My name is Matus (@msteis on Twitter), in crypto for 5 years, an ex-Outlier Ventures Token Design Lead, advised 50+ projects on token economy design.
I’ve been following Idle for some time and noticed that the utility of the protocol itself does not really do justice to the price of its token. I did some thinking and would have a couple of ideas on how to improve the value accrual mechanisms of the token.
I do realize that many of you have been working on Idle for a number of years, so I don’t want this to seem as too prescriptive, but rather as the beginning of a discussion and a collection of thoughts from multiple sides.
In my experience, token economics is largely about ensuring that demand for the core utility of the protocol is proportional to the demand for the token, and ideally inversely proportional to the token supply. That’s why various forms of staking are often the simplest and most elegant way forward. Rising demand for the protocol utility causes higher demand for the token (as it needs to be staked to get access to that utility), and the staking mechanism causes supply to shrink (as tokens are staked). Higher demand & lower supply = positive price impact.
Here is a couple of ideas as to what the IDLE token utilities could be that came to my mind:
Staking IDLE tokens in exchange for access to premium features on Best Yield, e.g. users who have staked at least x IDLE tokens or at least y $ value in IDLE tokens get priority access to new pools, get priority when redeeming idleTokens during congested periods, etc., this could be further brainstormed with someone who knows more about the product and its roadmap.
Safety Module backstopping e.g. the senior tranche on Yield Tranches, i.e. users stake IDLE tokens in a smart contract called Safety Module and earn yield (coming from fees and / or newly minted tokens), hereby increasing security of the deposits in senior tranches in cases of black swan events / hacks, etc.
Staking for gas fee rebates, e.g. users who have at least x IDLE tokens staked get their gas fees rebated when interacting with the protocol’s smart contracts.
The pattern here is that we’d layer additional utilities onto the token, so that more users would want to buy it and lock it away from the circulating supply.
Also have other ideas in mind and would be happy to discuss further if the community thinks this is something that would help!
Ciao @matus.eth and welcome to the forum!
Your post comes at an interesting time as we were internally discussing similar topics around IDLE / stkIDLE and its utility in the Idle ecosystem.
All points you raised could be viable and I would also add in the discussion the possibility to do fee rebates on the underlyings (not only gas fees) for Idle depositors.
One thing to consider is what can and cannot be done with the stkIDLE contract that we already have (which makes stkIDLE non transferrable), as this is a non upgradeable contract so it limits a bit some of the possibilities
Anyway in the next days Treasury League will come out with some more insights on this
Welcome to the gov forum, @matus.eth! It’s great to have you here, and I’m glad you’re kicking off ideas to improve the utility of IDLE.
I agree with you that the utility of the IDLE token can be improved, especially towards the product suite and its usage.
Currently, the stkIDLE staking model is based on VeTokenomics, but we’ve observed that the Gauges module is not really adequate for yield strategies as it’s been for AMM pools, so the community decided to lower the incentives on that side. This is fine, as we need to continually evaluate our staking model to ensure it remains effective and relevant to our community’s needs.
Regarding the options you suggested:
stkIDLE for premium features: this is interesting and could work well for new Yield Tranches that get released over time – would be useful to test if there’s interest for this kind of feature among the current customer base
Safety Module backstop: this option can give even more value to the Senior side and it’s implemented by other DAOs like Aave, however, I’m not a big fan of this model because if the staking assets are used as a backstop (so likely need to be converted into other assets), it could create a higher-impact negative flywheel during turmoil events.
Fee rebate: that’s the option I like more as it’s well-connected to the usage of the product suite and adds utility to it. As @william suggested, we can add a plain fee rebate/discount on the performance fee, so could be a good fit both for large LPs with fee discounts and for small LPs with gas fee rebates.
I’d be happy to hear the other ideas you have in mind, and I’m keen to hear other voices from our community about this. Would love to see this becoming a structured proposal and get voted by IDLE tokenholders. Thanks for starting this discussion!
Hi @matus.eth, thanks for sharing your thoughts with us!
And glad to see @william and @Teo answers, I agree with the vision reported in their
I’d like to deep dive into the points you raised:
Access exclusive pools via IDLE staking. Idle released 10+ tranches in 2023, and many others are in the pipeline. These products target sophisticated investors (e.g. Hedge Funds and HNWI), providing outperforming results compared to other market solutions. The priority access would amplify economic benefits for LPs, thus staking-based access would reward LPs that are also protocol owners.
This approach would particularly fit leveraged strategies, where the max return is usually achieved once a few m$ is deployed.
Safety Module, introduced by Aave, was mentioned in the initial conversation. The DAO voted for the Curve-like model (veTokenomics) and the staking infrastructure can’t be modified to support it.
Staking for gas/fee rebate: both fees and gas can be included in a sharing mechanism, with the former representing a higher return for large players and the latter for retail.
The cost to own IDLE might be higher than the actual gas rebate and this can create a barrier to entry for retail, while large deposits can benefit from a discount that generates positive ROI.
Keen to hear other ideas and identify the best ways to expand IDLE token utility
Re. stkIDLE contract - Understood, do we know what the current ratio of stkIDLE vs. circulating supply of IDLE is? Just so that we know how many tokens would be missing out on the benefits of the potential upgrade. Is this the correct contract? Staked IDLE (stkIDLE) Token Tracker | Etherscan
Re. Rebate split (fee rebates on underlyings vs. gas fee rebate) - This is a good idea, targeting both small and large users with different utilities that are relevant to each. We need to be careful about the costs of this, as you rightly pointed out. Is this dune dashboard reliable? https://dune.com/idle.finance/revenue-outlook
Re. Access to premium features - Are there available relevant user data that we could go through to check interest @Teo?
Re. Safety Module concerns, this is totally valid, I think what Aave does is that they also have something called Backstop Module, which is a smart contract with ETH and stables and gets sold of first in the event of a shortfall. What might make sense would be to restake the assets staked in the Safety Module to 3rd party yield protocol and use e.g. 50% of the yield to fill up the Backstop Module? Although this would introduce additional risks, so not sure if worth it. Also, Aave’s FDMC is ca. $1bn, IDLE’s is $3.5m, so they have more insurance capital to work with (but also much more to lose in the case of a shortfall). So yeah, Safety Module should definitely be implemented later (if ever), when IDLE has more traction and higher MC. Not a priority now, especially given @davide 's point that it’d be difficult to implement.
Re. my other ideas:
In case anyone of your partners (e.g. Euler, B.Protocol, etc.) owns a significant portion of IDLE tokens, it might make sense to try to negotiate a deal where if people stake IDLE, they’d get benefits on other protocols (which would potentially benefit your partners’ treasuries). I haven’t heard of this being done yet though, so just an idea.
This is a somewhat crazier idea, but if IDLE continues developing / shipping more products, gains more traction and Ethereum layer 1 no longer fulfils its needs, it could make sense to redo IDLE as a layer 1 chain, similar to what dydx have done. Also not a priority now, but might make sense to keep our minds open in case the adoption comes.
In terms of prioritization, what do you guys think makes the most sense to focus on now? Premium features and rebates? Interested in your thoughts!
let me jump in the conversation
I’m summarizing all the above points in a comprehensive post to present the available options and get the DAO votes in an informed way. But before its publication, let me answer your points above.
The current number of staked IDLE is 1.6m (source) vs a circulating supply of 5.4m (source), i.e. ~30% staked tokens. And yes, the address you shared is the IDLE staking (stkIDLE) one.
Yes, the Revenue Outlook dashboard is a useful source of data. It has just been updated to support Dune SQL. Let me also point you to our quarterly reports, which are available in our documentation. The Performance Reports are a bit more comprehensive.
Been Idle fully permissionless it’s a bit difficult to gather the sentiment of our depositors regarding this gated feature outside our Forum. We are in contact with some institutional LPs, though, and we will ask for feedback on this. I agree with Davide and see the added value in this premium access.
We may also think to leave the deposit “free” for smaller LP positions (say below $2.5k) and introduce a gated entrance only for deposits above a certain threshold. In this way, we should be able to accommodate both retail and institutional interests.
thanks @Biaf for pointing out the right resources, and I concur re premium features that we could research and get some feedback from institutional LPs.
In general, I believe that if we expand the current product suite towards underlying yield strategies such as leveraged/folding yield (recursive lending/borrowing to leverage yield), delta-neutral or option-based strategies, that’s the vertical where premium features might lie – these strategies need to have a max capacity, and stkIDLE holders might get priority access to them.
Glad to hear @matus.eth’s other idea, my 2 gwei about them:
Looks interesting, would you mind expanding on the benefit on other protocols? Do you mean something like rebates?
I guess this applies more to underlying integration like Lido/Clearpool/Compound/Aave, rather than ontop integration (like Shapeshift/Yearn/Harvest), as for the latter there’s already the Integration Partner Program as incentives. Btw, at the current time, we’ve Lido DAO with about 25k IDLE coming from our D2D collab in 2022.
Eheh like this idea, and actually got some similar thoughts from the team using account abstraction infras similar to InstaDapp’s Avocado – not sure it’d be a great UX improvement to use only IDLE as gas currency, but with a multichain future it might be useful to have native AA that would let users deposit into any preferred chain without the need to switch, allow users to pay gas with the token they want to deposit, and use IDLE as an alternative gas currency (with a lower cost).
I feel that as of now, the priority might go over rebates with stkIDLE as an update of the current staking module – ofc happy to hear IDLE holders’ opinions, so probably it’d be natural to run a snapshot about it as the next step and see where Idle DAO wants to go!
