SD Mega Burn: Proposal to reduce total $SD supply

Summary As part of the Tokenomics revamp, StaderDAO proposes SD Mega Burn, a one-time burn for optimizing token supply by 30 Mn $SD & bringing it down to 120 Mn $SD vis-a-vis the current 150 Mn $SD.

Motivation The past three years have made Stader Labs a leader in the multi-chain LST space.

▹ $550M+ TVL & 85K+ stakers across 4 chains
▹ Largest LST product on Polygon & Hedera ▹ Fourth largest LST on Eigen Layer

Key insights gained during this period include designing an optimal rewards structure, enhancing incentive mechanisms, and gaining a nuanced understanding of fund requirements. Reducing our total supply is a pivotal step in optimizing SD tokenomics.

Thus, the team proposes SD Mega Burn - a one-time burn of 20% of the total token supply, reducing the total supply to 120M $SD from 150M $SD.

For more details on the current and proposed token supply breakdown: https://forum.staderlabs.com/t/sd-mega-burn-proposal-to-reduce-total-sd-supply/1107

With partnerships with leading industry players such as Ledger, Metamask, OKX, Safepal, Anchorage and BitGo, Stader has established a strong playbook for growth in the industry. On the basis of this playbook, we did extensive rewards planning to sustain our ambitious growth targets over the next decade and have proposed the below revised token economics:

Doubling our current rewards rate and assuming zero price impact on SD, we need 36M SD in rewards over the next 10 years to achieve a minimum of 10X growth. Given that this is a fairly conservative estimate with a very long runway, the extra unvested SD of 7.5M is value dilutive for the community and it might be prudent to burn this excess supply in the rewards bucket.

The DAO Fund was intended for any additional incentives beyond the rewards spend. With delegations to universities, ecosystem partners and community advocates to strengthen community governance, we have utilized 2.5M SD so far. A burn of 15M SD from this category, leaves us with ample allocation of 5M SD for future governance and incentivisation purposes.

The Ecosystem Fund was intended for additional team, partner incentives and any future fund raise along with any POL. A burn of 7.5M SD in this category leaves us with a buffer of 2.2M SD which as per our historical requirements and future growth assumptions, more than suffices for upcoming needs in this category.

This tokenomics burn plan has been proposed after detailed discussions with community members and token holders who had concerns around the low float and high FDV of SD token. With a much better understanding of incentives and rewards required to meet our growth objectives, the SD Mega burn proposal addresses these concerns.