Proposal 008 - StakerDAO 2.0 and Wrapped Tezos (5L8LRHCaB)

Introduction:

This is the eighth proposal submitted by the Staker Operations team (Ops) based on STKR token holder feedback. The purpose of this proposal is to introduce two major developments to the StakerDAO ecosystem, STKR 2.0 (STKR) and Wrapped Tezos (wXTZ). However, it also explores an addition to the Blend token management process. As always, we seek community feedback and approval by the Staker Council.

Proposal Items:

  1. Re-architect and expand governance to introduce a liquid governance token to allow governance participation from the broader community in the StakerDAO ecosystem.

  2. Build Wrapped Tezos based on STKR holder feedback as well as Tezos community feedback.

  3. Implement a BLND buyback experiment to stabilize token price to NAV.

ITEM 1: Introducing STKR 2.0

StakerDAO is proposing the launch of STKR, a community owned governance token. Since the launch of the StakerDAO governance process in January 2020, StakerDAO and its ecosystem has been guided by stakeholders. To date, these stakeholders represent investors in StakerDAO, the team and advisors. StakerDAO first launched Blend, the easiest way to long on the best PoS networks, and StakerDAO is soon deploying Wrapped Algorand and Wrapped Tezos (if approved). As the StakerDAO ecosystem matures, it is important for the StakerDAO community to control the future for StakerDAO.

Current State

In our current governance process, we have three representative entities: The Staker investors, the Council, and the Operations (Ops) team. The Ops team serves the Council by gathering and presenting proposals by stakeholders and submitting them on-chain for the Council to vote on. If approved by the Council, the Ops team executes the associated items in the proposal. The Council’s main function is to understand the benefits and drawbacks of a proposal and vote on what would be best for the community. The Staker investors are responsible for electing the Council and for participating in the proposal submission process.

Future State

In the expanded governance process, the Ops Team will no longer be responsible for collecting and submitting proposals. Any STKR token holder will have the ability to submit ideas. These ideas will circulate and will require a minimum endorsement level from other STKR holders.

Endorsed ideas will then become proposals and proceed to a Council vote as they do today. Further, as designed by the original architecture, the Staker Council will be elected via an annual vote by STKR holders. We believe that this dual layer of governance provides a long-term strategic view for the direction of StakerDAO, reduces the churn on low value proposals, and serves as a deterrence to malicious actors.

Terminology Notes:

  1. In our current state, STKR tokens are illiquid representations of equity held by investors in Staker Services Ltd. We anticipate deprecating STKR 1.0 tokens as their current use case is underdeveloped and is likely to remain so for the foreseeable future until more liquid security token markets are available for this kind of asset. Going forward, STKR will refer to a liquid governance token used for governing StakerDAO.
  2. In addition, proposals submitted by STKR holders will now be referred to as “ideas” if they have not yet attained the minimum endorsement level required from other STKR holders. Once ideas reach the minimum endorsement level, they become proposals, which can be put forth to the Council.

STKR Allocation

Under the terms of this proposal, 5 million STKR will be minted at genesis and will become accessible over the next 2 years. The initial two year allocation is proposed as follows:

  • 50% to the StakerDAO community treasury over 2 years - 2,500,000 STKR
  • 27.75% to Staker Services team members, future team members, advisors and to fund future Staker Services Ltd expenses with 2 year vesting - 1,387,500 STKR
  • 22.25% to investors with 2 year vesting - 1,112,500 STKR

An inflation rate after the initial 2 year allocation to StakerDAO community members is built into the token management process and can be set via Staker Governance. The initial inflation rate will be set at 0%.

The Community Treasury

The StakerDAO community treasury will be governed by STKR token holders for the long term growth of StakerDAO. STKR will vest within the treasury on a block by block basis, and will be primarily used in two ways:

  • to reward StakerDAO users who participate in currently launched StakerDAO assets - anticipated to include BLND, wALGO and wXTZ and to incentivize their participation on an ongoing basis.
  • To pay for the cost of engineering, marketing, audits and other costs associated with new projects that are approved via Staker governance.

A genesis model for distributing the Community Treasury will be developed in consultation with the community and council, and will be proposed closer to the launch timeframe for STKR. Following the governance transition to the STKR model, token holders will be in control of adjusting the ongoing distribution model.

As new projects are added by the community via Staker Governance, we expect the community to also specify STKR token rewards for those projects and to adjust current rewards to provide optimal long term success for StakerDAO.

STKR tokens will be claimable on the chain of action: Ethereum, Tezos, or Algorand, and StakerBridge will allow users to move STKR between chains as desired.

Launching New Products on StakerDAO

Following the launch of STKR, the existing Staker Operations team will operate at the behest of the Staker Council. An operations agreement between the Council and the Ops team will be put in place to fund their services on a contracted basis, and a different model can be implemented through governance should the community wish to do so.

We also expect the community to be interested in developing and launching new types of products that are appropriate for StakerDAO. These products will be promoted through the governance process and ultimately considered by the Staker Council.

New projects may require a development grant in STKR tokens to be made to the teams that are developing the projects. We expect community members to propose details related to grants, and work with the Council to approve and administer these grants. Following the launch of STKR governance, the StakerDAO protocol and products will be in the hands of the community.

ITEM 2: Wrapped Tezos

In the previously approved proposal, there was an indication that the Ops team would follow up on the Wrapped Algorand proposal with a Wrapped Tezos proposal. Following feedback from the StakerDAO community the Ops team has finalized the proposal for Wrapped Tezos.

With this proposed implementation, the native XTZ token can be staked to secure the network while also minting a liquid wrapped token to interact with other projects across networks.

Wrapped Tezos (wXTZ) will allow XTZ holders to have continued price and staking reward exposure while creating a fully collateralized liquid position to leverage across the DeFi ecosystem.

Note: The current ticker is expected to be wXTZ, however it is subject to change from now to product launch.

Here is how it would work:

Minting

  1. A user or “chef”, Alice, executes the wXTZ FA2 contract on Tezos. This contract provisions Alice with an address and associated secret key. This address is termed an “oven”. The execution of the wXTZ contract may take place by command line, within a non-custodial wallet, or on a 3rd party site.
  2. Alice then can deposit / lock XTZ into the oven.
  3. Once XTZ are deposited into the oven, the contract generates an equivalent quantity of wXTZ in the oven (1:1)
  4. The FA2 contract will also allow Alice to select a baker with whom to delegate, but other wallets and validators may interact with the smart contract so that their users delegate solely to their own baker.
  5. XTZ rewards are accumulated in the oven
  6. Accumulated rewards automatically generate additional wXTZ (1:1)

Transferring

  1. Alice can choose to move her wXTZ to a Tezos address. It is anticipated that wXTZ will become a useful token in Tezos DeFi as it grows.
  2. Using a separate FA2 contract based on the StakerBridge protocol, Alice can choose to send her wXTZ on Tezos to Ethereum. Once on Ethereum, Alice may choose to participate in Ethereum-based DeFi with her wXTZ.

Redeeming

  1. Using a Tezos wallet or other front-end interface developed by the community or StakerDAO, Alice can review her position in her oven, including the number of XTZ locked in the contract and the number of wXTZ in the oven available for usage.
  2. In order to unlock her XTZ, Alice can use the contract to “burn” a number of wXTZ equivalent to the number of XTZ she wishes to unlock and withdraw.
  3. After Alice unlocks her XTZ, she sends the XTZ to an XTZ address.

Fee Structure

The wXTZ contracts will feature several variables regarding fees / taxes that can be managed via StakerDAO governance. These include:

  • Minting fee: Governance may choose to set a wXTZ mint fee, taxing all newly minted wXTZ a percentage specified by governance. At launch, this tax will be set at 0%.
  • Rewards fee: Governance may choose to set a XTZ rewards fee, taxing all newly baked XTZ a percentage specified by governance. At launch, this tax will be set at 0%.
  • Redemption fee: Governance may choose to set an XTZ redemption fee, taxing all redeemed XTZ a percentage specified by governance. At launch, this tax will be set at 0%.
  • Stale Oven tax: Governance may choose to implement an oven tax on ovens that have no activity over a period of time. This tax may programmatically tax XTZ in the oven and make these XTZ available to be redeemed by any wXTZ holders. At launch, there will not be a Stale Oven tax.

Development Plans and Timing

StakerDAO has contracted with Stove Labs to develop the Wrapped Tezos project, and has contracted with Trail of Bits to provide a security audit. It is expected that the cost to the StakerDAO community to deliver this project is between $100,000 - $200,000 USD and will be delivered within 3 months of proposal approval.

ITEM 3: BLND NAV Management

As was envisioned in the architecture of BLND, from time to time the Staker Council would authorize the repurchase of BLND tokens to a certain amount.

We propose creating a process where 5% of the BLND AUM is available on an ongoing basis to repurchase BLND tokens that are available for repurchase at a price point below the NAV. Tokens purchased through this process would be burned so that the process itself would not require a detrimental adjustment to the AUM and therefore to the NAV.

We propose running a 2 month pilot of this process and reporting results back to the Council for further consideration at the end of 2020.

Proposal 008 - StakerDAO 2.0 and Wrapped Tezos.pdf (85.5 KB)

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