How Does Blend Work?

The Blend token (BLND) will represent a much easier way to go long on a high quality
mix of Proof-of-Stake layer-1 protocols. It will track a transparent, algorithmically
managed basket of assets. BLND itself is an ERC-20 token and it will live on the
Ethereum network to benefit from the network’s vibrant DeFi ecosystem. Blend is
synthetic exposure to the risks and benefits that come from participating in the PoS
ecosystem.

How does Blend work?

Step 1: An initial offering of Blend is anticipated to be conducted through a token sale
platform and registered broker-dealer. Staker is currently in conversations with CoinList
and its affiliate partner, EC Securities. This proposal authorizes the Staker Ops team to
execute this or a similar partnership by March 2020.

Step 2: Blend intends to launch with a supply cap of 50mn tokens at $1/token. Staker
believes that the sale of these tokens will take place over a 90-day period. The funds
raised will be used to purchase the PoS assets as indicated by the “BLND Methodology”. The BLND basket methodology is subject to periodic adjustment through the Staker governance process.

Step 3: After the PoS assets are purchased, they will be delegated to selected
validators. Validators will be selected through recommendations from the Ops team and
from the STKR token holder community. The recommendations will consider an
appropriate mix of validators that optimize for variables like fees, performance, security,
reputation, and more. Initial validator selection for BLND will be submitted in the March
2020 proposal.

Step 4: Staker expects to implement a management fee for launching and operating
BLND. This fee will come from rewards generated by validators and it will be used to
buyback and burn STKR in a tender model. Staker believes an appropriate
management fee is 20% of generated rewards. Depending on the final mix of PoS
tokens in the basket, and the rewards rate of those tokens, this could represent an
annual fee of approximately 2% of NAV. Final fee structures for managing BLND will be
submitted in the March 2020 proposal.

Step 5: Rewards post-management fee will be used to buyback and burn BLND. It is
anticipated that Staker Ops will conduct a monthly tender offer for the repurchase of
BLND from registered BLND holders. BLND mimics distribution of rewards through this
buyback program.

Step 6: The supply of BLND will decrease following buyback and burn programs and in
theory, BLND’s price should rise in line with what would have been the percentage
distributed.

Step 7: Registered holders of BLND will have the ability to redeem their holdings
directly with StakerDAO on a periodic basis for the underlying NAV. A fee may be
charged for this redemption. Timing and methodology of the redemption model will be
provided in the March 2020 proposal.

What can be changed over time?

STKR token holders may actively choose to change various levers within BLND through
the Staker governance process. This includes the:
● Supply - If BLND reaches its supply cap and continued demand is seen,
additional BLND could be issued e.g. raise BLND supply cap from 50mn to
100mn.
● Methodology - If numerous, high-quality PoS assets launch in 2020, BLND could
increase or decrease the number of constituents in its basket. STKR token
holders could also decide to change model inputs or switch from market cap
weighting to equal weighting.
● Caps and Floors - Should the STKR token holders choose to do so, caps or
floors can be implemented for any aspect of the BLND token model. For
example, a cap for the maximum weight or floor for the minimum weight of any
particular asset in the basket could be implemented.
● Validators - The validators selected and their respective delegation for BLND’s
underlying assets are subject to change in light of new information.
● Fee - Fees are also subject to change based on market conditions.
● Emergency adjustments - In extraordinary cases, an asset may lose eligibility for
continued inclusion in the basket or other elements of the basket process may
need to be adjusted. In this case, the asset can be removed, or elements
adjusted in between ongoing governance cycles by unanimous vote of the Staker
Council. Should such a process occur, it must be reapproved by a majority of
council members in the next governance cycle.

Rewards generated from staking create funds to buy back and burn both BLND and STKR. What is the recommended split that will be initially proposed?

A competitive product for BLND holders + incentivizing effective management from STKR holders will likely require a fee between 10-30%. Based on competitor products and the benefits related to ease of use for exposure to PoS protocols, the inclination is to recommend an 80-20 split. 80% of rewards generated will be used to buyback and burn BLND while 20% will be used to buyback and burn STKR.

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