TEMP CHECK SLURP-56 | Strategic Evolution: Adopting Optimistic Governance & Liquid Value Accrual

[Leonardo]

1. Executive Summary

This proposal advocates for a comprehensive modernization of the stake.link protocol’s governance and economic architecture.

Currently, the protocol faces a “Capital Efficiency Paradox”: token holders are forced to choose between solvency (locking for yield/governance) and liquidity (holding liquid assets). This structural friction stifles secondary market depth and slows operational agility.

We propose migrating to an “Optimistic Governance” framework. This model decouples day-to-day execution from ultimate sovereignty, entrusting a specialized Technical Council with operational upgrades subject to a strict Time-Lock, while the DAO retains a “Kill Switch” (Veto Power).

Simultaneously, we propose restructuring the economic model to distribute Protocol Revenue (LINK) to Liquid SDL Holders and Liquidity Providers, thereby aligning intrinsic utility with market liquidity.

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2. Context & Rationale

The Liquidity Dilemma

In the current “Ve-Token” era of DeFi, liquidity is often sacrificed for governance alignment. For stake.link, this creates a zero-sum environment where every token staked for governance is a token removed from the liquidity pool. Consequently, low liquidity creates high slippage, which discourages new entrants and necessitates treasury interventions (such as OTC discounts) to maintain capital flow.

The Governance Fatigue

Complex decentralized protocols require frequent, technical parameter adjustments. Expecting the broader community to vote on every operational granular detail leads to voter apathy and slow execution.

The Solution: Governance Minimization

Industry leaders are moving toward “Governance Minimization”—the philosophy that governance should be a safety brake, not a steering wheel. By minimizing the active friction required to manage the protocol, we maximize its efficiency and economic attractiveness.

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3. Specification: The Dual-Layer Architecture

We propose splitting the protocol’s management into two distinct layers: The Operational Layer and The Sovereign Layer.

A. The Operational Layer (The Technical Council)

• Role: A council comprising core contributors, technical leads, and verified node operators.
• Authority: The Council is empowered to push upgrades, adjust staking parameters, and manage routine treasury allocations.
• Mechanism: “Optimistic Execution.” Council actions are technically queued on-chain but do not execute immediately. They sit in a 7-Day Public Time-Lock.
• Benefit: This allows the protocol to iterate rapidly and professionally without burdening token holders with constant administrative voting.

B. The Sovereign Layer (The Citizen DAO)

• Role: All SDL token holders.
• Authority: Ultimate Control & Veto Power.
• Mechanism: During the 7-Day Time-Lock of any Council proposal, the DAO can initiate a VETO vote.
  • If a Veto threshold is met, the Council’s transaction is cancelled immediately.
  • In extreme scenarios, the DAO retains the power to vote to dissolve or replace the Council.
• Benefit: This preserves the censorship resistance and decentralized nature of the protocol. The Council serves at the pleasure of the DAO, ensuring regulatory compliance and trustlessness.

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4. Economic Restructuring: Liquid Value Accrual

To solve the liquidity crisis permanently, we must make the SDL token intrinsically productive without requiring a hard lock.

Proposed Change

We propose altering the fee-distribution logic of the stake.link protocol to direct the Protocol Revenue (LINK rewards) to:

• Liquid SDL Holders: Accrue yield simply by holding the token in their wallet.
• SDL/LINK Liquidity Providers: Accrue a “Boosted” yield for providing liquidity on recognized DEXs (e.g., Uniswap v3 on Base).

Impact

• Demand Driver: SDL becomes a direct claim on LINK cash flow. This makes the token a “pristine collateral” asset.
• Liquidity Flywheel: By paying yield to LPs, we align individual profit motives with the protocol’s health. Users no longer need to “choose” between yield and liquidity; they get both by LPing.
• Reduced Sell Pressure: Since rewards are paid in LINK (a high-conviction asset), recipients are less likely to dump their rewards compared to inflationary farm tokens.

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5. Security & Risk Mitigation

This model actually improves security compared to the current state:

• The 7-Day Delay: Under the current model, a malicious governance vote could theoretically pass quickly. Under Optimistic Governance, every code change is visible for 7 days before execution, giving white-hat hackers and the community ample time to audit and Veto.
• Flash Loan Immunity: Since the Liquid SDL token has no proactive proposal power (only Veto power), an attacker cannot flash-loan SDL to instantly drain the treasury. The “Attack Vector” of open governance is effectively closed.

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6. Conclusion & Next Steps

This proposal represents a maturation of stake.link. We are moving from a “launch phase” structure to a “scaling phase” structure.

By adopting Optimistic Governance, we achieve the speed of a centralized startup with the safety and sovereignty of a decentralized DAO. By adopting Liquid Value Accrual, we transform SDL into a highly liquid, yield-bearing asset that solves its own market depth issues organically.

We request a “Temperature Check” vote to authorize the core contributors to begin drafting the technical architecture for this migration.

[Erazz]

-So that would mean lockers would only have the benefit of the priority pool? Would they still be locked for 4 years ?

-What’s the math behind this ? we would go from 6% apy for stakers to what % for every holders?

Overall i think this is a good idea.

[Tokenized2027]

Thank you for writing the proposal and actively participating in the DAO’s discourse @Leonardo.

I am strongly against this proposal. While it identifies the problem of low liquidity for SDL markets and the need for the DAO to pay costs in stables to keep it running, the proposed solutions fundamentally underming the protocol’s core value proposition and security.

The move to an “Optimistic Governance”, in reality, is a move to centralize power in a small and unaccountable “Technical Council”

In that scenario, the Council only needs to propose a change. The DAO, composed of thousands of uncoordinated holders, must mobilize, organize, and reach a high quorum threshold within a short 7-day window to stop it. This is very difficult in practice. By concentrating operational power in a small, identified group, the protocol becomes a much clearer target for regulatory scrutiny. The “Council” starts looking a lot like a centralized management team as opposed to the current framework where any vote that receives heavy feedback can turn into a reSDL community vote.

As for the “Liquid Value Accrual” - this economic restructuring is probably the most dangerous part of the proposal. It dismantles the long-term alignment incentive that is the bedrock of the protocol’s stability and has been since the tokenomics revamp. The current ve-token model rewards long-term commitment. You lock your tokens, signaling you are here for the long haul, and you get higher governance power and rewards. This aligns your interests with the protocol’s long-term health. The proposed model destroys this. The assumption that once this is removed, individuals will choose to LP, and on top of that, we will suddenly see a mass influx of volume just because there is more liquidity on secondary markets, is not substantiated by anything.

This policy directly incentivizes short-term “mercenary capital” that will buy SDL to farm LINK yield and dump it at the first sign of trouble. The protocol becomes a yield farm, not a governed infrastructure.

Paying LINK rewards directly to liquidity providers (LPs) on SDL/LINK DEXs sounds good on paper (“Liquidity Flywheel”), but in practice, it creates massive sell pressure on SDL.

• LPs are, by definition, market makers who sell the token as its price rises. They are not necessarily long-term holders.

• By giving them LINK, you are effectively subsidizing the exit liquidity for everyone else. LPs will take their LINK yield and dump their SDL position the moment the yield becomes unattractive, causing a death spiral.

The proposal claims flash loan attacks are impossible because liquid SDL has no proposal power. This is true, but it misses the point. An attacker doesn’t need to propose; they just need to veto. Imagine a critical security patch is proposed by the Council. An attacker could flash-loan enough SDL to meet the veto threshold and block the patch, holding the protocol hostage or leaving a vulnerability open. The veto power is a massive attack vector in itself.

While the project is still in its very early stages, I think a better approach would be to explore ways to improve liquidity within the existing ve-token framework (e.g., bond-based liquidity, or incentivizing long-term LPs with ve-power) rather than tearing down the entire foundation. I believe the community should reject this proposal in its entirety.

[Leonardo]

@Tokenized2027, I have taken some time to reflect on your feedback.

1. Concession: You are right about the Council.
You argued that moving to a “Technical Council” creates centralization risks and regulatory targets. I agree.
The strength of DeFi is trustlessness. Installing a “Board of Directors” undermines that.
I am officially withdrawing the “Optimistic Governance” portion of the proposal. Let’s keep the DAO direct.

HOWEVER…

While I agree on Who governs (the DAO), I strongly disagree on How we govern (Locking). Your defense of the “ve-token” lock relies on technical myths that Uniswap disproved years ago.

2. The Myth of the “Flash Loan Veto” (Security)

You argued that without locking, we are vulnerable to Flash Loan attacks.

Refutation: This is technically incorrect.

Major protocols like Uniswap (Governor Bravo) and Compound utilize Past-Block Snapshots.

• The Mechanism: When a proposal is created at Block X, the contract calculates voting power based on balances at Block X-1.
• The Result: A Flash Loan happens in the current block. It cannot retroactively change your balance in the previous block.
• The Reality: An attacker borrowing 10M SDL today has zero voting power on a proposal made yesterday. The “Flash Veto” vector is mathematically impossible.

3. The Myth of “Mercenary Capital” (Alignment)

You argued that paying yield to liquid holders encourages “dumping.”

Refutation: Liquidity is not “disloyal” but it is efficient.

Rational investors do not dump cash-flow assets.

• The Case Study: Look at GMX ($GLP) or Aave. They do not require 4-year locks to be safe. They are safe because the asset generates real yield.
• The Comparison: We are currently treating our investors like Prisoners (“Lock or leave”), while GMX treats them like Partners (“Stay and earn”). GMX won. We are struggling.

4. The Proposal: The “Uniswap Standard”

Since we agreed to drop the Council, we must adopt a model that allows the DAO to function efficiently without starving the liquidity pool.

I propose we move to the Liquid DAO Model:

1. Voting: 100% Liquid
   • Mechanism: Users “Delegate” to themselves (like UNI/COMP). No lock-up required.
   • Benefit: Active governance participation increases because capital isn’t trapped.
2. Yield: 100% Liquid. Distributed to Holders & LPs.
   • Benefit: Solves the “Entry Problem.” Institutions can finally buy SDL without massive slippage because LPs are incentivized to build the order book.

Conclusion:
I have listened to you and dropped the Council. Now, I ask you to look at the data from Uniswap and GMX and drop the Lock.
We don’t need to trap our users to succeed. We just need to build a protocol worth holding.

[resdl.eth]

NO. I vote against changing the token model in any way.

[peculiarpearlue]

I’m a strong “no” on changing the token model in this way, even with the council idea withdrawn.

SLURP‑8 introduced reSDL specifically to align long‑term participants. We asked people to lock for up to four years, gave them boosted LINK rewards, governance power and staking priority, and represented those positions as NFTs so they could still exit via secondary markets. That is a classic ve‑style design that many protocols use precisely because it filters for long‑term, aligned governance rather than short‑term speculators.

This proposal effectively unwinds that deal and turns SDL into a fully liquid “real yield” token where LINK protocol revenue is streamed to any holder and especially to SDL/LINK LPs. I think that is dangerous for several reasons:

First, it replaces sticky, locked capital with mercenary capital. We’ve already seen across DeFi that when you pay high liquid yield, you mainly attract capital that farms while the APR is good and then leaves. That creates volatile liquidity and makes SDL a vehicle for short‑term farming instead of long‑term alignment around Chainlink staking.

Second, paying LINK to LPs structurally adds sell pressure on SDL. LPs are, by definition, constantly rebalancing by selling SDL into strength. If we subsidize them with a hard asset like LINK, we are effectively funding exit liquidity for everyone who wants to rotate out of SDL whenever the narrative cools down.

Third, dismantling the lock model breaks the social contract with existing lockers. A lot of us accepted multi‑year illiquidity precisely because the tokenomics promised that long‑term commitment would be specially rewarded. Flattening everything into a liquid revenue‑share means that future buyers with no lock and no history can have similar or better economics to those of us who already committed.

Finally, I don’t see this as necessary to fix liquidity. The “capital efficiency paradox” is real, but there are other tools: protocol‑owned SDL/LINK liquidity, bond‑style deals where the DAO trades SDL at a discount for permanent LP positions, and better support for trading reSDL NFTs so locked positions can be bought and sold. All of those would deepen liquidity without tearing up the alignment mechanism we just implemented.

I’m therefore voting strongly “no” and would prefer we focus dev and governance bandwidth on incremental improvements to the current model instead of a full tokenomics reboot.

[hboss]

@Tokenized2027

Thank you for writing the proposal and actively participating in the DAO’s discourse @Leonardo.

Thank you @Leonardo for writing the proposal and building a foundation for discussions of your proposed idea.

For all the reasons mentioned on Telegram and above, I kindly vote against changing the token model in any way.

Cheers

[Leonardo]

Subject: Re: The “Social Contract” is failing – Why we must flatten the model for survival

@peculiarpearlue, I respect your commitment as a long-term locker. I understand the weight of the SLURP-8 agreement because it was designed to reward loyalty.

However, I am voting YES on this change not to betray that loyalty, but to save the underlying asset from irrelevance. We must look at the hard data: The “deal” we made is functionally locking us into a shrinking economy.

You argue that we must preserve the exclusive privileges of the Lockers. I argue that those very privileges are what create the Financial Exclusion that prevents new capital from entering.

Here is the breakdown of why the “Status Quo” is dangerous and why the “Alternatives” you suggested do not work.

1. The “Social Contract” vs. Financial Reality

You argue that flattening the model “unwinds the deal” because new buyers could get similar economics without the lock.
My Counter-Argument:

• The Current Reality: The system currently forces new capital into a binary choice: Accept extreme illiquidity (4-year lock) OR accept negligible, diluted base yields.
• The Result: Rational capital refuses both. They simply do not buy. This is why our liquidity is thin and our price action is stagnant.
• The Hard Truth: By protecting our “Boost” and treating new liquid capital as second-class revenue participants, we are protecting a larger slice of a shrinking pie. It is financially superior to hold 1 Share of a high-velocity, liquid asset (Uniswap/Aave model) than 4 Shares of an illiquid asset that requires OTC bailouts to survive.

2. The “Mercenary Capital” Myth

You argue that liquid yield attracts farmers who “leave when the APR is good.”
Refutation:

• This is true for inflationary farm tokens. It is false for Real Yield (LINK) assets.
• Evidence: Look at GMX ($GLP) or Aave. These tokens are fully liquid. Investors do not “farm and dump” them; they accumulate and compound them because the yield is real currency (ETH/USDC).
• Verdict: We do not need a lock to make capital “sticky.” We need consistent Revenue. If the yield is real, the investors are rational, not mercenary.

3. The “LP Sell Pressure” Fallacy

You argue that paying LPs funds “exit liquidity” and adds sell pressure.
Refutation:

• You are focusing on the Exit, but ignoring the Entrance.
• Right now, institutional size capital cannot enter stake.link because the slippage is too high. By refusing to incentivize deep liquidity, we are effectively gating the protocol.
• The Trade-off: I will gladly accept LPs “selling into strength” (rebalancing) in exchange for a liquid order book that allows whales to buy $100k+ positions without destroying the chart.

4. Why Your Alternatives (Bonds/POL) Are Worse

You suggested solving this via Bonds or Protocol Owned Liquidity (POL) instead of a reboot.

• Bonds: Issuing bonds means selling SDL at a discount to arbitrageurs. This is direct dilution of existing holders and creates more immediate dump pressure than liquid yield ever would.
• POL: Using DAO funds to buy our own liquidity drains our stablecoin runway—the very runway SLURP-54 is trying to save.
• NFT Trading: Secondary markets for reSDL NFTs are illiquid and complex. No institutional fund is going to buy a “used governance NFT” to get exposure. They want a fungible, liquid token.

Conclusion:
The “Ve-Token” model (Locking) was a trend in 2022. The market has moved on to Real Yield (Liquid).
If we cling to SLURP-8 out of nostalgia for a “Social Contract” that isn’t delivering growth, we will own a large percentage of nothing.

I urge the community to embrace the Pure Liquid Model.
One Token = One Vote = One Share of Revenue.
Let the market function.

[peculiarpearlue]

Leonardo, appreciate the detailed write‑up. I still end up in the opposite place, and I think several of your premises don’t actually hold when you zoom out beyond a purely “financial engineering” lens.

I’ll stick to the same structure you used: the “social contract”, mercenary capital, LP sell pressure, and alternatives like PoL/bonds.

1. “Social contract vs. financial reality”

You frame the social‑contract argument as if people are asking for an immutable constitution and ignoring reality. That’s not what I or others mean by “social contract”.

The core of the social contract around SLURP‑8 was simple: if you accept multi‑year illiquidity in SDL, you get structurally better economics and structurally more say in the protocol. That’s literally what vote‑escrow models are built to do: lock tokens for a defined time and grant time‑weighted governance power and rewards so that those with the longest commitment have the most influence and upside.

Nobody was guaranteed a specific APR or price, obviously. What people were implicitly promised was that “commitment duration matters” and will be recognized in the economic and governance structure for more than a single market cycle. When you change that foundation after a short period and move to “liquid holders and LPs get the lion’s share of yield”, you are not just “updating parameters”; you are inverting the basic tradeoff that lockers signed up for.

Financial reality actually cuts the other way from how you frame it. In a credibly neutral, permissionless ecosystem, the only real collateral protocols have is their reputation and predictability. If the message is “we’ll redo tokenomics root‑and‑branch every time the market gets bored”, the rational response of sophisticated capital is not “great, they’re flexible” but “I should discount any long‑term commitment because the rules will be rewritten again.” That uncertainty itself is a form of risk premium.

Plenty of protocols with ve‑style models have adapted over time without ripping out the core lock mechanic: Curve’s veCRV being the canonical example. They’ve iterated on gauges, bribes, and emissions, but the basic deal – lock for up to four years, get more governance and a larger share of fees – has remained the backbone precisely because it sustains long‑term alignment.

So the dilemma is not “cling to a dead structure vs. keep the protocol alive”. The real dilemma is “do we preserve the principle that long‑term commitment is structurally privileged, or do we revert to a fully liquid, yield‑centric design that treats time preference as irrelevant?” I think the former is still the right side of that trade, especially for an infra‑style protocol like stake.link.

2. “Mercenary capital is a myth”

On this point I think you’re fighting the wrong battle. Nobody is claiming that there is some pure world where every participant is altruistic and never moves for yield. Capital is obviously opportunistic.

The distinction people are making is between structures that encourage very short‑term, fast‑moving capital and structures that bias towards stickier participation. The “mercenary capital” language is shorthand for the former, and there is real, empirical data on this.

Analyses of yield‑farming behaviour show that a majority of farmers exit within days of entering a farm and that half are gone within two weeks. Protocol and research write‑ups that led to “DeFi 2.0” explicitly call out exactly this pattern: liquidity mining rewards attract capital that rushes to the highest APR, then leaves as soon as incentives weaken, causing volatile TVL and constant sell pressure from farmed tokens being dumped.

Vote‑escrow models were invented as a corrective: if you want maximum voice and maximum share of fees, you commit to a time lock. That does not magically remove all mercenary behavior, but it raises the cost of pure opportunism. Locking differentiates between someone willing to take multi‑year illiquidity risk on stake.link and someone who wants to farm SDL for a couple of weeks and then move on.

By contrast, the model you’re proposing does exactly the opposite. Any liquid SDL, bought at any time, instantly participates in the LINK fee stream. Any SDL/LINK LP, regardless of their time horizon, immediately taps into that “real yield”.

There is no screening mechanism anymore – no requirement to lock, no vesting, no cliff. The only “filter” is whatever past‑block snapshot you use for voting. That’s good for flash‑loan defense but irrelevant for distinguishing a farmer with a one‑month horizon from a participant with a four‑year horizon. Flash‑loan‑resistant voting snapshots solve one very specific class of governance exploit. They do not solve the broader issue of TVL and voting power being dominated by funds that are always one click or one bridge away from the next opportunity.

So when you say mercenary capital is a myth, you are effectively denying both the empirical behaviour that’s been measured across DeFi and the entire design logic behind veTokenomics and protocol‑owned liquidity, which were explicitly created to tame that pattern.

3. “LP sell pressure is a fallacy”

Here the math is straightforward and not really a matter of opinion.

In a constant‑product AMM, the pool maintains x·y=k; the price is the ratio of reserves. When external demand pushes SDL’s price up, arbitrageurs buy SDL from the pool and add LINK until the pool price matches the market again. That process necessarily leaves the pool with more LINK and less SDL than before – which means LPs have effectively sold SDL and bought LINK as the price rose. Numerous AMM primers walk through this exact dynamic; it is the textbook explanation of impermanent loss and inventory risk for LPs.

Whether LPs are “happy” about this because their dollar value went up is a separate question from the directional flow of tokens. Mechanically, LP positions short volatility in the appreciating asset compared to a holder who just sat on SDL. From the perspective of someone who cares about SDL’s fully diluted value and the cost of exit liquidity, every unit of external demand that pushes the price up is partially diverted into “LP sells SDL into that demand and accumulates LINK”.

If you now start paying those LPs a stream of LINK from protocol revenues, you are reinforcing exactly that behaviour. You are taking the protocol’s hardest asset and giving it to the cohort that is structurally positioned to be selling SDL on the way up and buying it on the way down. You can argue that this is acceptable because it buys deeper books; you cannot argue that it is neutral in terms of SDL sell pressure.

The key contrast with the current model is that today, the main recipients of LINK fees are lockers whose positions are maximally long SDL and maximally long stake.link’s success. In your model, a meaningful share of those fees gets diverted to actors whose base position is 50/50 and whose rebalancing behaviour mechanically dampens SDL rallies in favour of LINK.

There is a world where that trade‑off is fine. But calling it a “fallacy” understates the directionally very clear effect AMM math has on how LPs interact with demand flows.

4. “PoL/bonds are worse”

I agree that “just throw PoL at it” is not a magic wand. Protocol‑owned liquidity and bond mechanisms have their own design risks and can be executed badly. But you present them as if they are obviously inferior in every dimension, which is not accurate.

The entire DeFi 2.0 wave – Olympus, Tokemak, Fei/Ondo, etc. – arose precisely because founders recognized that renting liquidity via endless yield farming was fragile and costly, and started exploring models where the protocol gradually accumulates and owns its own base liquidity.

The main advantages of PoL‑style approaches, when sized sanely, are:

They are opt‑in and incremental. The DAO can choose to acquire liquidity over time, at a pace that matches revenue and risk tolerance, instead of committing upfront to a permanent, protocol‑level redistribution of fee flows away from lockers and toward liquid LPs.

They do not require tearing up the lock model. Long‑term alignment through reSDL can remain, while the DAO separately builds a “hard floor” of protocol‑owned SDL/LINK liquidity that is not mercenary and does not vanish when APRs elsewhere become trendy.

They keep the core risk where it belongs: on the protocol’s balance sheet, managed via governance, rather than embedding it into a standing obligation to pay any external LP or holder who shows up. PoL is a capital‑allocation strategy. Your proposal is a permanent change in who the protocol pays and for what.

They are reversible in a crisis. If some future regime or regulatory environment makes heavy on‑chain LP positions undesirable, selling down PoL positions is mechanically straightforward. Undoing a fully baked “SDL is a liquid revenue‑share for all holders and LPs” narrative is much harder.

It is absolutely valid to say PoL and bonds come with opportunity cost and execution complexity. But those are the kinds of trade‑offs governance is supposed to manage. They are not an argument that “therefore we should instead stream LINK to any liquid SDL/LP forever.”

And critically, PoL and bonds directly target the specific problem everyone agrees exists: the need for deeper, more resilient liquidity in SDL pairs. They do not require dismantling time‑weighted governance, nor do they flatten the difference between someone who locked for four years and someone who bought yesterday.

5. Where this leaves my vote

Your reply makes a strong case that SDL liquidity and UX need improvement. I don’t disagree with that at all.

Where it does not persuade me is on the necessity of replacing a lock‑based, alignment‑centric model with a fully liquid, revenue‑sharing SDL. The empirical evidence on yield‑farming and mercenary liquidity shows why protocols moved toward ve‑style locks and PoL in the first place. The AMM math around LP behaviour is clear about who ends up selling into demand and accumulating the hard asset. And the intangible but very real “governance credit score” a protocol earns by respecting long‑term commitments is, in my view, more valuable than shaving some theoretical inefficiency out of the current setup.

So I remain a strong “no” on moving to the liquid SDL + LINK‑to‑LP/holders design you’re advocating. Fixing liquidity, UX and capital efficiency is important; it just doesn’t require flipping the table on the alignment structure we only recently asked the community to buy into.