Discussion/Proposal: Economic Parameters to be Set by Shutter DAO0x36 for Staking

[jul1an]

Simple Summary

Shutter DAO 0x36 has voted to move forward with Blockful.io as the technical contributor to develop staking (link). Blockful has already started with the technical contribution, which can be followed in this thread. In order to get staking live for Shutter DAO 0x36, it is important to agree on the economic parameters. This discussion seeks alignment within the DAO regarding these parameters and the introduction of a Keyper Staking Obligation, followed by a vote.

Background and additional information

Keypers are essential for generating encryption and decryption keys, which are crucial for the network’s security. Staking provides them, and every SHU holder, with the opportunity to be rewarded for their role. Staking V1 focuses on incentivizing Keypers and Delegators via SHU token rewards, without a slashing mechanism. Rewards are derived from protocol fees and grants from the DAO treasury. As of V1, grants from the DAO treasury are the only source of distributed rewards. Staking can begin anytime, with rewards accruing immediately and a lock-up period before unstaking. Governance allows adjustment of reward amounts, distribution rates, and lock-up periods to align with the DAO’s strategy.

Economic Parameters Considerations for Shutter DAO 0x36:

1. Amount of Reward Pool: Set the initial reward pool at approximately 10,000,000 SHU.
2. Reward Distribution Rate: Implement at the beginning a reward distribution rate of 8 SHU per minute, increasing by ≈10% month-over-month (on average).
3. Lock-Up Period: Establish a minimum lock-up period of 6 months for stakers.
4. Keyper staking obligation: Keypers must stake a minimum of 50,000 SHU permanently as a commitment to their role, possibly increasing as the network grows.

If these parameters are implemented as described, they would lead to an approximate 20% APR with around 7% of the fully diluted supply staked, based on the assumptions made/scenario simulated, in 12 months.

Note: These parameters are preliminary and based on assumptions and potential scenarios. They should be thoroughly discussed and refined. In practice, adjustments may be necessary to optimise their effectiveness.

Further information and details can be found in the following DISCUSSION DOCUMENT.

Next Steps

• Discussion of economic parameters within Shutter DAO 0x36
• Refinement of proposal based on the discussion
• Initiate vote to set economic parameters for staking

Voting Platform

• Snapshot

Vote

Members of Shutter DAO 0x36 are invited to vote on this proposal using the following options:

• Vote “YES”: To approve the proposed economic parameters and the Keyper Staking obligation
• Vote “NO”: To not approve the proposed economic parameters and the Keyper Staking obligation
• Vote “Abstain”

[luis]

Awesome document, recommend everyone interested in staking and Shutter to have a read!

Looking forward to the discussion here, let’s get this going and aim for an iterative approach so that Shutter DAO 0x36 can take the first step as quickly as possible!

[dbas]

Great proposal. Our view is this largely hits the target well. One thing we note is that the 6-month lockup for anyone to stake/delegate may be rather high and could result in lower staking participation. Perhaps differentiated rates could be applied instead to cater to different needs, with one of the options being no lockup or like 3-week lockup but with lower APR.

[jul1an]

Back in mid-June, the DAO voted to implement the following parameters for staking at the beginning of the Go-Live of the staking mechanism:

• Amount of Reward Pool: Set the initial reward pool at approximately 10,000,000 SHU.
• Reward Distribution Rate: Implement at the beginning a reward distribution rate of 8 SHU per minute, increasing by ≈10% month-over-month (on average).
• Lock-Up Period: Establish a minimum lock-up period of 6 months for stakers.
• Keyper staking obligation: Keypers must stake a minimum of 50,000 SHU permanently as a commitment to their role, possibly increasing as the network grows.

The results can be looked-up here:

The technical implementation by Blockful.io is almost finished, the progress and technical details can be found in this thread. In order to account for the complexity of the Keyper and Delegate Staking mechanism, Blockful needed to create two contracts (one for Keypers and one for Delegates). Therefore, the Reward Distribution Rate needs to be adjusted resp. split between both contracts compared to what has been previously discussed in the economic concept. A starting point could be the initial allocation of SHU for Keypers compared to total supply but there might be other approaches as well that need to be discussed within the DAO.