimal protocol health and staking products.

Proposal:

As we await key developments—such as formalized partnerships with custodians that hold millions more LINK tokens than are currently staked through stake.link, and the completion of audits for Native LINK Staking Withdrawal Contracts—we propose implementing the following measures for a 90-day period:

  1. Increase the reward rate of the stLINK/LINK Curve Finance Pool:
  • Raise SDL emissions from 88,062.3 SDL per 90 days (3.42% reward rate) to 264,186.9 SDL for 90 days (10.26% reward rate), effective immediately upon enactment of this temp-check that will become SLURP-25.
  1. Discontinue emissions on the Camelot DEX Arbitrum Pools:
  • We’re pleased to see that since the Priority Pool’s balance decreased in the first week of September that the Curve Pool has remained resilient, arbitrageurs have been hard at work, and liquidity has increased in the stLINK/LINK Pool. We propose for the time being that emissions be discontinued on Camelot DEX with the goal of establishing more liquidity onto the Curve Pool as we await the completion of audits and agreements in the works with custodians / exchanges who aim to stake LINK tokens via stake.link.

What Does This Achieve?

  1. Integrity in the Curve Finance Pool:

The foundation of stake.link is Liquid LINK Staking, and maintaining access to LINK withdrawals is paramount. Tripling SDL emissions for a 90-day period will ensure liquidity remains robust until Native LINK Staking Withdrawal Contracts are fully implemented. Prior to the conclusion of this 90-day period, we also anticipate onboarding at least one digital asset custodian to establish a steady pipeline of LINK tokens continuously flowing into the Priority Pool.

  1. Expiration of Camelot Rewards

For context, Camelot incentives see 146,100 SDL emissions every 30 days while Curve sees 88,062.3 every 90 days. As important as our multichain journey is, we want to ensure that the Curve Pool remains well capitalized while making note that we plan to incentivize SDL emissions in the short-term future on other Layer-2 networks regarding a future deployment that will be proposed to the stake.link Community and stake.link DAO.

Ending Thoughts:

As noted in our end-of-year 2023 update, 2024 brings its own set of challenges and opportunities, just as 2023 did. However, we remain ready to tackle these obstacles and continue moving forward.

Though we are confident that the proposed measures will safeguard the protocol’s operations, this proposal is a fluid conversation in the form of a temperature check. We welcome the community’s insights and feedback on how best to proceed—collaboration is at the heart of what makes us strong.

Key Updates:

  • Our first non-Chainlink deployment to Metis is scheduled for Q3 2024.

  • The first DAO employee [NAIL] has been hired and will be working full-time to identify new staking opportunities, networks, and streamline DAO operations.

  • Core Contributors are currently in talks with three reputable custodial entities, all of whom have individually confirmed their intent to offer LINK staking to their clients via stake.link. In their own words, the demand for LINK Staking is palpable.

  • LINK LST Lending – Coming Soon

We encourage the community to read this Temp-Check thoroughly and share candid feedback. We look forward to securing more wins for stake.link as we head into the final stretch of Q3, and aim to close out 2024 on our strongest footing yet.

OK;LG

3 Likes
2

Without knowing the demand of unstaking from long term stLINK holders (people not mercarily arbitraging the stlink/link rate) from say month long or more just holding stLINK, what good is incentivizing the PP going to do? Youre just inviting more mercenary behavior into the protocol.

While i acknowledge that mercenary behavior and liquidity has its place in a nascent protocol, we are no 2 years old and operating flawlessly. We need to shy away from inviting that type of behavior into the PP.

I also want to point out that incentivizing the CRV pool MORE, while sounds great, you’re going to attract a lot of current stLINK holders, NOT link holders who are already not using the protocol. I can only assume that LINK holders still no using or knowing about SDL probably have security issues and inviting them to take 2 risk tolerances (CRV contracts and stLINK contract) is honestly beyond the scope of most holders who cannot read solidity so quell their fears.

I personally do not see the long term benefits of either of these actions vs something like Tokenized has brought up where we incentivize the CRV pool with LP tokens as rewards to create a “Set it and Forget it” type of staking in DeFi.

Another viable solution to this problem COULD be simply outreach and patience. Without knowing the % of stLINK holders unstaking and using the PP for INSTANT withdrawal (not the point of stake.link) there is literally no way to know how this incentivization benefits us. You can still withdraw 1-1 on a 28 day unfreeze or you can simply swap in DeFi (should be our main priority)

You really need the DeFi incentives to be higher and not lapse so that stLINK holders can assess the risk of swapping half their stacks for link and LP’ing in DeFi vs just hodling stLINK and chilling. Without stLINK holders swapping to Link (somehow) and LP’ing the only outcome is going to be lopsidding the pools weight to a lower ratio which in turn may give us less than 1-1 rate (antithetical to our pools whole reason to exist).

There is a lot to think about but i am personally not rushing out to fix this situation without knowing the above information as far as what % of ACTUAL people are benefiting from the PP 1-1 INSTANT withdrawal.

5 Likes
3

I appreciate the team’s proactive approach in addressing the empty Priority Pool, which is indeed one of the main value propositions of SDL. I can see the considerable thought that has gone into this proposal, and I commend the team for their vigilance in monitoring the tokenomics related situations while delivering industry leading code. It’s a lot to juggle and I’m thankful you guys are good at it.

The proposed increase in the reward rate for the stLINK/LINK Curve pool is a prudent move. Healthy volume in this pool creates a stable offramp from stLINK with less slippage. I’d like clarification on this though: Will the raise in SDL emissions for this pool be entirely covered by the diversion from the Camelot pools, or will additional SDL need to be allocated from treasury funds?

While I support the intent behind the SDL emissions program for the Priority Pool, I have some reservations about its proposed structure. The proposed mechanism, as it stands, seems vulnerable to exploitation. For instance there is a scenario where a potential loophole exists in which a large holder could cycle funds through multiple wallets, claiming rewards repeatedly without contributing net new LINK to the pool. This would be structured as: Large deposit to the Priority Pool from wallets 1 and 2, wallet 1 gets staked, user claims rewards, user unstakes from wallet 1, the priority pool link from wallet 2 gets staked, user claims rewards, unstakes from wallet 2 and repeats from wallet 1. This could lead to unintended depletion of rewards without achieving the desired outcome of sustained liquidity.

Given these concerns, I propose that we separate these Liquidity Pool and Priority Pool incentive initiatives into two distinct votes, allowing us to refine the details of each proposal collaboratively. As an alternative to the direct payout of 0.5 SDL per 1 LINK staked, I suggest the following:

  1. The team could conduct an OTC sale of SDL to purchase LINK and deposit into the Priority Pool themselves.
  2. The team could then perform this arbitrage for staking then swapping stlink for link internally, ensuring liquidity remains in the Priority Pool while simultaneously earning fees for the SDL protocol from the Curve LP. This also helps build the SDL protocol-owned liquidity of the stLINK/LINK pool.
  3. These fees and arbitrage profits could be reinvested into the Priority Pool, creating a sustainable flow of new liquidity without rewards and fees leaving the protocol ecosystem.

While I’m open to the concept of rewards for staking LINK through the Priority Pool, I believe a more structured approach would mitigate risks associated with instant payouts and undefined total reward amounts. I propose:

  1. Establishing a fixed total amount of SDL for rewards.
  2. Implementing a tracking mechanism where Priority Pool depositors receive a percentage of the total reward pool based on their proportion of total LINK deposited, minus any LINK they’ve unstaked to prevent gaming of the system.
  3. Distributing this reward as a one-time payout at the conclusion of the incentivization campaign (or at the end of each campaign if we do multiple of these).

This delayed, single payout structure serves multiple purposes. It encourages long term commitment from stakers, aligns incentives with the protocol’s goals, and provides a clear timeline for both the team and participants. Moreover, it allows for a more accurate assessment of each participant’s contribution to the pool’s liquidity over the entire campaign period, ensuring a fair distribution of rewards that reflects sustained support of SDL.

Refinement and separation of these proposals can help us all reach a more sound, salient outcome and turn the priority pool emptying into a big opportunity that does not dilute SDL token holders as harshly.

5 Likes
4

Having seen the spiral of a token called ERSDL from an improperly setup staking reward system, and how people found ways to game the incentives. I fully agree a major priority should be making sure the end behavior of depositors matches with the goals of SDL.

4 Likes
5

really agree with resdl here. I think separating these two proposals is a good idea. Especially because the custodial entities could alleviate the PP issue without needing to incentivize with SDL emissions. Even better that it would be new link deposited.

With two separate proposals we could get the incentives increased for the curve pool without a further strain on SDL. I’m saying this as a Camelot LP and basically advocating for lowering my rewards, but I understand the need.

I think whatever is decided we need to be very careful with the SDL token which has hard a pretty rough go of it as of late and we don’t want to spiral as Dustin mentioned. I hate to think that SDL and ersdl would even be in the same conversation (name aside)

3 Likes
6

Hello, I agree with both Michael and Resdl points’.
I wouldnt want to see Arbitrum phasing out.
The future is multi-chain

2 Likes
7

Hi everyone,

Just voicing my opinions regarding the Temp-Check:

  1. I am in favour of this to concentrate liquidity but do not increase overal SDL handouts. It is important for the longterm survival of the protocol to strengthen SDL value prop and it is rapidly declining at the moment
  2. I am not in favour of this since it is weakening SDL value prop as well not effective without broader marketing campaign attached to it. To raise awareness we would need a targeted effort to reach link holders or stakers. As of now the DAO and core contributor lack the skills to do so. All emissions therefore a free giveaway to people that could deposit regardless in the PP.

Thanks for the Core Contributor and the Community to react so fast to these ever changing and faster changing circumstances.

Best
J /Asymmetric

2 Likes
8

As of this moment, the curve pool is achieving its objective of maintaining a relatively stable swap of LINK/stLINK; currently at 49.77% stLINK to 50.23% LINK.

This was an urgent matter; and the protocol was correct in raising this issue.

link stlink curve
link stlink curve1032Ă—396 38.1 KB

The issue at hand is providing some stability to the priority pool, especially as we incline with the state custodians to demonstrate that we are a thoughtful and responsible party. Maintaining a constant amount of total SDL emissions, I think it is appropriate to increase the SDL emissions to the stLINK/LINK Curve pool as a temporary contingency. This amount should be thought about with consideration to the volume of the Camelot pool; for as we move into the future, we don’t want to dissuade folks into providing liquidity in other chains, as folks have done here for Camelot (only to see their rewards diminished).

On consideration #1: Given that at the moment, the Camelot wstLINK-LINK pair is smaller than the established curve stLINK-LINK pair, with perhaps less volume (and more aliquots of microvolume transactions); I do think it is appropriate to move the ticker to slightly favor the Curve pool. However, I wonder if we can go do so in a graded way; that is, let us up the reward by .5x for the first 10 days, then by 2x by the first 30 days, then by 3x for the remainder of this 60 day period (or some sliding scale version of this.)

On consideration #2: I’m open to this, as it rewards stakeholders; and those that interact with the protocol are necessarily the protocol; hence rewarding them with SDL, will encourage them to stake more LINK. I wonder if there is a point where we can consider mercenary / arbitraging behavior as background noise, such that, the larger custodians that need to stake, will simply buy SDL in bulk to ensure both staking priority as well as have a voice in governance.

In some ways, having both a priority pool and a curve pool and an arbitrum pool, is incredibly redundant; and perhaps the fact that the priority pool gets emptied is testament to us having moved too fast. It’s too many pools being asymmetrically handled. Thinking outloud here…if the arbitrum pool gives rewards; if the curve pool gives rewards; then it should also follow that the priority pool gives rewards until the LINK is staked. So, perhaps that is a more viable solution. The SDL emissions may be necessarily less as it is time curtailed? And, if they convert their stLINK to LINK, and back in…the priority pool continues to be maintained for the reward that they seek. It is unlikely they will exit by way of curve or camelot as there is a fee to do so there; and if it did, the liquidity providers would be rewarded.

As I’m brainstorming out loud. Perhaps we can try the #2 Priority Pool Emissions Program first on a 10-30 day trial, and see where that takes us; for the restoration of the priority pool does seem to be the main thrust of the underlying urgency. I would imagine the rewards for a priority pool emissions program should be commensurate with the curve pool; but necessarily less as it is time limited as the LINK gets staked.

3 Likes
9

I’m glad to see active participation within the community and as a result the amended draft. I’m in favor of reallocating the SDL emissions to target Curve for a 10%~ reward rate and discontinue the emissions on Arbitrum. With our currently shrinking SDL treasury and market capitalization, the volume there does not justify the emissions at the moment.

2 Likes
10

This eliminates the redundant pool bodies. Further, as the Curve Pool has from the beginning been the source of swapping link for stLINK, making it more robust, and injecting incentives to keep it robust makes the most sense.

A temporary strategic withdrawal from a L2 and bringing things back to Curve, prior to a native withdrawal functional state makes the most sense.

Bravo on the patience. Bravo on thinking through this.

This works.

1 Like