SIP-12: Revised tokenomics

SGT Tokenomics Improvement Proposal & Messaging Docs

SIP: 11 Document with images: https://docs.google.com/document/d/1HJm289xCvnpE_oA1ncEZYj9BghLPJNM8Qq5kn9CAFHo

There has been discussion within the community regarding the tokenomics of the SGT governance token. We are excited to roll out the first in a series of SIPs that will progressively move development of a staking model where SGT is locked up to boost yield across the various staking rewards pools. This will lead to greater demand and reduced circulating supply for SGT in the short to long-term.

The long-term goal is to develop SGT into a cash-flow positive token, where eventually ETH2 Fees collected could be distributed directly to SGT stakers, in addition to SGT yield. Our short & mid-term goal is productizing a staking & lock-up model for the SGT token. We are using a working “veSGT” title for this effort within our tokenomics working group and community calls. This will provide a strong foundation for future product & vault development.

The following emissions have been developed by the core team and a working group of community volunteers and project advisors to prepare us for this larger goal.

Why Revising Current Tokenomics Matters:

SIP (x) puts to vote a revision of the current SGT token emissions. Currently 2.9 million SGT tokens are allocated for distribution over 2 years (through November 2022) with emissions ramping up largely from Febraury-November 22 (~45% of the total emissions occur in the final two quarters). See below for specific numbers.

The current model risks heavy dilution to early project stakeholders and may not be the most practical for a model where holders are locking up SGT to boost yield. Additionally, with vETH2 rewards to the day (via the 5% fee) may take some time to scale up, as well as come online. We believe a longer, more smoothed over emission curve will supplement yield more sustainably and reduce dilution risks to the earlier project supporters & investors.

Proposed Tokenomics Changes:

A “Yes” vote will push a DAO-approved revision of SGT token emissions beginning in quarter 2 (Beginning May1st). It will extend and smooth the curve of SGT token emissions across all staking rewards pools.

SIP (Number) proposes two fundamental changes to current SGT tokenomics & emissions. The proposed emissions can be viewed here and below:

A “Yes” Vote Means 3 Key Changes to SGT Tokenomics:

• Extend emissions from 2 years to 3 years (August 2023 being the start of the final quarter, instead of August 2022).
• Revise the rate of SGT emissions to increase in the short-term but to decrease at a deflationary rate over time. (See curve comparison below)

The total taking rewards (2.9 million) remains unchanged, only the pace & rate emissions.

Additional Note to the DAO on Involvement in Staking Model Development & Tokeonmics:

As we are rolling out additional liquidity pools and products for our users we are looking to consider adjusting stakeholder reward weights from the staking contract after the emissions vote has passed. We invite the community to engage our upcoming community call(s) to provide feedback on this topic and participate in the ongoing development of the “veSGT” staking model we’re looking to develop through quarter 2. We’re just getting started and want to build with our users and community.