SIP-7: Staking Budget for LAND Owners

TL;DR

What

At The Sandbox, we were used to reward our LAND Owners with assets and SAND based on their involvement in the ecosystem. As the community noted, the staking amount has been reduced a lot during the past months, which deters a fraction of the community to hold their LAND and stake SAND. We are proposing to use a portion of the DAO’s budget to increase the staking amount to better reward the active community.

Why

The DAO should focus on increasing SAND and LAND value and this participates in the narrative where LAND Owners are key to our ecosystem. We should reward the ones who are actively participating and staking is part of the equation.

How

We are requiring a 750,000 SAND total budget that will be spread till December 31st, 2024 to add 750,000 SAND to the total SAND pool currently allocated for the staking by The Sandbox from the DAO staking treasury.

When

As long as this decision is approved, the Sandbox DAO will send the total budget (750,000 SAND) to The Sandbox treasury so they can increase the loot pool starting on the first week of August

Who

Remy BOMPAR - Director of LAND ecosystem at The Sandbox; X profile @Bellbyche

Council recommendation: Neutral 😐

SIP Details

Background/Context

LAND Owners are the cornerstone of our community, representing over 25,000 people globally and owning more than 130,000 LANDs.

In 2022, we launched an airdrop of SAND to LAND Owners based on their token allocation, specific traits, and LAND locations. Given the evolving market, we need to carefully manage the distribution of SAND and the value we place on our community.

Rather than conducting another SAND airdrop, we aim to support our active and committed LAND Owners. These key stakeholders, who contribute to the appreciation of LAND and SAND values, can participate through staking.

Staking involves locking a certain amount of cryptocurrency in a wallet to support blockchain operations, earning rewards in return, usually in the form of additional tokens. Staking has been available in The Sandbox environment since September 2022, accessible here: https://www.sandbox.game/en/me/staking/

With 20,000,000 SAND currently locked by 4,500 stakers, we have distributed over 8.8 million SAND to our LAND Owners so far. To further incentivize participation, we propose allocating a portion of the DAO’s budget to the LAND Owner pool and increasing the APY for the second half of the year. This will boost APY (current rate is around 5%) during this period, assuming the number of stakers remains stable.

Description

We will allocate a portion of the DAO's budget, specifically 750,000 SAND, to enhance the LAND Owner staking pool. This additional budget will be distributed over a set period thereby increasing the overall reward volume for LAND Owners.

The DAO will decide whether to implement this operation.

Upon approval of the SIP, the DAO will transfer the funds to The Sandbox blockchain team, who will then allocate the new budget to the staking pool.

Users can take advantage of this enhancement by staking SAND tokens in the pool dedicated to LAND Owners. As a reminder, each LAND allows its owner to stake up to 2,000 SAND.

Rationale and benefit

LAND Owners have been requesting more rewards for some time, especially as LAND prices have been dropping. We believe that providing additional value to LAND Owners presents a significant opportunity, but we want to ensure that these rewards benefit only our active members. We emphasize the importance of remaining engaged within The Sandbox community.

Only users who stake in the LAND Owner pool will be eligible for these enhanced rewards. Currently, the weekly reward pool is 15,000 SAND, which averages out to approximately 3.5 SAND per week per staker. By increasing the pool to 47,000 SAND (750,000 divided by 23 weeks), we can potentially raise the weekly rewards to 7 SAND per staker, assuming the number of active LAND Owners remains stable and the total value locked persists at this level.

We believe that this initiative will not only address the concerns of our LAND Owners but also reinforce the value of staying active and engaged within our community. By rewarding those who contribute to the ecosystem, we aim to create a more dynamic and prosperous environment for all stakeholders.

Risk analysis

Advantages

Increased Participation:

• Attract More Stakers: Higher rewards can attract more participants, increasing the overall stake and security of the network.
• Greater Network Activity: More stakers can lead to higher transaction volumes and greater engagement within the network.

Market Demand:

• Token Appreciation: Increased demand for the staking token can drive up its price as more people buy it to stake and earn higher rewards.
• Enhanced Liquidity: Higher rewards can boost liquidity as more tokens are bought and staked, potentially leading to more trading activity.

Competitive Edge:

• Differentiation: Offering higher rewards can differentiate the staking program from competitors, making it more attractive to potential stakers.
• Increased Adoption: This can lead to a broader adoption of the network and its ecosystem, as higher rewards might entice users from other platforms.

Risks

Inflationary Pressure

• Token Inflation: Doubling the rewards often means increasing the supply of tokens, which can lead to inflation and reduce the value of the token if demand doesn’t keep pace.

Market Volatility

• Price Swings: An increase in staking rewards can lead to significant market volatility as speculators buy in for short-term gains, leading to potential price swings when they exit.
• Dumping Risk: Once the rewards are distributed, there is a risk that stakers might sell off their earned rewards, leading to a sudden drop in token price.

Considerations for Mitigation

• Gradual Increases: Implementing reward increases gradually can help mitigate inflationary pressures and market shocks (as per a weekly staking reward).
• Transparent Communication: Clearly communicating the reasons for and the structure of reward increases can help maintain community trust and support.
• Dynamic Adjustments: Building in mechanisms to adjust rewards based on network conditions and participation can help maintain balance and sustainability.

Implementation Plan

Launching between July 22nd to 25th because it matches perfectly with the blockchain operations conducting the rewards for the next 4 weeks.

Resources required

Over the 23 weeks, we will allocate 750,000 SAND/23 per week, so the DAO can send the full amount so the blockchain team can set up the staking pool properly without creating delays. The SAND will be deployed on Polygon as per the usual staking program. We won’t create a new pool of stacking, it will directly be added to the existing LAND Owner reward pool.

Metrics for Success

We can measure the number of stakers, staked volume during the period of activation, we can also track LAND and SAND prices and also claim rate of staked funds

APPENDIX

Alternatives Considered

We also thought about airdropping / opening a claim to the LAND Owners, but we felt that it wouldn’t target the really active people and we also wanted to increase the rewards to stakers who are here for the long run.