MIP-19 Upgrading to staking V2

Authors

  • Merit Circle DAO core contributors

Summary

The Merit Circle DAO staking module was always designed to evolve. This proposal seeks to implement the first upgrade to the current (v1) staking module, into staking v2. The planned overhaul will increase the options, flexibility and longevity of the staking module. The contours of this proposal are based on the lengthy forum discussions and several polls that have taken place within the Merit Circle community. This proposal also seeks to introduce a yearly staking policy poll, to adjust a set of fixed parameters for each year thereafter.

This proposal aims to set a hard number for next year’s MC subsidy (currently 10% for year one) and the bonus multipliers for stakers in the governance module.

The proposal further aims to allow for staking rewards in the form of airdrops, potential other forms of rewards, bonus and discount tiers on Merit Circle DAO products, but makes no hard promises for this. The DAO can (re-)evaluate and decide to overturn any of these reward mechanisms or, on the contrary, make specific proposals to expedite specific benefits for stakers.

Staking v1 will be phased out and fully ended once the deposit of the last staker under staking v1 has been unlocked. Deposits in v1 will be disabled once v2 is live. Staking v1 stakers will only be able to withdraw their holdings when their stake has unlocked, at which time they can decide to stake in v2 or use their tokens otherwise. The same applies to those locked rewards that unlock 12 months from the moment of claiming. This applies to both the single staking pool ($MC) and the LP staking pool ($MC/ETH). Both pools will be replaced with v2 pools, a v2 single $MC pool and a v2 LP $MC/ETH pool.

Abstract

This proposal seeks to implement a new staking module, Staking v2. Orange Pill Ltd will be assigned as the software development company responsible for the development. Merit Circle DAO through its distributed multi signatories will be the deployer of the new module.

The discussions on which the underlying decisions, parameters and ranges have been based can be found here:

Staking v2 discussions: Discussion: Staking v2 - Discussion - Merit Circle

MP-1: Merit Circle proposal: MP-1 - LP pairing asset in the Staking v3 module

MP-2: Merit Circle proposal: [MP-2] LP staking length in the new staking v2 module

MP-3: Merit Circle proposal: [MP-3] Choice of platform

MP-4: Merit Circle proposal: MP-4 – Choice of LP pairing asset(s) in staking v2 module

Since the old staking pools cannot be upgraded, we need to phase out the old pools. To do this, both the v1 and v2 pools will exist simultaneously for a period of one year.

V1 pool

  • All deposits will be disabled on the v1 pool from the moment the v2 pool goes live. Claims and withdrawals will stay enabled.
  • The same bonus multiplier will remain for the V1 pool, that is in the range between 0% and 100% (0 weeks resulting in a bonus of 0% and 52 weeks resulting in a bonus of 100%).
  • V1 interface in new V2 dashboard.
  • Migrate to v2 button for unstaked MC or MC/ETH.

V2 pool

  • New v2 pool areas opened in a new and upgraded staking dashboard.
  • Uniswap v2 is used, similar to v1.
  • MC/ETH LP pool.
  • MC single sided staking pool.
  • Locks from 1 week to 208 weeks.
  • 0 week or flexible is equal to v1 no-bonus = 0% bonus.
  • Longer locks will get exponential benefits – A quick breakdown can be found below.

0 weeks / flexible = 0%
52 weeks = 65% (Small relative advantage for V1 pool for lock periods <1Y, to compensate people that are locked in V1 and thus are not able to benefit from an instant V2 switch)
104 weeks = 150%
156 weeks = 300%
208 weeks = 500% (Relative advantage compared to V1 pool or shorter V2 locks, exponential bonus)

It will be possible to stake in 1-week intervals, from 0 weeks (flexible) and up to a maximum of 208 weeks (up to 52 weeks under v1). The bonus multipliers between the above ranges will be exponential. Bonus multipliers for different staking lock periods can be changed by DAO governance.

Additional relative bonuses may arise in the form of airdrops or mint spots (from partner games or MC products) that are only available to stakers that lock for 2 years or longer. This proposal seeks to aim a soft-target of at least 50% of the airdrop value only to participants that stake for 104 weeks (2 years) or longer. Airdrops will be negotiated on a per project basis. This proposal seeks to give Orange Pill Ltd the mandate to negotiate these airdrops on behalf of the DAO.

Staking rewards could consist of the following components:

  • Yearly MC subsidy (to be voted on every year)
  • Airdrops from partner games and from MC games. Eventuality, numbers and timing to be decided.
  • Other (DAO could decide on other forms of MC staking rewards)

Yearly subsidy

For year one (current year) under staking v1 the subsidy was set to 10% of the initial total token supply. This was purposely set as an aggressive incentive for people that bought the LBP, to equalize between LBP buyers and seed buyers (seed buyers couldn’t stake most of their $MC in the first year - LBP buyers had a way to lower their higher cost-basis in this way) and to bootstrap attention and liquidity.

For the next year (year two), the subsidy should be lower given the high subsidy for year one. It should provide attractive APRs to incentivize longterm stakers. Longterm stakers are good because they are incentivized to grow, guard, promote and otherwise contribute to the DAO, including participate in governance and provide liquidity. In return, they are rewarded by the DAO with the subsidy (& possibly other rewards). For year three the subsidy could be similar, lower or higher.

We propose a 3% stake subsidy rate (30,000,000 $MC) for year two based on the current APRs and the fact that we expect the DAO can supplement more rewards from things outside of subsidy in year two. The amount of rewards that does not come from subsidies should ideally increase each year as the DAO grows. Of course the DAO can also decide if it prefers a subsidy centric model and use revenue and airdrops in other ways (building the treasury or burning tokens).

We think it is best to set a new subsidy at the end of each year, so that it can be adjusted and fine-tuned to the live situation. It is very hard to plan four years out. Hence we also propose to have a yearly staking policy poll vote each September, where we decide on the next year’s subsidy.

The effects will go live November 5th (the inception date and start of the first year’s subsidy).

Additional potential staking benefits

  • Voting power (with similar weight multipliers)
  • Discount tiers on the NFT marketplace (Sphere) and gaming dashboard

Reward split
The 80/20 split will be maintained, but as long as the v1 pool is live, the first year, it will be split over v1 and v2 based on the TVL. To ensure a fair relative distribution of staking rewards. It will look as follows.

20% of staking rewards to:

MC Single V1 (20% total MC subsidy + staking rewards) / staking weight-based total TVL V1 and V2 single pools (sMC) * Staking weight-based TVL V1 pool

  • Relative bonus multiplier (per staker)
    MC Single V2 (20% total MC subsidy + staking rewards) / staking weight-based total TVL V1 and V2 single pools (sMC) * Staking weight-based TVL V2 pool * bonus (per staker)
  • Relative bonus multiplier (per staker)

80% of staking rewards to:

ETH/MC V1: (80% of total MC subsidy emissions + staking rewards) / staking weight-based total TVL V1 and V2 LP pools (sMC) * Staking weight-based TVL V1 pool

  • Relative bonus multiplier (per staker)
    ETH/MC V2: (80% total MC subsidy + staking rewards) / staking weight-based total TVL V1 and V2 LP pools (sMC) * LP Staking weight-based TVL V2 pool
  • Relative bonus multiplier (per staker)

After 12 months from the date of the launch of v2, v1 pools stop receiving rewards. At this point 100% of staking rewards is split 80/20 (80% MC/ETH and 20% MC) between v2 pools

New staking rewards in staking v2 will be locked for one year counting from the time of claim, similar to V1 (eMC - non-transferrable).

Other changes:

  • After your lock period has passed, you need to re-lock to retain the same bonus (currently, in v1, the bonus is maintained into perpetuity)
  • APR is calculated retroactively, to account for other staking distributions and for a changing yearly staking policy (each year the DAO can vote on the amount of rewards that should go to stakers for the next year).

Other features

  • Claim and auto-stake in 12M function (upon claiming locked rewards)
  • Claim and stake function (upon claiming unlocked rewards)
  • Bonuses portal (active discounts for account and airdrops to stakers)
  • Increase the lock of an existing deposit

Disclaimers

  • The DAO cannot make any guarantees for rewards
  • The staking module and all parameters can change, subject to DAO governance
  • Staking is not without risks. While the DAO should be incentivized to do everything to mitigate and protect against these risks, it is ultimately not able to ensure stakers against all risks.

Motivation

The new staking module will allow for more modularity and will benefit the current token economic model of the Merit Circle DAO. It incentivizes long-term stakeholders and contributors, as it has more ways to reward stakers and thereby our community. The new staking module should increase longterm liquidity for $MC and encourage active participation in the DAO.

Budget

  • Operational expenses will be borne by Orange Pill Ltd (and Orange Pill Ltd receives development budget by the DAO), who will be designated as the lead development team on this project.
  • Further costs should only consist of the audit, which should be approximately $50,000

Rationale

Are there any new risks introduced with this staking module?
There will be some changes to the code compared to staking v1. New code will be introduced and deployed, this introduces some level of risks. The risks will be similar to the risks in v1, with the main difference being that the new contracts will be mutable and subject to change through DAO governance.

Naturally, this new version of the code will be shipped for an audit like everything we have done in the past. That means that the staking module will not go live before a proper audit.

When will staking v2 go live?
As soon as it’s finished. We cannot communicate an exact date, but we’re aiming for a release within the end of the one-year anniversary of staking v1.

I am locked in V1, but I want to move to V2, can I switch immediately?
Sadly, no. We have looked at many ways to implement this, but there were no viable options to upgrade the current staking module or transfer all stakers. However, on average, all stakers will be in the same situation so in a relative way you should not be at a disadvantage (since all bonuses are relative). On top of this, the current mechanism ensures staking rewards for v1 will continue for the entire length of the locked period. V1 stakers also have a small relative bonus to stakers that stake for the same amount of days in v1 (up to a year).

I am trying to decide whether I should (lock) stake in V1, or wait for V2, what is best for me?
Since staking v2 is probably approximately two months out, using locked stake for two months or shorter (or flexible staking) seems like the best option if you want to get the maximum benefit from staking in v2. Staking v2 becomes most interesting for the stakers that plan to stake for a long time, since longer locks get exponentially more rewards. Whereas v1 has a linear bonus increase curve.

Copyright and related rights waived via Creative Commons CCO

6 Likes

Thanks for the work you all put into the proposal. I really like the new staking mechanism and rewards structure. Really looking forward to lock my stakes for 208 weeks :wink:

Voting AYE on this one!

3 Likes

Meow,

Thank you to the @DaoCoreContributors for this very highly anticipated proposal.

The proposal for a new staking rewards program is something many have been looking forward to, and we are excited to see this new program implemented in the coming months.

While the old staking system was fairly basic and immutable, we are happy that the new staking system has built in flexibility, as well as the option to lock for much longer than 12 months if so desired. We believe that those who wish to pledge their support to the DAO for the long-term should be able to do so. We also support the exponential APY bonuses for locking, as we believe those who lock for the longest should feel the most rewarded. The 80/20 reward split between LP and single-side staking has also worked well so far, and so we see no reason to change that.

While the DAO has currently decided to remain with the MC/ETH LP pair due to the significant decline of the USD price of Ethereum, it seems likely that at some point in the coming months/years there could be another sentiment shift towards USDC - as we saw earlier this year. As the new staking contracts are more flexible, would an LP pairing shift be possible if the DAO decided upon it in the future?

Overall we are pleased with the plans for V2 staking, and are happy with parameters set out by this proposal. As these staking contracts feature different code to the current ones, we appreciate that the DAO is taking security seriously, and is taking the time to have reputable audits completed

We will be happily voting YES to this proposal.

Signed with left paw,

Mr. Purrito

1 Like

Overall, a much-needed improvement. I would however ask you to look at:

Learnings from the market are straightforward → Locks don’t seem to work. They don’t produce illiquidity as the people who aren’t going going to sell aren’t going to sell. Traders will trade, core token holders will hold.

Instead of locks, which ultimately punishes your core token holders, I would move towards non-locked multipliers, whereby one still needs to keep MC staked for N period of time and gains X multiplier, however is free to unlock at any time.

By ridding of locks, we can also rid ourselves of f’ing over hardcore members whom decided to early adopt and stick with the project. In this instance, I would also consider a retroactive ‘Thank you’ to the lockers who decide to re-stake.

Eg…

  • Staker stakes in module V1 for 11 months.
  • Lock unlocks
  • Staker re-stakes in module V2
  • Staker gets a culumantive benefit as though they were staking for total N days, in the V2 pool.

S

Hi,
Thks for your work on this and all this details.

I’m in Merit Circle since the LBP and max staking in MC/ETH pool 52 weeks since the beginning. So I carefully read each proposal about $MC staking.

I’ve just 1 question.

Where the “3% stake subsidy rate (30,000,000 $MC)” will come from ?
Will it come from an other part of the initial token emission (which one?) ?
Or will it need a new token emission from the DAO ?
Or will it come from DAO revenues used for token buyback for the staking ?

Thx for your contribution to the DAO

1 Like

Thanks to all that have contributed to the discussions so far. See below responses to various questions asked on the governance forum and in other channels.

Q: I am staking with a 12 month lock in V1 contract. Lock-up will expire somewhere in November. If i decide to leave the tokens in V1 do I still get my 100% boost from the 12 month lock?
A: No. The proposal seeks to implement a mechanism that will require all stakers (both in the v1 and v2 pools) to re-lock their tokens for at least one week in order to earn added bonuses on their rewards. For instance, if your one year lock-up in the v1 pool expires on 5 November 2022 and staking v2 has been implemented as proposed, you would only continue to earn rewards as a “flexible” staker (with no added bonus).

Q: Do I understand it correctly that v2 rewards are not locked?
A: No. The lock-up period will be the same as under the current staking module, i.e. for 12 months counting from the time you claim. An auto-stake function may be implemented which would enable a staker to have the tokens automatically staked upon the 12-month lock-up period lapsing. Through an auto-stake function, the staker could stake the rewarded tokens through one transaction instead of multiple. It will only be possible to auto-stake in the single sided v2 pool (not the LP-pool).

Q: As the new staking contracts are more flexible, would an LP pairing shift be possible if the DAO decided upon it in the future?
A: Yes, that would be possible. Such shift in code does imply risks relating to migration of contracts which would need to be carefully considered and handled in a diligent manner before proceeding with it. The revised code should (as always) be subject to proper audit. This would in practice imply that the shift in code may take some time, although it is doable.

Q: Where the “3% stake subsidy rate (30,000,000 $MC)” will come from
A: The intention is that the 3% will come from the community incentives pool, i.e. token emissions from that pool.@Shad thank you for the post and views on lock-ups. The lock-up proposal is currently based on the outcome of MP-2 regarding staking, where majority voted in favor of a 48 month lock-up possibility (which was also discussed in detail by the community prior to that poll).

The point you make regarding a potential additional “retroactive” benefit for persons that re-stake is interesting. Starting this conversation internally with the development team is step one. Step two would be to implement this into this current proposal, or more realistically spin up a separate additional proposal for this.

We are happy to see further discussions on this and the other points you make — Discussion is encouraged to continue in this thread. We are happy to respond to other questions anyone may have regarding the proposal. If there are no further questions within the next 24 hours, this proposal will proceed to a vote.

1 Like

The proposal is now up for voting!

https://vote.meritcircle.io/#/proposal/0x45b53873700c5745a8fb8490503efed7209883c950ea8dc39e3177b04222c311

1 Like