SharedStake Governance V2

New Governance Tokenomic details

Chimera Defi
7 min readAug 23, 2021

Table of contents

  • Goals
  • Detailed token split (Farming, founder, treasury, cross-chain rewards)
  • New token mechanism (Migration, veSGT intro, farming)
  • veSGT (Value accrual, token burn, token utility)
  • Governance & Token safety features (ownership transfers and decentralization)
  • Timeline
  • Early developer preview (Links to smart contract sources, solidity metrics, inheritance hierarchy)

Goals

We wanted to improve our previous tokenomics by learning from our community and thought leaders in the DeFi space

The main goals of liquidity mining for SGTv2 and the new token are:

  • Reduce gas costs with a standard Burnable ERC20 based on OpenZeppelin reducing contract size by 50% for SGTv2 token
  • Reduce sell pressure via a migration contract instead of airdrops
  • Improve governance via only allowing snapshot proposal creation and voting via vote escrowed liquidity similar to Andre Cronje’s projects like Kp3r and Fixed Forex
  • Incentivize staking via SharedStake, and liquidity for the tokenized staked ETH and our governance token
  • Prevent rug-pulled tokens from Kairos from re-entering supply via a blocklist
  • Follow community decided tokenomics as closely as possible
  • Vest both treasury and founder shares to alleviate share dilution concerns
  • Quarterly micro-adjustments to prevent overpaying for liquidity. Following the mechanism.capital Native Token Liquidity primer.
  • Add a token burn mechanism
  • Add value accrual and share buybacks

We plan to use airdropped options in the future to drive more usage instead of direct token airdrops. Additionally we hope to do a wider airdrop to a larger audience to attract more governance participants and users of other protocols to get more feedback on SharedStake.

Detailed Token split

Farming, founder, treasury, cross-chain rewards

In the past we had spirited discussion on improving tokenomics within our community and we will be using a simplified version of that.

You can see the governance vote here:

And the detailed breakdown: https://docs.google.com/document/d/1hHcXJB4go1ngJAH3YVFuNZE1uUjph8DBkNMpGNAt9oQ/edit?usp=sharing

We will be honouring the community decision.

With some minor modifications and simplifications:

  • Reduce total rewards duration to Dec of 2023. This is to allow us time to actively transition the project to full decentralization within the SEC’s 3 year grace period mentioned in the Token Safe Harbor Proposal
  • No 2 year timelock, there is far less uncertainty around ETH2 landing in Q1 2022 now
  • Pick up at the token circulation at the current time. There is 6.8M SGT in the community multisig. Therefore this will the number of token used for farming and future rewards.
  • 3.2M tokens will be added to a TokenMigrator contract that will allow users to exchange circulating or held SGT to SGTv2
  • Farming rewards will be deployed cross chain
    - 60% of farming rewards will be deployed on Ethereum — 2.04M tokens
    - 20% on Avalanche — 680k tokens
    - 20% on Polygon — 680k tokens
  • New farming ratios on Ethereum will be:
    - 50% for veSGT
    Remaining 50% will be split across other pools
    - 20% for SGTv2-ETH LP
    - 10% for vETH2-ETH LPs on Saddle or other stable swaps protocols
    - 10% for Ruler or other lending protocols
    - 5% for solo SGTv2 stakers
    - 5% for solo vETH2 stakers
  • Farming ratios on Polygon will be:
    - 60% for SGTv2-Matic
    - 40% for vETH2-ETH
  • Farming ratios on Avalanche will be:
    - 60% for SGTv2-AVAX
    -40% for vETH2-ETH
  • Consolidate all non-farming and non-founder shares into the treasury.
  • 15% founder tokens will be vested over 28 months — 1.02M tokens
  • 35% treasury tokens will also be vested over 28 months to prevent overpaying for early staff, bug bounty’s and such — 2.38M tokens
    These will be used to fund marketing, external development hires, partnerships, bug bounties

Spreadsheet with the tokenomics breakdown:

Rough diagram of the tokenomics:

Rough farming distribution diagram

New token mechanism

  1. There is no airdrop
  2. There is a migrator contract which we will launch to mainnet. It can be used to convert SGT into SGTv2 for those that choose to. A user will need to call a “migrate” function on the contract while having SGT in their wallet that the contract is allowed to spend. The contract will burn the amount the user specified, and in return send SGTv2 to the user. This will be a 1:1 conversion of SGT to SGTv2
  3. SGTv2-ETH liquidity will need to be locked into a VoteEscrow contract to generate veSGT which has governance rights and the most rewards.
    This, like Pickle, Curve, Iron, seeks to provide long term price stability and liquidity and make sure people with the long term interests of the protocol are participating in governance.
v2 governance mechanism

To launch quicker, we will be releasing an article with the steps needed to migrate from SGT to SGTv2 and generate veSGT on-chain before we launch a UI.

veSGT contract and UI will be outsourced to a separate protocol. More details to come.

veSGT

Token burn, value accrual and token utility

veSGT is minted depending on the lock duration. i.e 1 SGTv2-ETH LP locked for the max duration of 3 years will generate 1 veSGT. Lower time locks will generate proportionally smaller amounts. Holders of veSGT will be distributed protocol fees.

Token Burn

If veSGT is unlocked before the lock end time, a 30% penalty will be charged. This penalty fee will be burnt. Reducing circulating SGTv2 and locking liquidity. This can be later changed to be routed to an insurance or safety contract or multisig for slashing insurance pending a governance vote.

Additionally the TokenMigrator contract will run for 2 months. At the end of that period any SGTv2 not claimed will be burnt, reducing total supply.

Value accrual

Protocol fees will be generated via the following schemes:

  • Solo staking deposit & recurring fees
  • SharedDeposit pool deposit & withdrawal fees
  • Profit from a share of performance fees at merge on staked ETH

This will be distributed to veSGT holders alongside SGTv2 buybacks.

Token Utility

A TokenUtilityModule will be launched in mid-late Q4 2021.

This will generate a boost ratio by comparing total staked veSGT to the users:

  • SharedStake NFTs
  • veSGT staked
  • veSGT in wallet

E.g. boost = Max(1, ((veSGT user / veSGT total)+NFT boost))

This contract will be queried by the following protocol contracts:

  • MasterChef — Farming rewards
  • SharedDepositV2 — User redemption of ETH rewards at merge
  • SharedDepositV3 — User staking of ETH for validators with secure preset ETH1 withdrawal address and other improvements
  • SoloStaking — Solo staking for users with multiples of 32 ETH and the ability to generate their own withdrawal keys

The contract and calculated ratio will be used for the following calculations and benefits:

  • Farming rewards boost — Farming rewards will range from 10%-100% of their initial output based on the users calculated boost
  • SharedDeposit V2 epoch length — i.e. how long the user will have to wait to unstake their ETH after requesting a withdrawal with their vETH2 balance at merge. This epoch will be implemented to prevent whales from flywheeling, unstaking vETH2 to ETH, buying more vETH2 and repeating the process when tokens are first available. And provides more time for users to remove liquidity from vETH2-ETH pools and redeem their share of ETH validator profits.
  • SharedDeposit V3 deposit fees — Users with sufficient veSGT staked will be able to stake ETH for future validators and unstake for free
  • SoloStaking — Users with sufficient veSGT staked will get significant discounts on deposit fees and recurring monthly infrastructure fees for solo staking
Token Utility Module architecture overview

Governance & Token Safety features

To prevent any issues and improve trust we will take the following measures:

  • Vesting contracts have been updated to the newest version of Badgers vesting contracts. Additionally they have been simplified to remove any delegate call functionality, which was previously exploited.
  • Initial liquidity will be locked permanently using UniCrypt. Most liquidity additions and price discovery will be left to users. But a small amount will need to be initially locked to set up the VoteEscrow & MasterChef contracts.
  • Ownership of the following contracts will be transferred to the multisig when launched:
  1. Timelock — polygon and avalanche rewards
  2. MasterChef — farming
  3. FundDistributor — holds funds for the Masterchef contract
  4. TokenMigrator — Responsible for converting SGT to SGTv2
  5. VoteEscrow — Responsible for converting SGTv2-ETH LP to veSGT
  6. Treasury Vesting
  7. Token Utility Module
  8. Blocklist
  9. Any core protocol contracts such as SharedDeposit v2 & v3, SoloStaking

The following privileged roles will be retained by founders alongside the governance multisig, pending review:

  • Oracle — Able to calculate and set price of vETH2 via an Oracle contract
  • Pauser — Able to pause ETH deposits and withdrawals on SharedDeposit v2, v3 & soloStaking in case of emergencies
  • Benefactor — Able to withdraw protocol fees and profit from core protocol contracts and founder vesting contract

Timeline

September:

  • Burn remaining SGT in multisig
  • Renounce ownership of any pre-existing SGT vesting contracts
  • Launch new governance token SGTv2
  • Launch token migration contract
  • Launch VoteEscrow

October:

  • Launch cross chain farming on AVAX & Matic
  • UI for veSGT

November:

  • Launch token utility module
  • Launch protocol upgrades with SharedStakeV2 and/or V3
  • Launch solo staking

Source code and early developer preview

Code and contract sizes: https://github.com/chimera-defi/SharedDeposit/blob/main/contractSizes.md

For each of the main governance contracts mentioned in the article the current solidity source code, Object inheritance hierarchy generated via sol2uml and Solidity metrics via Consensys Diligence tooling is provided for review:

SGTv2

TokenMigrator:

SimpleVesting:

VoteEscrow:

MasterChef:

FundDistributor:

Blocklist

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