Prime Staking - IDLE staking v2

The following is an extract of the proposal posted on the Idle governance forum.

Summary

A proposal to present the IDLE staking version 2 - offering unique fee discounts to stakers.

Background

This summer the DAO's Leagues presented an analysis focused on updating the IDLE staking

At the time of writing, the number of staked IDLE is 1.6m (source) vs a circulating supply of 5.4m (source), i.e. ~30% of IDLE staked. The ratio of staked IDLE vs the total IDLE supply is ~12%, locked for an average of 1.8 years.

Leagues are aware that the utility of IDLE staking should be revamped. It’s then worth discussing some old and new ideas coming from the community to have a clear view of the available options to update the current model.

multiple ideas were shared and discussed

We would like to gather the sentiment of Idle DAO toward all the proposals listed:

1. Pause the staking reward program for stkIDLE holders
2. Introduce a performance fee discount for stkIDLE holders
3. Introduce early access to new pools for stkIDLE holders
4. Update Snapshot’s voting power for stkIDLE holders

The DAO voted to pause the staking reward program, i.e. proposal 1.

Rationale

During M3-2023, Leagues continued brainstorming about the second proposal both internally and with some stakeholders

2. Introduce a performance fee discount for stkIDLE holders

Fee discount: that’s the option I like more as it’s well-connected to the usage of the product suite and adds utility to it. As @william suggested, we can add a plain fee rebate/discount on the performance fee, so could be a good fit both for large LPs with fee discounts [...]

This post aims to formalize the structure of the program and then vote on it.

Fee Discount

Goals

This strategic initiative offers a dual advantage. Liquidity providers, integral to the protocol's revenue stream, will have the opportunity to benefit from a fee discount. At the same time, IDLE token holders will benefit from an enhanced utility for their tokens within the Idle ecosystem, potentially catalyzing heightened demand and an augmented volume of locked IDLE tokens.

This convergence of efforts aligns the objectives of diverse stakeholders in the long term and has the potential to cultivate a more dynamic and robust governance framework.

Discount Tiers

In the IDLE staking update post, we outlined some possible discount tiers, these may be the final ones starting from the base performance fee of 15%

This table assumes that the IDLE tokens are staked for the longest length available, i.e. 4 years.

stkIDLE linearly decreases from the lockup date to the end date. The maximum locking period is 4 years.

Shorter staking periods will affect the discount applied. Following the amounts presented in the Tiers summary table above, a locking of 2 years will make T1 not applicable. Similarly, a locking of 1 year will make T1 and T2 not applicable and so on.

Beneficiaries

The discount will be applicable to the IDLE stakers at first.

We can then think of expanding the beneficiaries list and include other LP tokens starting from the 80-20 IDLE-USDC Balancer pool and then consider other pool such as an IDLE-WETH pool on Liquis.

Such LP tokens will need to match the dollar value of stkIDLE.

Methodology

Ideally, users should have the staked IDLE (or equivalent LP tokens) in the same wallet that they will use to deposit into Idle pools.

Leagues will manually distribute the discount in the form of the underlying tokens of the pool once a month using a dedicated dashboard for the actual matching of stkIDLE and deposits with the relative fee generated and the fee discounts. The process of discount distribution will be then automated letting users receive the discount directly in their wallet.

A minimum threshold of distribution equal to $100 will be applied to avoid demanding transaction management. Undistributed discounts will be accrued and shared once the minimum threshold is met.

This methodology allows depositors to increase their locking period over time to maintain the discount tiers of interest.

Pools

The program will be initially tested for 3 months on the Yield Tranches pools (besides the Fasanara YTs, part of the strategic agreement with the DAO) on Ethereum. When fine-tuned, it could be expanded to the Best Yield vaults and to other chains where the Idle product suite is deployed.

Example

One example of the Clearpool Portofino DAI YTs has been detailed in the proposal and may be helpful in understanding the proposal.