Sponsorship is a novel core function of Dymension which will be included as part of the 3D upgrade.
TL;DR: DYM Sponsorship is a weight-based voting system for DYM stakers, responsible for choosing how to split the onchain incentive stream between RollApps and liquidity pools.
Dymension stakers control protocol-owned DYM tokens, allocated between the incentive manager and community pool. While the community pool acts as a reserve for extremely unexpected challenges, the incentive manager is built to responsibly stimulate growth for the emerging Internet of RollApps.
Currently, a governance vote takes place each month to distribute incentives for boosting the Dymension liquidity layer. For each governance proposal, stakers can only vote yes or no. This process is slow and does not reflect the accurate preferences of the Dymocracy stakers. Furthermore, this process can’t scale to support and incentivize emerging RollApps in an environment of permissionless RollApp deployment.
Sponsorship empowers the Dymocracy to dynamically decide what is the optimal distribution of the pie. This is done through an onchain weight-based voting system for staked DYM, resulting in:
- Support for RollApps.
- Liquidity boosts to selected pools on the Dymension liquidity layer.
How does it work?
Onchain governance sets the initial base amount of tokens that the incentive manager distributes every month (e.g., 1K DYM each day). These tokens are then distributed to different RollApp sequencers and liquidity pools according to Sponsorship weights.
What are Sponsorship weights?
Users who stake their DYM with active validators receive Sponsorship voting rights proportional to their staked amount. They then choose freely how to allocate these sponsorship rights to any number of RollApps and/or liquidity pools they wish to support. The Dymension protocol streams the initial base amount of DYM according to the total cumulative Sponsorship weights.
Users may choose which RollApps or liquidity pools they want to sponsor based on preference or their own personal interest. For example, RollApps may incentivize users to sponsor them or their token liquidity pool.
Sponsorships are designed to stream DYM in a dynamic manner, bring more value to DYM stakers, and create permissionless opportunities for an array of ecosystem participants.
