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 yearâs 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 â 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 â 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 couldnât 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 yearâs subsidy.
The effects will go live November 5th (the inception date and start of the first yearâs 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 itâs finished. We cannot communicate an exact date, but weâre 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.
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