A high-level overview of the upcoming decentralized governance platform — StakerDAO, and how it seeks to combine the world of decentralized finance (DeFi) with decentralized governance.
Tezos has shown how important decisions can be made in a decentralized manner on a blockchain protocol. Conversely, MakerDAO has pioneered decentralized financial products. To this date, participation in on-chain governance within the Tezos protocol is roughly 80% — a number that is higher than that of the European elections.
Fast forward to today, and we are witnessing the upcoming launch of StakerDAO, a platform for governing financial assets in a decentralized, secure, and compliant manner — built on the Tezos blockchain.
What is StakerDAO?
To better understand what StakerDAO is, I decided to reach out to Jonas Lamis, CEO of Tezos Capital. Below in bold were my questions for Jonas, in quotation were his responses.
Q. Jonas, what inspired you to start StakerDAO?
Since the launch of Tezos, I have been running the Tezos Capital delegation service. Tezos Capital grew to be one of the biggest bakers, and it became apparent that my business was very tied to the success of Tezos. I talked with other validators on different PoS chains and many had the same single token risk. So I began research opportunities to create synthetic derivatives from the PoS ecosystem that could provide the long term upside that I envisioned, while also spreading the downside risk across the best PoS networks.
At the same time, I was watching governance evolve on Tezos and on MakerDAO and saw that having a community of informed and incentivized decision-makers guiding the long term growth of projects is likely a better model than tight centralized control. I put these two concepts together to design StakerDAO.
Q. Tezos is great for high-value, high-complexity and seeks to make rigor and safety key practices. Apart from these aforementioned points, what aspects of Tezos influenced you the most in the design of StakerDAO?
We have selected Tezos as our layer 1 chain for the Staker Token (STKR) because 1) it offers as proven decentralized layer1 governance process. 2) the formal verification methods for contracts offer a rigor not found on other contenders. 3) The project has created a professionally staffed foundation and support teams with the largest long term endowment to move the ecosystem forward.
Q. StakerDAO will be collaborating with Serokell in the development of the GOV.1 token standard. What uses will the actual StakerDAO (STKR) security token have within the StakerDAO ecosystem?
From a design perspective, we have adopted the Tezos Agora process, reconfiguring and renaming it Staker Agora for our particular use case.
STKR token holders are responsible for electing a governing council and for working with the operations team on submitting the monthly Staker Proposals. Proposal examples could include ones to launch a synthetic token, an index fund, or a stable coin for example. As these projects generate revenue, profits ultimately flow back to the STKR token holders.
The Staker Agora
Tezos, the protocol which StakerDAO is built on, consists of a formal means whereby token holders can vote and decide on changes to the network. Within the governance process, it takes roughly 3 months for a proposed protocol amendment to be activated — contingent upon all 4 phases reaching quorum.
Building on top of the Tezos governance process and Tezos Agora, StakerDAO will implement the GOV.1 token standard to create Staker Agora. Staker Agora will consist of a month long governance cycle where proposals are presented, discussed, voted on, and ultimately implemented. STKR token holders will be directly responsible for participating in discussion of new/upcoming proposals, submitting feedback and electing all of the five Staker Council members through an on-chain vote on the Tezos blockchain.
The Staker Council and Staker Ops Team will play important roles in the Staker governance process. The Staker Council will consist of five members who will govern the various assets managed through Staker DAO. Conversely, the Staker Ops team will be directly responsible for soliciting and developing proposals for the Staker Council to vote on and its subsequent implementation thereof upon approval from the Staker Council.
Decentralized Finance (DeFi)
Decentralized Finance (DeFi) has been met with a lot of attention in the cryptocurrency space recently and is arguably one of the most important innovations in the space we’ve seen. DeFi pivots on the notion that traditional financial instruments can be recreated with a decentralized architecture outside of a centralized counterparts control and authority.
To this date, roughly $705M is locked into DeFi, with the highest amount concentrated within Maker. While there are many verticals in DeFi, DAI, a stablecoin that is pegged to USD and backed by Ethereum (ETH), represents a synthetic asset. For every DAI, there is $1.50 of ETH locked in the MakerDAO smart contract.
Bootstrapping from the success of MakerDAO, StakerDAO also seeks to take a similar approach by allowing value to be generated from the underlying DeFi protocol, with new DeFi applications that have been anticipated to go through the Staker Agora in Q1 or Q2 of 2020.
However, stablecoins are not the only focus and what StakerDAO will ultimately be capable of and Jonas had a few words to say about the opportunities he sees in DeFi with StakerDAO.
Q. What opportunities do you see in De-Fi for StakerDAO?
In 2019, we saw the launch of the first generation of defi offerings, primarily on Ethereum. We expect the ecosystem to continue to grow in 2020 and we look forward to launching projects on Tezos as well as on Ethereum and potentially other chains. The great thing about StakerDAO is that the possibilities are only limited by the creativity of the STKR token holder community.
The upcoming launch of StakerDAO will combine the world of DeFi and decentralized governance. Where Tezos has shown its strength in providing a best-in-class governance structure and having a high level of participation along with the inspiration drawn from MakerDAO’s economic model, StakerDAO will embody the future of decentralized financial governance.