Introducing Stake DAO by Stake Capital: claiming future yield revenue
Stake Capital is one of the world’s leading blockchain companies in both staking services and the #DeFi (decentralized finance) movement. It has been operating for over a year, capturing millions of dollars in AUM and validating more than 12 PoS chains (disclosure: invest at your own risk).
As Proof-of-Stake is increasingly becoming the favored consensus algorithm, it is clear that the crypto industry is shifting towards staking mechanisms. Meanwhile, the emerging DeFi landscape keeps gaining momentum regardless of market fluctuations. New financial primitives are popping up from global hackatons to top tier VC firms enabling staking, borrowing, lending, betting, derivatives, playing with interest rates and more.
At Stake Capital, we provide financial instruments designed to maximize returns on this new asset class. Staking pools are formed with delegators sharing revenue, locking assets for a fixed period of time; nominators are then able to collect rewards as a passive investment. Our mission is to open up these financial opportunities in a permissionless fashion, embracing the ecosystem’s core values.
Today we are proud to announce our next step: a revenue-sharing DAO for our DeFi services, enabling DAO token holders to continuously receive staking rewards.
This will allow anyone to claim future Stake DAO income earned from our service fees, under the form of regularly dispersed rewards. We are also introducing a novel way to leverage locked collateral in external DeFi markets, providing both liquidity and DeFi composability to staked assets on our platform. By further decentralizing our services to the wider crypto community, we want to align Stake Capital users with us by letting them become DAO members, sharing profits as well as key decision making processes.
A self-governed DAO to claim fee revenue
Stake DAO will distribute value generated by a basket of DeFi services to Stake Capital delegators / actors via the Stake Capital Token (SCT). The process goes as follows:
- Stakeholders provide collateral on one (or more) Stake Capital DeFi services. Collaterals include Ethereum (coming soon), Tezos, Loom Network, Synthetix pools, Livepeer, Cosmos Network, Kusama, Polkadot and more.
- After a set cycle duration, SCT tokens are disbursed to all delegators, proportionally to the amount of fees they generated for Stake Capital, no action required. The staking yield will be disbursed as usual in the same staked cryptocurrency. The cycle duration depends on the staking asset, as each token has a specific cryptoeconomic mechanism.
- SCT holders can then stake their earned SCT to receive DAO fees staking rewards on Stake Capital website. SCT stakers will share revenue collected by the DAO on a regular basis.
SCT tokens have a fixed supply; they will be distributed at a continually diminishing cycle rate, incentivizing early staking delegators. Moreover, SCT holders will be granted pro-rata governance rights over the DAO, letting holders modify specific parameters such as adding a new DeFi service, changing the token disbursement rate or yield cycle duration amongst others.
By both giving DAO staking rewards and governance rights to SCT stakers, this essentially turns all users into active Stake Capital DAO stakeholders. This system not only rewards early adopters with more voting power, it also optimizes for collective long-term thinking, as longtime users will naturally collect more SCTs. This further aligns incentives between token holders and Stake Capital beyond a simple service provider relationship.
Another goal of ours is to maximize value creation on staked assets deposited as collateral in our platform — as described in the Step 1 above. What if we enabled composability and liquidity for these staked assets?
Introducing LTokens: unlocking #DeFi on collaterals
Every collateral asset staked will generate a Liquid Token, or LToken. These fungible ERC-20 tokens allow its holders to enjoy financial instruments on top of these otherwise locked assets. Inspired by the Yield Protocol, a 1:1 peg between the underlying asset and the LToken will be established, unlocking collateral potential to be exchanged on secondary markets as derivatives. By setting a new DeFi primitive, LTokens enable new composable solutions to be integrated in other DeFi platforms, including better interest rate discovery, prediction markets, or any other compatible financial combination. LTokens possess set contract cycle durations dependent upon each individual asset’s properties.
As soon as LTokens are minted, they can be traded on exchanges or leveraged in various ways on DeFi platforms. Following their expiration date, the underlying collateral will be unlocked in addition to accrued staking interests and disbursed SCT tokens.
In the future, a scenario could be that Alice stakes 10 ETH via Stake Capital, mint 10 “LETH” tokens, and then sell her tokens to Bob at a premium on Uniswap. Once the LTokens mature (the contract expires), Bob will get back 10 ETH and receive both accrued interests as well as newly distributed SCT tokens.
Staking outside the LTokens pool will still be possible; users that choose to do so will keep receiving SCT token on a proportional basis.
The future belongs to decentralized organizations
Internet runs the world, yet no tech companies ever “ digitally incorporated” until the Decentralized Autonomous Organizations movement came along. By reducing coordination costs, we strongly believe that DAOs will enable self-sovereign communities to emerge, leveraging the wisdom of online crowds. After a successful past year at Stake Capital, gradually decentralizing our internal business processes and incentives to the public feels like the next logical step. We are thrilled to participate in this organizational revolution, and hope to gather as much feedback from the community as possible.
To learn more about the DAO structure, feel free to read our light paper.
If you’re interested in being an early participant, you can register your interest here.
With assistance from Julien Bouteloup, Leopold Joy and Valeria Kholostenko
