Thanks @Falcone for bringing the attention of the community to this topic.
Staking is a mechanism widely used in crypto space, since the birth of pure PoS blockchain. In that case the stake entitles validators to produce new blocks. In the token world, staking does not allow people to generate/mint more tokens, but dedicated funds can be addressed to such actors for their commitment.
This kind of staking locks the number of tokens available on the open market, bringing benefits for token holders, but it has no material advantages for the protocol itself (no increased TVL or accrued fees).
This model might be applied in the early stage, to test the community traction towards staking programs, but I can’t see it as a long-term solution.
It is for this reason that I’d like to introduce the Curve staking model.
CRV holders can lock their CRV into the Curve DAO to receive veCRV. The longer the locking period is, the more veCRV they are entitled to receive.
There are 3 major benefits for veCRV holders:
- Vote in Governance proposals;
- Receive more CRV when providing liquidity;
- Receive part of the protocol’s fees.
The first two points are very interesting:
- Token holders that want to join the Governance lock $IDLE for long periods and have full voting power;
- Token holders that prefer a balanced strategy between funds availability and Governance participation have reduced voting power (short locking period);
- Token holders interested in $IDLE Liquidity Mining get a reward boost by locking tokens (or the opposite situation, investors that do not hold enough $IDLE get reduced incentives);
- Token holders that are not interested in the Governance prefer funds availability, therefore have no voting rights.
Even if it’s early to implement a fee-sharing program (Curve generates 30M in fees, Idle now sits on an estimated 200k per year), that part might already be ready to be added once the right time will come.
This system might align holders’ incentives, Governance participation and protocol’s growth.
Using $IDLE as collateral is definitely interesting, but I have some concerns on the security/resiliency side.
The creation of $IDLE vaults on top of the staking program implies that Idle protocol redirects those locked $IDLE to third-party lending protocols, so the stakers are heavily relying on other platforms. Furthermore, I expect substantial complexity in developing vaults on top of a veCRV-like staking system.
The use of $IDLE as collateral might be a further value proposition, but not linked with the voting/staking use case.
Some community members might decide to allocate $IDLE in vaults, focusing only on economic benefits, while others could balance returns and Governance rights.