What Should Be Done With Bought-back SD?

As part of our SD buyback transparency framework, we are opening a formal discussion on the use of SD tokens acquired via quarterly buybacks. This is a critical step in aligning value accrual with the long-term interests of the protocol and its stakeholders.

The community is now invited to help decide how these tokens should be allocated. With more than 70 votes cast across Telegram, Discord and Twitter, Option 1 (Burn) and Option 4 (Distribute to SD stakers and Cabbage traders) have been the most popular. Those are the ones that will be laid out here for final voting.

Context: Initial Buyback Pool and Distribution Schedule There are already 562,000 SD tokens accumulated in the buyback wallet (0xEfe40fF167A89Ce3babdad161d41d798Ca7116b2). These tokens will be used alongside the ongoing quarterly buybacks and will be distributed gradually over the first 12 months following the activation of the selected distribution policy.

Broader Context: Toward Zero-Inflation Distributing SD tokens from the buybacks will reduce the need for ongoing emissions. The SD emissions budget is currently published quarterly on the forum and outlines all incentive outflows.

Link to the latest SD emissions budget (July 2025): https://forum.staderlabs.com/t/sd-tokens-emissions-budget-jul-25/1419

Currently, the protocol emits around 100,000 to 150,000 SD per month, while quarterly buybacks are already absorbing the equivalent of approximately 50,000 SD per month in market value. The long-term goal is to fully offset emissions through buybacks, eventually reaching net-zero token inflation. This goal is now within reach and requires careful alignment of incentives and execution.

Deciding SD use-cases Option 1: Buyback and Burn SD tokens are permanently removed from circulation by sending them to a burn address. Examples of similar models include BNB, TRX, and VRTX. Pros: Deflationary model Simple to implement and verify Value accrues to remaining token holders

Cons: No direct reward to protocol participants No flexibility for future incentive programs

Option 4: Hybrid Distribution: 50% SD Stakers, 50% Cabbage Traders A balanced approach where 50% of the SD buybacks are distributed to SD stakers in the Stability Pool, and 50% to active traders on Cabbage. Pros: Incentivizes both governance participation and product usage Distributes rewards across user segments Flexible structure for future tuning

Cons: More complex implementation