Auto-Compounding for New $DG Governance Contract

Background

$DG holders that stake their $DG in Governance receive an APY paid in $DG and proportional voting rights in the DG DAO. Today, there is 230K $DG staked in Governance ($59M USD) and we pay 600 $DG/week to stakers, which represents ~13.4% APY. Staking, unstaking, and claiming the $DG earned from staking are all ETH Mainnet transactions.

With the upcoming 1:1,000 $DG token split recently approved by the DAO, we have a natural opportunity to upgrade the $DG governance contract since existing stakers will need to unstake, swap Old $DG for New $DG, and restake their positions.

Proposal

For New $DG, introduce xDG, which represents a fractional ownership stake in the $DG governance pool. In this framework, $DG governance rewards would be deposited directly into the pool and xDG appreciates in value compared to $DG.

Rationale

Rather than paying to claim rewards, the APY auto-compounds into xDG. $DG governance positions would also be able to be traded directly via xDG rather than needing to pay to stake and unstake $DG.

Side Note: Sushi is a good example of a project using this structure today. https://docs.sushi.com/faq-1/xsushi-faq