Summary: This is an actionable proposal for an implementation of locked staking based on feedback and discussion over recent weeks.
Abstract: I believe we are in consensus over the merit of offering locking with higher returns than regular staking. It has come down to implementation, and there have been several options proposed by myself and others in recent weeks. I have tried to synthesize those options into this, which I believe has the best pro/con structure.
How it'd work:
- Locking would offer a multiplier on your stake. For example, a 1 year term could offer a 4x multiplier. By locking 10 OHM for 1 year, you would earn rewards on 50 OHM (10 + 10x4).
- Different terms would offer different multipliers. Everyone would still earn from the same reward pool, but lockers would earn on a larger amount (and therefore earn more than stakers).
- You can unlock before the end of your term, but you forfeit everything you have earned
What it might look like:
(This is a model. It's impossible to predict without knowing the breakdown of supply among terms).
Potential Staking Rewards
Y axis = multiple on 1 OHM
X axis = days (cutoff is 1 year from now)
Red part is what we have already done
Green is unlocked
Orange is 3 month lock
Blue is 6 month lock
Purple is 12 month lock
We should be able to accomplish the above while simulataneously reducing overall rewards from 0.53% supply per epoch down to 0.25% supply per epoch. We can sustain that rate for over a year with current reserves. This would offer a healthier balance of reward accumulation and backing appreciation. As you can see, lockers do not have to forfeit much for this; the rate of exponentiation is lower, but 1y lockers would likely start at a higher rate than they earn right now.
How you'd interact:
- There would be a slider window on the dApp where you can choose your lock term.
- Options would be in 1 month intervals.
- You would see the boost % you're getting, and the additional amount of OHM you will earn on.
- After locking, you will receive a voting locked token (vlOHM) that allows you to retain governance power. (This is the only purpose of vlOHM. You will never actually interact with it. It is minted to your wallet when you lock and burned from your wallet when you unlock. It cannot be transferred, traded, or utilized beyond governance.)
- When your lock is complete, you claim your OHM plus rewards.
- Before your lock is complete, you can reclaim what you staked (but forfeit all rewards).
Multipliers need to be computed off chain because lockers can compound their multiplier. Someone who locks for 12 months must earn at a higher rate than someone who locks for 1 month 12 times, otherwise everyone will do the former and they're never all that locked. This type of math is hard to do on chain, so it will become a governance policy parameter.
I propose the following: (annualized rate = boost if they compound the boost for a year at the end of each lock)
1 month: 7% boost (125% annualized)
2 months: 16% boost (144% annualized)
3 months: 27.5% boost (165% annualized)
4 months: 42% boost (186% annualized)
5 months: 60.5% boost (211% annualized)
6 months: 83.5% boost (236% annualized)
7 months: 112.5% boost (264% annualized)
8 months: 149% boost (293% annualized)
9 months: 195% boost (323% annualized)
10 months: 255% boost (357% annualized)
11 months: 335% boost (397% annualized)
12 months: 450% boost (450% annualized)
For: Implement it. Aligns incentives to compete to lock supply off the market. Reduces total inflation, strengthening market and reducing decay of backing.
Against: Do not implement it. Extra level of complexity versus basic staking. Requires commitment to get higher rewards.
Double XP weekend! We should start distributing rewards at the current 0.53% rate to both the old contract and the new one. Stakers would have 2 days to migrate before rewards start to decrease on both (with old staking falling to 0 and new staking falling to 0.25%).