Staking Reward Token

With staking around the corner, I feel that its important to have a discussion and gain consensus regarding how the protocol fees should best be distributed to stakers.

The original forum post mentions for the staking proposal $IDLE should be the reward token:

However I would like to propose that wETH (wrapped ethereum) should instead be distribution token to stakers.

The purpose of this post is to explain the rationale behind wETH, and to get comments from the community regarding this. A snapshot vote will subsequently be created to finalise the decision.

Why not IDLE?

Staking IDLE to earn more IDLE is a very questionable move, and does not improve the utility of IDLE. It is similar proposition to “Send me 2 ETH, and I’ll give you 1 ETH”. Put simply rewarding staking of an endogenous token with more of that same endogenous token provides more ammo for others to criticize the legitimacy of our protocol.

This is s similar argument that was put forward in

Why wETH?

For all intents and purposes, ETH is the standard currency in the Ethereum ecosystem. The purpose of staking $IDLE was to increase the tokens utility, and long term sustainability, in this case it makes sense to distribute a more stable currency. Staker’s who wish to purchase more $IDLE from their distribution can easily do so, but it also gives people the flexibiliy to trade for what ever token they want.

Rewarding ETH also provides stability because, relative to IDLE, ETH price is a lot less volatile. Indeed this was the reasoning for curve finance choosing 3CRV in the first place since it’s basically equal to a dollar (plus a little yield).

FAQ

How does this benefit the protocol?
By distributing in wETH is gives the protocol additional legitimacy, and increases the utility of the $IDLE token. Stakers are essentially incentivized to stake by “staking x $IDLE for y weeks I can expect a yield of %z”, using wETH makes the expected yield more stable than if it was distributed in $IDLE.

Doesn’t distributing $IDLE act as a buyback from the protocol?
Yes and no, while its true that by distributing $IDLE, the protocol will need to market purchase $IDLE these are not taken out of circulation, but instead redistributed to existing holders, this is essentially a zero-sum game, and the buying pressure you created, is just offset whenever the fees are traded again.

Why wETH and not IDLE_wETH_BestYield
This is actually a good alternative, though it would require additional technical effort to add which would doubtlessly increase the gas costs for claiming. Instead we could have a button on the UI to optionally deposit the fees into IDLEwETHBestYield. In this way giving the maximum flexibility to stakers.

I am very interested in what the community thinks about this, and am looking forward to having a discussion and coming to a consensus

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@8bitporkchop

I like this thinking a lot; and agree that regardless of buybacks the idle distributed remains in circulating supply anyway.

And I also think it’s a more compelling proposition to be receiving wETH as your % of performance fees. As mentioned in comments on your link to Pickle exploration of this if people want to use rewards to buy more Idle they can easily do this using wETH.

Also, as a stage 2 rewarding in IDLE_wETH_BestYield is also a great idea!

I’d like to see an auto compounding feature within this, so my wETH Gains can grow faster without needing to manually compound them (set and forget would be amazing!)

I think the reliable and more predictable returns, delivered in ETH is more attractive to new community members that want to take a share of the performance fees the protocol is generating.

I would vote ‘YAY’ :blush:

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Great topic and overview, thanks @8bitporkchop – this is an important matter as we’re getting close to our IDLE staking program.

Initially, I was personally more oriented towards IDLE as reward token, as it would allow implementing a mechanism similar to how Idle Smart Treasury is currently operating.

I see your point on the weird vibe of staking IDLE to earn IDLE, but I differ on this because in the IDLE staking community discussion we’re talking about market-buying IDLE with WETH, not just giving IDLE from eg Ecosystem/Long-Term fund. A “ponziesque” system would drive its value from the next person paying more for it than the previous one, whose only advantage comes from being early. Staking IDLE to receive IDLE (bought thanks to the inflows created by the protocol) is a totally different scenario, even if this is an endogenous token.

Regarding the zero-sum game, you’re assuming all staking rewards will be traded back again, while we can also expect that community members looking to stake IDLE are also long-term committed to the protocol – the zero-sum game would turn into a positive-sum game where the protocol redistributes its token to active and committed tokenholders, increasing their ownership of the protocol and voting power. Additionally, we could also think to reward stakers with stkIDLE (leaving to them the choice of the locking period), effectively reducing a possible selling pressure.

With that being said, I actually agree WETH would be the asset with the most utility and it would be the best for Idle brand as we’ve built our protocol on top of Ethereum, and we’re part of this amazing DeFi community.

At the end of the day, my view is that it’s not completely a matter of the reward token, but rather a matter of the cash flow generated by the protocol.

I believe this would be a choice that our community should drive, as they’ll be the primary users for IDLE staking. I would suggest spinning off a Snapshot poll about this, gauge community sentiment and then proceed with the most preferred choice.

The possible options for the reward token could be:

  • IDLE
  • stkIDLE
  • WETH
  • idleDAI/idleUSDC (even more stable)
  • IDLE/ETH SLP (Sushiswap IDLE/ETH pool token, increasing market liquidity)

PS: echoing the one-click WETHidleWETH tool (which I really like), I’d foresee another possible one-click automation (in case we go with WETH staking rewards path):

  • WETHIDLEre-stake could be really handy (always bearing in mind possible the gas cost, as I see 3 TXs here, 4 if you’ve never approved Uni/Sushi to trade WETH on your behalf)
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Snapshot poll is here, and will be live in a few hours :slight_smile:

Idle (snapshot.org)

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The League has designed this table to compare the benefits and drawback of each listed options :point_down:





Feel free to suggest other positive or negative outcomes!

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Some generic feedback on rewarding stakers in $IDLE or stkIDLE:

  • I don’t believe “ponzinomic vibe” is fair or accurate. Paying back in $IDLE is more akin to a share buyback which gets distributed. Calling it ponzinomics unfairly attributes notions of fraud/unsustainability to it.

  • If swapping the fees for IDLE is done on a sufficiently frequent basis instead of an all-at-once-lump-sum-market-buy, the front running can be curbed by quite abit. Since the former will have to be implemented regardless, I don’t see the front-running to be an issue.

Naturally (in case it’s not obvious) I am in favor of receiving IDLE as a reward Token.

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To add my 2 gwei on this topic:

Originally, I assumed staking @Idle should provide more $Idle. Staking in the native token is something you typically see with many successful layer 1 / infrastructure protocols (screenshot below) albeit Idle is DeFi where this is not typically the case.

I read some of the points raised in the Pickle Finance thread and found some compelling reasons for rewards Idle Stakers in WETH/ETH, however, I personally still prefer the idea of rewarding $Idle Stakers in $Idle for some of the following reasons:

  • I like the thought of rewarding a strong :gem::raised_hands: in the token they believe in. I think this naturally aligns with their outlook on the future of $IDLE :rocket:
  • This positive outlook would amplify the APY to higher heights as the protocol grows in TVL token utility (e.g., Idle as Collateral)
  • It could subtly reduce more of the “active” circulating supply of $Idle than rewarding in WETH or other options

Personally, I think the alignment fits better with the ethos that “Idle begets more Idle”. Anyway, that’s my personal opinion out the way. Let’s get voting! :slight_smile:

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#SAMETEAM

https://signal.idle.finance/#/idlefinance.eth/proposal/QmYy9jRimRLxhji2NjmQseiLrnUuYJMwpTATGSyVT5Siuj

be sure to vote with you IDLE!

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Hey guys,

Just wanted to share some thoughts on stkIDLE from a technical side, this is definitely the most technically complex approach, as stkIDLE based on the curve model is not exactly erc20 compatible it.

With that said, IDLE which is bought using the protocol fees can be claimed and added to your staking locked amount which therefore increases your stkIDLE balance.

This however does mean that staking rewards will not be available until AFTER the your staking period has expired.

Additionally, an edge case would be trying to collect staking rewards after your lock has expired? Do we force stakers to create a new lock? Do we distribute IDLE to stakers? Do we put idle into a vesting contract to unlock after a certain duration?

While I personally am in still in favor of WETH as the distribution token.

If the community does decides to distribute $IDLE as the reward token, I suggest that $IDLE, not stkIDLE be distributed, In this way stakers still have flexibility to increase their locked balance, without cumbersome complexities of stkIDLE.

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+1 to @RTP2016 and @mrpqzm

I would expect as an $IDLE staker to receive more $IDLE; it’s in line with other top protocols and has additional benefits laid out above.

I would also agree stkIdle would be a fine choice, however given the comments @8bitporkchop shared on the technical implementation and timing elements of claiming, I favor $IDLE and believe staking rewards paid in $IDLE are in the best long term interest of the protocol

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The initial snapshot [here] for selecting the staking reward (a multichoice poll) seems to have a bug that causes vote duplication when a user selects multiple options, we made a test with a wallet with 0.09 IDLE and it was counted twice.
Since there’s indecision between IDLE and WETH in the poll, and Snapshot multi-choice is not working correctly (it duplicates the votes), we are willing to start a Scattershot poll extension with the same options. In this way we want to give tokenholders more flexibility for expressing their opinion on the reward token for IDLE staking.
We also noticed a couple of address changing the vote during the poll, so we expect this can help better gauge the real sentiment of tokenholders.

Please cast your vote again here :arrow_right: Scattershot (fork of Snapshot) the poll is open until this Sunday :ballot_box::alarm_clock:
Please note that now you have the possibility to split your vote in %.

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The Scattershot is closed and the community decided to stake their $IDLE tokens to earn more $IDLE rewards and increase their APY! :money_mouth_face:
We will now move on with the IIP on-chain implementation and IDLE staking will go into production next :rocket::fire:

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