[EXAIP-14] EXA Staking Program (stEXA)

• Proposal ID: EXAIP-14
• Proposer: Exactly Core Team
• Date: 28 August 2024

Summary

The new EXA Staking Program will enable EXA token holders to get treasury fees and gain additional voting power by staking their EXA tokens. This structured system of rewards will be based on the staking duration and the amount staked, promoting long-term commitment and contributing to the Exactly protocol’s growth and stability.

The staking period will be twelve months. During this time, the stakeholder can add more EXA to their stake to earn more fees, partially or fully claim them, or unstake their entire position.

The staking program is designed to reward long-term EXA holders; the fees available to claim will be reduced if the users withdraw early or keep the stake active after the twelve-month period ends. To receive the total fees, the users must keep their EXA staked for the entire staking period.

Background

Over the past 18 months, Exactly Protocol has grown from an early-stage DeFi protocol to one of the top lending protocols on Optimism, according to DefiLlama, with +176k transactions, 38k users of the protocol and almost 3k EXA holders. In June 2023, the Treasury Fee parameter was activated on OP Mainnet, and its treasury retains 20% of the interest fees paid by borrowers. You can follow the amount of Treasury Fees collected in our Dune Dashboard

Proposal

Exactly Protocol will launch the EXA Staking Program, designed to reward the Exactly DAO participants through a structured and automatic distribution of protocol fees.

Staking Program structure:

• Distribution of protocol fees: The protocol's treasury fees will be partly allocated to the Staking Program. A specified fraction (providerRatio) of these fees will be assigned to the staking pool, with an initial parameter of 0.5 (50% of the fees)
• Dividend module: Users who stake their EXA tokens will receive dividends based on the staking duration. The dividend index updates regularly, ensuring that participants who stake for longer periods receive proportional rewards. This module supports multiple assets, although a single-asset approach for USDC will be used to simplify the automatic dividend distribution.
• Enhanced voting power: Stakers will gain additional voting power, directly influencing protocol decisions. The voting power increases with the staking duration, incentivizing users to stake for extended periods.
• Extra rewards: Besides dividends, participants in the Staking Program could receive rewards in other tokens, providing further incentives for long-term participation.
• Discretionary EXA buybacks buy the Treasury with the remaining fees not distributed in the staking program.
• Penalty function for early withdrawals: The program will incorporate a penalty function to encourage the completion of the staking program period. Early withdrawals will incur penalties, reducing the dividends awarded.
• Penalty function for overstayers: Users will be encouraged to restart their positions after the end of the staking program. There will be a penalty function for users who stay in the program longer after the finish date.

Implementation

The implementation of the EXA staking program will involve several key steps:

1. Development of the Dividend Module: Create the technical infrastructure for the dividend distribution, including calculating and updating the dividend index. Ensure that the system can handle both single-asset and multi-asset dividend distributions. In this step the following parameters will be initially set:

• ProviderRatio: 0.5 of withdrawn assets to provide when harvesting. The rest goes to Exactly DAO Savings Account Multisig
• Market from which to harvest: USDC native market
• Minimum time (minTime) to stake and get rewards: 0 months
• Reference period to stake and get full rewards (refTime): 12 months
• Discount factor for excess exposure (excessFactor): 0.9

2. Integration of the Penalty Function: Establish the rules and mechanisms for the penalty function to ensure fair distribution of dividends and discourage periods shorter or longer than the established reference time. In this step the following parameters will be initially set:

• penaltyGrowth: Penalty growth factor: 2
• penaltyThreshold: Threshold penalty factor for withdrawing before the reference time: 0.1

3. Adjustment of Voting Power: Modify the governance framework to account for 50% more voting power for EXA stakers scaled by their staking duration.

4. User Interface Updates: Update the Exactly Protocol’s web interface to provide clear information and tools for staking, tracking dividends, claiming, and withdrawing. The new staking program will be location the Strategies Section and will look like this:

Audits

• Chainsafe audit report
• Sherlock audit report
• StakedEXA.sol GitHub final commit

Staking model

• Math notes

Conclusion

The new staking program will enable EXA token holders to receive treasury fees and additional voting power in the DAO, aligning incentives for long-term commitment and contributing to the protocol’s growth and stability.