Discussion: Staking v2

Dear community,

In the past couple of months, we’ve seen dozens of community members pleasantly enjoying the Merit Circle DAO’s staking pools. As we mature and the DAO progresses, we feel that it’s time to gauge our community’s thoughts about the future of these pools.

For the first year of staking, we’ve dedicated 100,000,000 $MC. However, for the second year and the future of the staking pools, we want to spice things up. We have some ideas that will take everything we learned from the past couple of months, and learn from our beloved community members to come up with a solution that meets all DAO members’ wishes.

Therefore, we want to start the discussion here first before we create an actual proposal. Starting off, we want everyone to answer the following questions;

  • Would you like to see a single-sided MC staking pool next to the LP pool?
  • What asset would you prefer as an LP pairing asset next to MC; ETH, WBTC, USDC or something else?
  • What weights should the LP pool have?
  • What is the preferred platform for LP tokens? (currently uniswap v2 50/50 LP tokens)
  • How long would you want the locking periods to be?
  • Should the staking subsidy be fixed or partly variable?
  • What % of DAO revenue should go to staking rewards? (currently everything used to build treasury, re-invest and buy back and burn $MC)
  • Should the DAO, outside of locked MC, also distribute ETH, WTBC or USDC from revenue to stakers with longer locks?
  • How long should staking rewards be locked for?
  • Should the DAO create mechanisms by which it builds long-term protocol owned liquidity?

Please take a moment to think about these questions and share your thoughts as a comment below. This is not a proposal yet, merely a way to source community ideas and gauge the temperature, so that we can sharpen the proposal.

Thanks in advance for weighing in!

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Henlo,

Today is a beautiful day. There is rain everywhere. Bees can’t make honey in the rain, like ETH LP can’t make profit in a bear.

I’ll keep it short, because I am drowning in this weather. Please be nice to me, I am cold.

Would you like to see a single-sided MC staking pool next to the LP pool?

MC, and MC-USDC pool

I think we’re done with ETH, it’s not good for anyone. Double risk, no good. Get rid of it please.

What asset would you prefer as an LP pairing asset next to MC; ETH, WBTC, USDC or something else?

USDC, see above

What weights should the LP pool have?

I don’t know, but with the gigantum unlocks from VC and angel and team and F&F coming up, I think let’s not reward them even more with single staking too much. They had zero risk with 0.032 cost base, they can go add some USDC and support the DAO. 20% single, 80% LP.

What is the preferred platform for LP tokens? (currently uniswap v2 50/50 LP tokens)

Ethereum is the only one who stood the test of time

How long would you want the locking periods to be?

Max 48 months for super bonus, maybe not fixed per months, but exponential. Bigger risk, bigger balls, bigger reward, better honey

Should the staking subsidy be fixed or partly variable?

What?

What % of DAO revenue should go to staking rewards? (currently everything used to build treasury, re-invest and buy back and burn $MC)

Huh? Too complex, I’m sitting in the rain okay, I’m cold.

Should the DAO, outside of locked MC, also distribute ETH, WTBC or USDC from revenue to stakers with longer locks?

Hellllllll no. That is our long term super stack. Let’s not give those to super Seed VCs haha what no. They get HUGE stacks already with zero cost-basis… let’s send them all our ETH, WBTC, and USDC too? No lol, they got enough. MORE THAN ENOUGH. No no no.

How long should staking rewards be locked for?

12 months

Thanks,
Honey

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Oh Man! Hell must have frozen over…never thougt i would agree with anything Honey says but in this case I’m almost completely in agreement with her points. Well done madam!

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It’s the rain, I’m telling you

I need to think more on two questions, but I’ll wait for the others to respond first

  • Would you like to see a single-sided MC staking pool next to the LP pool?

Yes, single sided is necessary. We don’t want a community of 100% LPs and no true holders. Holders deserve to be rewarded for their commitment.

  • What asset would you prefer as an LP pairing asset next to MC; ETH, WBTC, USDC or something else?

I understand the dislike of ETH pairs, and the implied risk but I think it should remain an option. There would be some liquidity fragmentation trade-off but it might be good to have multiple options. USDC and ETH specifically.

  • What weights should the LP pool have?

50:50

  • What is the preferred platform for LP tokens? (currently uniswap v2 50/50 LP tokens)

Uniswap is fine, not worth migrating for any potential minor benefits of other platforms.

  • How long would you want the locking periods to be?

104 weeks max weight

  • Should the staking subsidy be fixed or partly variable?

Fixed or increase only. Parameters should be defined and constant as members are locking their funds. If there were to be a change (reduction), users should have the option to unlock.

  • What % of DAO revenue should go to staking rewards? (currently everything used to build treasury, re-invest and buy back and burn $MC)

No change needed.

  • Should the DAO, outside of locked MC, also distribute ETH, WTBC or USDC from revenue to stakers with longer locks?

No.

  • How long should staking rewards be locked for?
    This is the biggest area of opportunity imo.
    A model similar to Adamant Finance (price bad, but model was good) where users can claim immediately and burn a % of rewards in return for immediate access. For example rewards by default unlock after 1 year, but at month 1 the user can unlock and burn 80%
    At month 2 can unlock and burn 70% and so on. The full amount is only unlocked after one year. This can be adjusted as the DAO sees fit, and a portion of the sacrificed tokens could also be reflected to the other stakers in the pool. This gamifies the rewards, reduces supply, and incentivizes hodlers.

Curious to hear others thoughts on this type of model.

Joey

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Hey joebags,

What do you mean by “no true holders”? LP supporters are not true holders? You expect Binance and other centralized exchanges to do free market making out of the kindness of their heart?

No, I mean that both are necessary. LPs especially in the case of USDC pairing are partially hedged, so they’re not fully exposed to price. LPs should continue to get higher rewards for this. It’s not a slight against LP, I am an LP myself. But we don’t want to disincentivize the average investor who just wants to buy and stake.

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Aha, okay. Gotcha!

I think I agree then. Having both single staking and MC-USDC LP staking would likely give all people a good opportunity to support the DAO.

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Agreed, and I think it’s optimistic to think if we went to LP only everyone would put up equal part USDC rather than selling half to USDC and LP-Ing. That would obviously be detrimental to price.

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Greetings @DAOCoreContributors ,

This is Admiral Erik von Pumpson of the MC Enterprise.

I’d like to think our space-gum kept our ship together quite well, but it ended up burning up entire fuel supply instead. We abandoned the ship, and are now stuck on a cheap space pod waiting to be picked up by friendly pirates.

In any case, below are the answered questions. Happy to defend them.

Would you like to see a single-sided MC staking pool next to the LP pool?

MC and MC-USDC pool. ETH pools are too volatile, no point, even for dollar bears. ETH is a good way to get destroyed.

What asset would you prefer as an LP pairing asset next to MC; ETH, WBTC, USDC or something else?

USDC

What weights should the LP pool have?

20% single, 80% MC-USDC LP

What is the preferred platform for LP tokens? (currently uniswap v2 50/50 LP tokens)

Uniswap on Ethereum

How long would you want the locking periods to be?

24-48 months, 48 if big boy rewards, maybe increase % for each quarter extra instead of fully lineair.

Should the staking subsidy be fixed or partly variable?

Fixed + variable bonus.

What % of DAO revenue should go to staking rewards? (currently everything used to build treasury, re-invest and buy back and burn $MC)

Can start with 15%, see how it goes. Revisit quarterly.

Should the DAO, outside of locked MC, also distribute ETH, WTBC or USDC from revenue to stakers with longer locks?

Nah, that’s DAO property, and needs a new proposal either way.

How long should staking rewards be locked for?

Like before, 12 months. Maybe partially burn-bought quicker, like @joebags mentioned for those who demand liquidity at a high cost.

Signed only if MC-USDC becomes realized,

Erik von Pumpson
Admiral of the MC Enterprise
Ascending Galactic Federation

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Thank you again to the DAO Core Contributors for another important governance discussion. We also believe that the staking pools have been an important feature for the Merit Circle community since November, and should continue to be so. While the DAO continues to invest and build its own products, the staking pools have served as an important part of the MC token utility, and are something which the vast majority of community members have participated in.

In their current state, these staking pools were only intended to last 12 months and so naturally, the community has already started discussing what changes they believe should be made. This discussion has likely been amplified due to market volatility.

Our thoughts and responses to the DAO Core Contributors questions are found below:

Would you like to see a single-sided MC staking pool next to the LP pool?

Yes. We believe a single-sided MC staking pool should remain in place. We recognize some community members would prefer not to LP stake their assets, and so an option should remain for them to stake without pairing their assets.

What asset would you prefer as an LP pairing asset next to MC; ETH, WBTC, USDC or something else?

Our choice would be a USDC pairing. Since November we have seen the price of Ethereum drag the USD price of MC both up and down due to the LP pairing. There is a large amount of uncertainty in the macro market, and it is unclear how the ETH 2.0 merge will affect the price of ETH. Having an ETH pairing exposes MC LP stakers to double the amount of risk, when compared to a USDC pairing. If Ethereum performs poorly, it makes it very difficult for the MC token to do well. While it is still likely the price of MC would move in accordance with the wider market, a USDC pairing would allow the MC token to move without the direct influence of the price of Ethereum, and thus lower risk for LP stakers.

What weights should the LP pool have?

We are happy with the current 80/20 split between LP and single side staking. We would also ultimately only want one LP pool (USDC pairing).

What is the preferred platform for LP tokens? (currently uniswap v2 50/50 LP tokens)

Our preference is still for keeping liquidity on Ethereum. It is still the most secure, reliable and decentralized layer 1. We are open to future bonuses or incentives taking place on chains such as Moonbeam or Avalanche, but the main liquidity, and staking, should remain on Ethereum.

How long would you want the locking periods to be?

We have been happy with the 12 month lock for maximum bonus with the MC/ETH pair. If a USDC LP pair was created, we could envisage locking up to 48 months for maximum bonus, but this would obviously need a larger rewards pool. LP stakers could likely be tempted to stake for longer than 12 months on a USDC pool, as it would only require them to be long on MC, rather than long on both MC and ETH (double risk).

Should the staking subsidy be fixed or partly variable?

The usual staking APY should be fixed, as it currently is. However, bonus APYs can always be introduced for varying amounts of times, for instance as community event rewards. These could be funded through the community incentives DAO wallet.

What % of DAO revenue should go to staking rewards? (currently everything used to build treasury, re-invest and buy back and burn $MC)

This is likely something that requires a lot more thought, and likely its own proposal. We would need to see the math behind the DAO’s revenue, and how much would be needed to sustain an attractive staking program.

Should the DAO, outside of locked MC, also distribute ETH, WTBC or USDC from revenue to stakers with longer locks?

Our initial thoughts are tentatively against a revenue distribution of this kind currently, but if it is something that the DAO wants to introduce, then it is something that will need its own separate proposal. The amount of thought and consideration this particular topic would require is worthy of its own proposal, and is too long to be discussed as part of 8 other questions.

How long should staking rewards be locked for?

We are happy with the current 12 months from the moment of claim.

We look forward to seeing the official proposal from the Core Contributors regarding this complex topic. We anticipate that once the Staking V2 proposal is released, further discussion and debate will take place, before the proposal is finalized.

Signed with left paw,

Mr. Yarn
Sad Cat Capital

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Our little DAO is growing up so fast! I remember taking home my first bags like it was yesterday. :blush:

I like the MC-USDC pool. It seems like a MC-USDC LP would attract non-crypto investment funds, retail investors without massive ETH bags, traditional game developers/studios, etc. who want exposure to GameFi without having to make bets on L1s. Those are growing segments of the investment market, so let’s go after them.

I would like a 48 month (or greater) staking option with 12 month lock. That 5-year* window corresponds with a realistic maturity timeline for Edenhorde, the NFT marketplace, the MC studio, and a family of MC-native video games. Aka, vertical integration. This is a longer timeline than our individual venture plays. The market will eventually arb out some percentage of our venture profit, so let’s reward investors who came here for the high beta shitcoin speculation but are staying for the native MC products.

Cheers,
Dolly

*edited to correct brain fart: I said “3-year window” originally because I don’t compute time

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Opinions on liquidity solutions like Tokemak, Olympuspro and Fei Ondo are also welcome.

Core contributors have researched them and are playing around with some ideas where they could play a role, but open to ideas and opinions on these.

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Sorry If I missed this.
But couldn’t understand what the possible sources of MC v2 staking rewards are gonna be.

Is it solely from % of DAO revenue ? is it from Community incentive pool ? (shows 29% in Gitbook) or is it gonna be a combination of both.

I have all my tokens locked and staked, I want to support the MC team and see them develop the crypto gaming industry.

However, both Cobie in a recent substack, as well as SBF in a recent podcast, have raised legitimate concerns about the purpose of staking in projects without proof of stake needs. I provide the links at the bottom, for those interested to explore.

So, before answering the questions posted by the DAOCoreContributors, I would be very grateful, for my peace of mind, if the DAOCoreContributors or the MC founding team can comment on the issues raised in the article.

In particular:

1-Is this proposal being done in anticipation of selling pressure?

This proposal aims to find ways to make staking more attractive, bring more buyers, lock more tokens.

Is this being done to facilitate the upcoming exit of a portion of the 350m tokens originally allocated to advisors/investors/team that become unlocked soon? (by creating buying pressure with rewards, and reducing selling pressure with locks while advisors/VC sell).

I have no problem with people making money, specially those that took more risk, but I value transparency. A clear communication around the intentions of the advisors/VCs and team around selling (especially since most public investors are under water) would go a long way for the community.

2-The effect of staking rewards on token price:

Our latest Treasury report points to usd126m in value, nice.

I have suggested in the past to include NAV (net asset value) per MC token (basically: Treasury Value divided by number of tokens).

With the NAV per token we can see if the DAO is creating value for the MC token faster than the dilution coming from staking rewards, incentives, etc (in other words, is the Treasury Value growing faster than the number of tokens issued). In accounting, you need to show both assets and liabilities to give people a complete picture, not just assets.

My concern is that if I make the calculation using 968m tokens issued (of which 350m are to advisors/VCs/team, 600m for rewards and incentives, the rest sold to public like me) I get to a NAV per token of just usd0.063, vs a current market price of usd2 (in other words, today the treasury assets of the DAO represent just 3% of the market value of the token).

This math may not be correct, as I cannot find information of number of tokens issued today (locked and unlocked). I would appreciate someone to provide this calculation.

Now, market value above asset value is not per se an issue, actually most companies have that. There is more value in MC than just the treasury (there is the team, the intangibles like brand etc).

But when the difference is so so high (30x higher) it could be a problem. And the more tokens given away with staking rewards, incentives (I just saw on twitter MC giving away 10k tokens in a “draw a picture” competition LOL), the bigger we make the problem.

And so, the DAO really needs to take into account this when designing a staking program. Are we creating or destroying value for the token.

Cobie article:

Huo

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Hello @DAOCoreContributors ,

Thank you for the thread. This is definitely something we need to get sorted out soon, appreciate the open forum.

Would you like to see a single-sided MC staking pool next to the LP pool?

Yes, but reduced. I believe the rewards and voting rights are too high versus a double-sided LP that inherit more risk, provides trading liquidity, and add extra funds through ETH (USDC in the future).

An example that falls more in line with my weights is the current Illuvium Pool.

ILV Pool

TVL: $728,084,984.77
APR: 20.51%
APY: 22.56%

ILV/ETH Pool

TVL: $248,706,971.60
APR: 246.39%
APY: 270.92%

What asset would you prefer as an LP pairing asset next to MC; ETH, WBTC, USDC or something else?

I am in favor of moving over to USDC and phasing out ETH over time . Importantly, we cannot screw over those who have added 12 months of locked MC/ETH liquidity over the last couple of months unless we introduce a migration tool that makes sense.

What happens if someone locks up 12 months right now? Do their rewards dry out in November? This has not been communicated at all. These lock options should have been removed from the staking interface if this is the case.

What weights should the LP pool have?

I am in agreeance with Honey above. Large unlocks from team/VC/angels should be encouraged to commit to LP rather than multiplying their already 60x bags on a single-sided pool and eating the free lunch.

The same goes with friends and family airdrops. 4% (40,000,000 MC tokens)

Free money → XXX% increase → XXX% increase → ???

Please add some skin to the game.

What is the preferred platform for LP tokens? (currently uniswap v2 50/50 LP tokens)

Uniswap has done its job reasonably well. I do not see the need to change this.

How long would you want the locking periods to be?

At least 12 months. 24 months does seem incredibly long in crypto, but with a solid v2, many loyal holders would do this (myself included).

Should the staking subsidy be fixed or partly variable?

TBD

What % of DAO revenue should go to staking rewards? (currently everything used to build treasury, re-invest and buy back and burn $MC)

This is a loaded question and needs its own thread.

Should the DAO, outside of locked MC, also distribute ETH, WTBC or USDC from revenue to stakers with longer locks?

I am against giving away our BTC / ETH / USDC from the treasury. These are the stability and long-term reserves of our DAO to combat the seed investment volatility. Buybacks and burns are essential. Curious to hear the thoughts of DAO Contributors.

How long should staking rewards be locked for?

12 months work well.

Further comments

1- How feasible is it to change the wallet address of your rewards?

2- It would be great to have some thoughts from seed in this thread. Many have been noticeably quiet or completely absent from governance forums. This DAO could be even bigger with the heavy hitters we have below.

A roll call would be nice.

Seed Contributors (Entities)
DeFiance Capital
Mechanism Capital
Maven11
DCG (Digital Currency Group)
Spartan Group
CitizenX
OP Crypto
Bitscale Capital
Dialectic Capital
Yield Guild Games

Seed Contributors (Individuals)
Alex (Nansen)
Ani Benerjee
BR Capital
Bobby (Coingecko)
Calvin Liu (Impossible Finance)
Coin98
Danish Chaudry
Danny Wilson (Illuvium)
Darren Lau (The Daily Ape)
Darryl Lau
David Post (Chainlink)
DeFi Chad
Gmoney
Isaac (Nansen)
Jasper (Flux)
Jihoz (Axie Infinity)
Kristaps Vaivods (Hash Rush)
Miss Bitcoin
Pavel Bains (MixMob, Bluzelle)
Perpetual Protocol
Peter (Flux)
Piers
Pocket Network
Richard (Quantstamp)
Ryan Berkun (Teller)
Satoshi Stacker
Sergei Chan
Tin Nguyen (Sipher)

I may edit the post with further thoughts. Still thinking about some ideas.

Best regards,
AS

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@huoguoshen

Staking v2 was always going to happen, as Staking v1 only lasts 1 year, so I’m not sure what you’re on about. The writer of that article gets seed just about everywhere, and has a permanent long on drugs.

@asam0oo makes a lot of great points.

I think we all mostly agree on single-staking ~20% and USDC LP staking ~80%.

Should the DAO, outside of locked MC, also distribute ETH, WTBC or USDC from revenue to stakers with longer locks?

These are our strategic reserves for later, not to just give away. These are our tanks, our cavalry, our planes, special troops, bees, and gunboats.

I am in agreeance with Honey above. Large unlocks from team/VC/angels should be encouraged to commit to LP rather than multiplying their already 60x bags on a single-sided pool and eating the free lunch.

This is also my annoyance. They spent a total of 4.5m USD to obtain their seed tokens, and that’s it. 0.032 cost base. Single-staking just like that and fully, that isn’t taking a risk. It’s a free donation to their already huge bags. It makes no sense. It’s also sad to hear that nearly none of the big VC’s are so quiet out there. We’re a DAO, but they make no sound. The sleeping bees in my garden make more sound. It feels very unfair that we have to buy x60+ prices to them, but that’s capitalism. But extra rewards too? Is it to pause them from selling? So we reward them to not sell? If they are such a problem, just remove them completely for hurting the project instead. I can’t imagine 4.5m USD costs them much grief.

Honey

honey-with-wooden-barrel-vectors

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Hi fellow Meritians!

I agree with the @SadCatCapital on this one. Though, I also have some crazy thoughts of my own at this point. The current state of the market has triggered something in my head which I would like to share with you all and hear your thoughts on the matter as it has everything to do with this conversation but is not mentioned.

Currently, some of the origami hands that locked up their tokens via staking have been saved by that very mechanism to not chicken out and sell their position. In a sense that the current mechanism of locked MC via staking is saving those poor souls from future poverty (if you believe in MC the same way I do).

Why don’t we GameFi the stakingmechanism to provide an ‘chicken-exit’ of some sorts? This ‘chicken-exit’ would have a penalty depending on the period you intitally locked-up your MC.

EXAMPLE: Let’s say I am providing liquidity in the future USDC/MC pool and locked the LP tokens for 52 weeks in the module. I am now eligible for rewards. 30 weeks have passed and the price of MC keeps dropping and my origami hands want to fold. I am eager to cut my losses as ‘I need liquidity!’ (much heared excuse in this space). There is now a escape, though the penalty (as an example) could be 30% (1% a week) of my position incl. current build-up rewards). The funds originating form the penalty can be re-distributed to the holders. Or partially go to DAO or even partially burned to reduce the supply at a faster rate. This also goes up the other way! So if the market explodes, people can also use this exit. But again, with a penalty.

I’d like to know what your thoughts are on such a mechanism incorporated in v2. The percentages etc. are just random figs, it would need some serieus analyses to find a reasonable equilibrium. But the mechanism would make things a little more interesting is my geuss.

SirDutchie out!

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Henlo,

Not a bad idea, but the penalties would need to be significant enough. Burning would be best I think.

That’s ofcourse something that can be worked out when the community agrees it could be a nice gimmick for staking v2. It could for example mean that the penalty starts at 100% from the moment you lock your tokens and that the % reduces over time, depending on your chosen lock-up period. Burning would my go-to aswell I think. Though tempted to also use some for additional rewards…

But I hope some of you have ideas about this aswell :slight_smile:

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