TEMP CHECK:SLURP-50 | Add 1.5% DeFi-PoL rake for Uniswap V3 SDL/LINK incentives in $LINK

SLURPs
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Abstract

This proposal seeks to gauge sentiment to implement a separate DeFi-PoL rake of 1.5% onto the community pool and the node operators pools, specifically to incentivize SDL liquidity on-chain, focusing on the Uniswap V3 SDL/LINK full range for real yield incentives in $LINK.

This initiative follows the implementation of the previous 3% DeFi-PoL rake, which demonstrated the value of re-funneling a portion of our stLINK LST reward rate back into stLINK/LINK liquidity providers as incentives. That initial 3% rake, applied to both the community and node operators pools, caused a negligible decrease in the stLINK reward rate from approximately 6.5% to 6.2% in 2024. This current 1.5% rake is projected to also slightly affect the stLINK reward rate, from 5% to approx. 4.8%, which is still substantially higher than native staking’s 4.32% reward rate.

It should be noted that the smart contracts underlying stLINK are designed with a configurable architecture. This means that the protocol governance can adjust or even unwind completely if competitive pressures change or if there’s a need to boost the base stLINK reward rate in the future.

The existing PoL rake currently provides around 9,500 stLINK per year to the Curve stLINK/LINK pool. Given the comparatively smaller size of the Uniswap V3 SDL/LINK pool, this 1.5% rake is projected to generate approximately 4,700 stLINK annually for distribution.

Instead of distributing stLINK directly to LPs, the protocol will receive stLINK, convert it to LINK via the Priority Pool (thereby enabling further LINK to be “swapped-staked” for the Priority Pool LINK depositors), and then deposit the LINK tokens as incentives directly to the Uniswap V3 SDL/LINK LPs on a recurring basis (e.g monthly).

The APY in LINK is expected to increase the SDL liquidity on-chain assuming the reward rate is attractive enough for LPers. To illustrate the potential impact of this 1.5% rake on Uniswap SDL/LINK LP incentives, the following table outlines the projected APY at various TVL depths:

TVL (Uniswap SDL/LINK Pool) Annual Incentive (from 1.5% rake) Annual Incentive (stLINK, converted to LINK) Projected APY in LINK
$320,000 (Current) $83,660 4,700 LINK 26.14%
$700,000 $83,660 4,700 LINK 11.95%
$1,500,000 $83,660 4,700 LINK 5.58%
$2,000,000 $83,660 4,700 LINK 4.18%

Note: The Annual Incentive is fixed at 4,700 stLINK, which translates to $83,660 assuming a price of $17.8 per stLINK. The Projected APY is calculated based on this fixed annual incentive amount.

Mechanism

The implementation of the 1.5% DeFi-PoL rake for Uniswap V3 SDL/LINK incentives will follow a clear and automated process:

  1. Rake Collection: A 1.5% portion of the stLINK rewards generated by both the community pool and the node operators’ pools will be re-routed. This “rake” is a predefined percentage taken from the stLINK’s reward rate via both staking pools.

  2. stLINK Accumulation: The collected 1.5% rake, denominated in stLINK, will accumulate in a dedicated protocol-controlled wallet or smart contract.

  3. Conversion via Priority Pool: Periodically, the accumulated stLINK will be converted to LINK via the Priority Pool. The Priority Pool’s existing mechanism facilitates the conversion of stLINK into native LINK tokens. Meaning depositors who deposited LINK in the priority pool will have a portion of their LINK staked ( “swapped-staked”).

  4. LINK Distribution: Once converted to LINK, these tokens will be programmatically deposited as incentives into the designated Uniswap V3 SDL/LINK full range liquidity pool.

  5. Real Yield Generation: The distributed LINK acts as a “real yield” for the LPs, meaning the incentives are paid in a widely recognized and valuable asset (LINK) that is generated from the protocol’s operations (via the rake), rather than SDL emission.

Rationale

The long term success and stability of the stakedotlink protocol are intrinsically linked to the robust liquidity of its native token, SDL. While our existing 3% DeFi-PoL rake effectively supports the stLINK/LINK Curve pool to strengthen our LST offering, there is a need to bolster $SDL’s own market liquidity. Implementing the rake for $SDL incentives is important for several reasons:

  1. Reduced Slippage: Establishing deep liquidity for SDL on Uniswap V3 enables bigger trades with significantly lower slippage and makes SDL a more attractive asset for larger participants and future institutional integrations.
  2. Prerequisite for Listings: Robust on-chain liquidity and volume are critical prerequisites for future listings of SDL on centralized exchanges.
  3. Attractive Real Yield Incentives: This proposal shifts the incentive mechanism to provide a “real yield” in LINK, a token that is widely recognized and highly attractive, rather than solely relying on SDL incentives. Given that SDL is currently at a lower market capitalization and may be less familiar to a broader audience, incentivizing with LINK directly addresses potential concerns about “pool2” type of inflationary rewards using $SDL.
  4. Enhanced DeFi Utility for SDL: By providing LINK yield through the SDL/LINK pool, SDL gains further utility as a means to produce attractive returns. This expands SDL’s role within the DeFi ecosystem, either when staked as SDL for reSDL, or when used in other DeFi strategies like LPing.
  5. Swap-Stake Feature: The integration with the Priority Pool to convert stLINK back to LINK provides another 4,700 stLINK to be “staked” via the Priority Pool for the ppLINK depositors.
  6. Sustainability: By directing a portion of the protocol’s revenue (via the delegation rake) directly into incentivizing core token liquidity, we create a self-sustaining mechanism that reduces reliance on treasury emissions for this purpose in the long run. This aligns with our natural progression towards a sustainable and viable protocol

Conclusion

While this won’t create volume, implementing an additional 1.5% DeFi-PoL rake to incentivize the Uniswap V3 SDL/LINK full range can be a step towards securing the long-term health and growth of $SDL. This proposal directly addresses the need for robust SDL liquidity by offering highly attractive, protocol-generated incentives in the form of LINK. The projected APY in LINK is designed to attract more capital into the SDL/LINK pool, leading to increased liquidity depth and ultimately, the foundation for higher trading vol.

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I think for once i’m strongly against this type of proposal. It is too early to take a toll once again on native stlink %apy, we should wait for aave’s wstlink listing as it will mechanicaly increase the demand for wstlink and in a trickeling effect, for SDL.

We have seen the stLINK reward rate falling like a rock, and while it was advertized as natural when the node share was decreasing, if Stake.link share in the community pool was to increase as it’s doing since inception, and no new node participants, the reward rate could even go under native LINK staking, and the only value proposition of stake.link left would be composability (wich is still huge, i agree).

I’m all for waiting to see the positive effect of wstlink lending on SDL attractiveness before going live with such a SLURP.

And, last but not least some people locked their SDL for several years, and the incentive to use SDL as intented and get first in line in the priority pool is quite strong already, i don’t want our people to have headaches for chosing between being an LP or the intended use case :grinning_face:

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Definitely for this. SDL the token needs help any way we can get it. I think this is a smart way to establish liquidity and make it so people can actually buy the token.

@Erazz I don’t even think its possible for the apy to slip below the community pool native. We still have the NOP pool pulling the apy up. Unless SDL swallows the entire community pool, we shouldn’t ever go below the community apy even with the rake.

Even if we do, a pool expansion will send the apy up again and when that happens we’ll be glad we have liquidity for the SDL token.

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I don’t know, every reward distribution already has around 16-17 % fees. with 1.5% more we would be close to 20 % rake ?
Lido, for example is around 10% fees.
I know stake.link has a moat actualy, but that’s a double edged sword. as there is no competitors, no need to dilute rewards more from stakers, we can develop the protocol slowly and build customer confidence.

SDL actualy has the same depth on uniswap than LDO if you’re talking relative to the marketcap.

Build customer confidence, increase TVL, wait for trickeling effect from lending listing and see the flywheel works instead of forcing our way.
SDL is so far a small protocol, growing nicely and liquidity will remain thin even with such changes.

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Hello Tokenized, and thank you for surfacing this slurp in the best interest of the DAO.

Here are my thoughts:

Most of my perspectives shared in SLURP-13 - MODIFICATION OF 10b regarding the use of Uniswap v3 over v2 for volume and efficiency still stand strong.

The devs have already implemented support for “IN RANGE” rather than “full range” LPs—let’s capitalize on that instead of backtracking. Uniswap v3’s ability to set price ranges gives LPs the essential tool of mitigating impairment loss (IL), and we shouldn’t strip that away. If an LP falls out of range, it’s fair they either reposition or stop earning. That’s the inherent design—efficient and performance-based.

I’ve heard Uniswap v4 could be even more optimal, though I haven’t personally researched its implications yet. Perhaps the nails or our community reps could help run an in-depth analysis on this?

I absolutely love this idea.

Could we make the distribution process more dynamic—for example, triggered after every X amount of LINK is accrued (e.g., 15 LINK)? If the limitation is gas fees, can we explore a gasless automation that allows for near-continuous micro-distributions (e.g., every 1 LINK)? That would be groundbreaking and would drastically improve LP retention.

Monthly distributions may not be optimal, considering LPs face impairment losses daily.
Taking inspiration from Curve’s recent successful ng pool launch, I truly believe that layering SDL rewards on top of LINK fees will drive massive participation. As the second-largest LP after LinkPool, I would personally double my position if such incentives are introduced.

IL is the biggest drawback for LPs. But if we’re able to distribute rewards in both tokens in the LP pair, we effectively neutralize IL—a massive win. The potential visibility and traction from the DeFi space could be game-changing.

With such a compelling APY structure, I’m confident LPs will pour in rapidly and we’ll hit those higher TVL targets in no time. Incentivizing LPs with SDL would serve as a temporary but powerful catalyst to ignite momentum—just as we saw with Curve.

Let’s make it happen. :rocket:

Cheers!

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I am against this proposal and made it known to Tokenized when he was working on it. I think the proposal itself is exceptionally thought out and well put together, but I share the same concerns as @Erazz in that there’s a real risk in the not so distant future that reward rate drops below native staking and the fee structure either needs to be rethought, or that risk for stLINK is accepted.

Adding another fee will only exasperate that problem, I would support this proposal if the current fee structure was changed. Although at this point in time, it’s hard to think what should be changed to make up the proposed 1.5% as outlined in this proposal.

Seeing @hboss state they would double their liquidity if this is passed is obviously a large incentive and getting as much liquidity as possible for SDL is important, although I would argue that it’d be paying for liquidity that currently isn’t used much since volume is low especially after MEXC delisting. I would personally say that marketing and awareness for SDL should be at the forefront as it’ll solve problems and naturally bring more LPs. If SDL sees a ramp up in volume and awareness, then it makes more sense then paying more incentives to attract more LPs but without that then it’s paying for something that’s not there yet.