Proposal 002 - Launch Blend (BLND) (5L8Le2Vq6)

This is the second proposal submitted by the Staker Operation team (Ops) based on
STKR token holder feedback. The primary purpose of this proposal is to introduce Blend
(BLND) to the community, evaluate its merits, and approve its launch. The secondary
purpose is the ratification of Shaishav Todi and Spencer Noon as Council members.

Proposal Items:

  1. Ops team, in conjunction with STKR token holder feedback, is submitting the Blend
    token (BLND), a synthetic PoS tracking token, for review and approval.
  2. The following individuals, Shaishav Todi of Lemniscap and Spencer Noon of DTC
    Capital, will join the Council.

ITEM 1: Blend Token (BLND)

Background:

A common challenge faced by Proof-of-Stake advocates is the complexity involved in
identifying, procuring, holding, and monitoring high quality PoS assets. With the
emergence of a vibrant DeFi ecosystem on the Ethereum blockchain, the StakerDAO
community was chartered with the January Proposal 001 to research synthetic assets
that could be deployed to both solve the staking complexity challenge, and deliver in
parallel a new primitive in this growing ecosystem.

Consequently, the StakerDAO team collaborated with prominent industry leaders to
bring to the table the idea of a diversified PoS basket being represented by a single
ethereum based tracker token.

The tracker token is a single token that makes it easy to buy, hold, or sell a position in
the industry. Benefits to holders include the ability to spread risk across several high
quality PoS tokens, reduction of delegation lockup risk, and the shifting of staking
rewards being received as a distribution to one where the rewards are consumed
through a buyback and burn model for the tracker token.

This 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”
below. 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.

BLND Methodology

PoS assets considered for inclusion into the basket are filtered by minimum thresholds of a $500mn market cap and $1mn in daily volume. Assets are then multi-factor ranked through the following two inputs: staking ratio (number of tokens staked on the network relative to the supply) and reward ratio (value of rewards generated relative to the price of the token). We believe the staking ratio maximizes a ‘quality’ factor while the reward ratio maximizes a ‘growth’ factor. These factors are equally weighted. The basket is then comprised of the top 3 tokens, is market cap weighted, and rebalanced monthly.

*This basket is expected to expand to 4 tokens when Polkadot is live

Additional Information: Link

Performance (FY2019):
Performance and other statistics for 2019 have been backtested for reference.
Link

ITEM 2:

Shaishav Todi is the 4th member to join the Staker Council. His team at Lemniscap has co-led a strategic funding round for StakerDAO. Based out of Hong Kong, the team has a strong background in traditional finance and technology as well as a perspective on the continued development of Eastern markets. Lemniscap also has a strong portfolio of Proof-of-Stake related companies in which it has invested in such as Figment Networks, Algorand, and Harmony.

Spencer Noon is the 5th and final member to join the Staker Council. Spencer leads investments at DTC Capital. Spencer also brings deep insight into how the crypto industry is developing along with an analytical eye for on-chain data.

Deliverables/Technical Specifications:

Github: https://github.com/serokell/staker-blend

Roadmap:
March 2020: Anticipated start of BLND token sale
April - May 2020: Anticipated start of BLND assets on Ethereum

The submitted proposal includes a SHA-256 checksum of this attached document:
Proposal 002 – Launch Blend (BLND).pdf (331.7 KB)
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