New Distribution & Staking Model

There’s a project I follow for DeFi. They have a pretty good distribution model, that favors long term holders and is a good way to distribute remaining IDLE supply.

Basically when its time to collect your IDLE rewards, they offer a 12 month lock or 1 month lock.

If you choose the 12 month lock, you get a 300% bonus in IDLE rewards.

If you choose 1 month lock, you receive no bonus and the remaining 200% that was supposed to be added to you, gets recycled/added back into distribution pool.

I think this would work really good with IDLE and will help dry up supply and incentivize holders.

We could even tweak the contracts for 3 lockperiods: 1 month, 6 month, and 12 month.

If ppl end up locking their rewards for 12 months, we can use those funds in the meantime to earn APY to build up the treasury to increase burn.

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For more clarity and extra additions to the info above…

Yes, it could be a form of staking as well, but for now I’m just talking about the the 90,000 IDLE rewards that’s being distributed monthly among all the pools that are “supplying” collateral like USD. When they redeem their rewards (APY + IDLE rewards). Give users a option between 6 month or 12 month lock periods that allows them to earn more IDLE rewards if they choose to lock upon redeeming. Will help with reward dumping as well.

The above is just one idea.

You can also add a new collateral pool specifically for IDLE token as well. This will allow users to “supply” their IDLE as collateral to earn extra idle rewards. You can look at this as a modified version of "staking’, but it’s not really staking, because the protocol will be able to use that supplied/locked collateral however they seem fit to earn interest in other ways to increase treasury/buyback/burn.

Think of it like this. Users are rewarded for helping protocol grow. They help dry up supply and at the same time it allows for protocol to grow and burn to increase. So at the end of the lock period, not only will users have more idle, but the price of IDLE will likely be a lot higher than the previous 12 months, since the protocol was earning APY throughout that lock period in other ways for treasury market buyback and burns.

When supplying IDLE as collateral into the IDLE pool, it will be different than all the other pools; There will be a time lock for it, 6 month or 12 month or even 24 months…while all other pools require none.

So for example, let’s say the maker/dai allow IDLE as collateral. We can take those users locked/staked IDLE and supply it into maker and mint DAI. Then we take those DAI and use it to earn APY for treasury, but all $ earned will be used to buyback and burn IDLE from open market.

Also, this won’t impact the staking model that is being setup to share platform fees. Stakers will still earn their share from protocol fees. And the ppl supplying their IDLE as collateral into IDLE pool will still be considered part of the “stakers” that are able to collect platform fees, but if they lock/are part of the IDLE supply pool, they will also earn extra IDLE.

You can simply view it as two types of staking pools: locked and no lock pools.

  • no lock stakers: receive normal part of protocol fees.

  • Time locked stakers: receive normal protocol fees + plus extra idle rewards + some of the APY that the protocol generated from the locked funds pool (but majority of the APY generated with locked funds will go towards buy back and burn)

I’m no coder nor financial guy, so maybe this won’t work, but just sharing ideas that I think can benefit.

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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:

  1. Vote in Governance proposals;
  2. Receive more CRV when providing liquidity;
  3. 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.

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I’m very much in favor of the proposal to implement staking model similar to Curve’s. It might add to or even replace a long-term LP incentive model, while aligning interests towards long-term success.

I see the following main-advantages:

  • Long-term alignment should make stakeholders consider long-term value creation & accrual
  • LPs who have decided to lock-up $IDLE in order to enjoy increased rewards are inclined to make use of those benefits and thus incentivize them to become long-term LPs
  • Can mitigate flash-loan governance attacks as voting power of even a large amount of tokens is tiny if held for a very short time
  • Interesting paper (I think curve’s model is ok in that you cannot lock-boost for individual votes & exit if you lose -> a minority community fraction can still fork off if some very controversial decision is taken)
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