[EXAIP-01] Transitioning to EscrowedEXA rewards (esEXA)

• Proposal ID: EXAIP-01
• Proposer: Exactly Core Team
• Date: October 11, 2023

Summary

This proposal seeks to unveil a redefined reward and swapping system that prioritizes the stability of the Exactly protocol with the new EscrowedEXA rewards (esEXA) for the benefit of long-term community members.

Background

Since launching the EXA token on July 24, 2023, our protocol has taken significant strides forward, giving the protocol a governance token and allowing the creation of Exactly DAO to start the path to decentralized governance.

We started by conducting an airdrop to stream the 100k EXA tokens using Sablier over four months. We also started the distribution of the EXA rewards with our Rewards Controller contract to start building an engaged community of EXA holders.

You can find the current EXA metrics in the following Dune Dashboards:

• EXA Airdrop
• EXA Token

But our vision goes beyond these early steps. Our main focus is ensuring the protocol's long-term sustainability. To achieve this, we refine our tokenomics plan and recognize the need for innovative mechanisms that preserve the protocol's integrity and provide enduring benefits to our users.

Proposal

We propose to cease the direct distribution of EXA rewards and transition to a more stable reward system by introducing the Escrowed EXA token (esEXA). The idea behind esEXA is to provide rewards equivalent to EXA, but with a linear vesting period, gradually releasing EXA tokens, ensuring that the Exactly protocol remains sustainable and rewarding for long-term community members.

This change encompasses the following elements for the esEXA to EXA conversion process:

• Burning Mechanism: Holders will burn their esEXA tokens to initiate the vesting period and convert them into EXA tokens, through Sablier.
• EXA Reserve: Holders must reserve some EXA tokens to start the vesting process.

The EscrowedEXA contract is an ERC-20 token contract that allows users to mint esEXA tokens in exchange for EXA tokens. The esEXA tokens are only transferable for accounts with a TRANSFERER_ROLE reserved for the protocol contracts to integrate smoothly.

To initiate the vesting process, users must reserve a portion of their EXA tokens as a reserve, with the reserve amount being a percentage of the total vesting amount previously configured by the protocol governance.

Vesting is orchestrated through Sablier, which establishes a dedicated stream for the user's vesting, linearly releasing EXA tokens to the user over time.

Users can cancel the vesting at their discretion, triggering the withdrawal of all vested EXA tokens from Sablier and the associated reserve. Any unvested tokens are returned to the EscrowedEXA contract, where the corresponding esEXA tokens are minted and returned to the user.

This mechanism guarantees that the exclusive path for the users to retrieve reserved EXA tokens from the EscrowedEXA contract is by adhering to the stipulated vesting schedule.

Implementation

The Exactly development team will implement the necessary procedures to integrate the esEXA token into the existing protocol. This process involves:

1. Develop EscrowedEXA.sol (esEXA) smart contract as a new periphery contract.
2. Audit the new smart contract with ABDK and OpenZeppelin.
3. Add the new esEXA token to the existing Rewards Controller contract (already audited by ABDK and Coinspect).
4. Update the UI of the Exactly Web App.
5. Define the initial parameters (vesting time and reserve percentage).

Conclusion

We are introducing the esEXA to improve the existing EXA token distribution scheme. This proposal seeks to strengthen the Exactly Protocol tokenomics to benefit long-term community members.

Your Feedback Matters

We value the insights and feedback of each community member. Before we proceed with this transition to esEXA, we invite you to share your thoughts, concerns, and suggestions regarding this proposal.

Next Steps

Pending community feedback and approval, the esEXA reward system will be implemented to ensure a smooth and secure transition to a better community rewards system.