Weighting & Staking LIP
Author: Cryptish
Date: 2nd August 2022
Notes
Any time I have written “profit” or “revdis”, I’m referring to the profit distributions from our GameFi investments.
Abstract
LIP-3 proposed that the Ethlizards became a GameFi Investment DAO. Included in that propopsal was a section titled ‘Staking’. This section included 4 different points:
- Ethlizards will receive profit distributions based on the length of staking.
- Profits will be distributed to Ethlizards’ holders via a staking mechanism over a TBD period.
- Holders must stake their Ethlizard in order to receive a share of the profit distribution.
- Length of staking will influence the weighting of profit distributions.
Since we have been invited, by the team, to discuss Staking and the options around staking (see the ‘Let’s Talk Staking’ Google Doc share in the Announcements channel), this document proposes changes to these 4 points.
This proposal’s main aim is to highlight how changing the above 4 points, to the below points, can benefit holders, new owners and the DAO as a whole.
- Ethlizards will receive profit distributions if they own the Ethlizards NFT at the time of the snapshot just prior to distribution.
- Ethlizards do not have to stake their Ethlizards NFT in order to receive profit distributions.
- Ethlizards’ holders receive an equal share of profit per NFT they hold. No holder receives a higher share, per V2 Ethlizards NFT, than anyone else.
The Idea as a Whole
The Vision
Lets compete with the biggest projects out there. I want people to notice us competing with the likes of BAYC on OpenSea’s rankings and wonder who we are and what we do.
How do we get there?
Focus on driving up our floor price. OpenSea alone currently have hundreds of thousands of visitors on their website every month. Any project with a 50ETH floor, as an example, gathers a lot of attention. Appearing at the top of OpenSea’s rankings is also a free way to communicate that we’re deemed valuable.
How do we do that?
We allow new owners to receive full revdis for any current investment. So, for example, if you buy a lizard right now, then the old owner gives up their rights for Civitas revdis and you get 100% of your lizard’s share of Civitas.
Is this unfair to the old owner?
No, the old owner decides what price he’s willing to give up his revdis for. If he/she looks at the dashboard to see the current value of all the investments, they can decide what price they’re willing give up those revdis for.
Say we have 20 current investments and the current value of all those coins give a $40,000 valuation per lizard (just an example). So, when I sell a lizard, I might think… well, the new owner is buying something that is currently valued at about $40,000. I expect these prices to increase a little more before revdis and I think the lizard holds great long term value, so I’ll price it at $60,000 in exchange for giving up my rights to claim anything in the future. You don’t get revdis but it’s easy to price it so that you still receive fair value. New buyers will obviously understand the high price, given that they’re buying into current investments which they can view easily on the dashboard.
Floor price compared to staking
Floor prices increase as we give new buyers more value. The more value you receive, the more money you pay.
The floor price gets a much bigger increase if you give owners all revdis for current + future investments than compared to if they have to start from 1x weight and only receive revdis for the time they stake onwards.
Additional argument regarding sellers
It’s also easy to argue that someone who sells is giving up their right to be invested in any current projects, in exchange for cash now. It’s simply how any investment works. When I buy shares in Apple, I don’t expect to receive anything after I sell, I just get a fair price for my shares.
The dashboard plays a big role
Imagine being a newcomer. You look at the dashboard, it shows how much each lizard is worth right now, given the current investments and the price of each game’s coin. It’s so easy to communicate our value to the world, using this.
Now, instead, imagine you’re a newcomer. The dashboard can show you that you get 1x at first, you have to stake for X years to get 2x weight and you don’t receive revdis for the time prior to purchasing. It’s a significantly lower amount and it’s also harder for those less DeFi savvy to understand.
The benefits of staking
Benefit 1: It reduces sell pressure and should give a bump in floor price.
Does this bump help other stakers? No, as they can’t sell.
Does this bump help people who choose not to stake? Yes, as they can sell to take advantage of the artificial increase.
If you have a level of sell pressure that you need to reduce, the way to fix it is to offer more reasons for the sellers to stick around. Staking puts a temporary band aid over the problem.
Not to mention that our vault increases from secondary sales, so if you can increase the floor price (as outlined above) but still allow trades as normal, the vault will benefit from those increased secondary sales.
Benefit 2: It will align holders with the purpose of the DAO.
This is demonstrably untrue. Any holders that are currently lurking without participating (1000+ lizards) aren’t demonstrating any actions that align with the DAO. By forcing them to stake, in order to earn full revdis, you don’t encourage them to stop lurking and to participate. Instead, they stake and simply return to lurking. For anyone who doesn’t participate, the best way to encourage them to get involved in the projects we invest in is to reward them for doing so (NFTs, whitelists and so on).
Staking doesn’t reflect your current thoughts on the project on which you’ve staked. For example, if I stake for 18 months and after 3 months I decide that I’ve changed my mind and no longer believe my money is best invested here, the 15 months I have left doesn’t reflect my feelings toward the project.
This sentiment from holders is important to understand and if you find yourself in a situation where the floor price receives an increase due to scarcity rather than value-based sentiment, when the unlock periods come, you can imagine plenty of holders taking advantage of it. It also keeps our new CEO, the team, council and contributors on their toes as, if you don’t stake, the floor price is fully reflective of our performance and not scarcity.
Scarcity can be a good thing but it’s only good if it’s due to the demand being high and not because the holders, at one momemnt in time, decided they couldn’t sell.
Why no staking?
The benefits outlined above render the weighting system unnecessary. If the weighting system is unnecessary, then staking loses a lot of its use.
Without the weight-based system and with the focus on maintaining a floor price based on real value, staking becomes much less useful. It’s not so much that staking is inherently bad or anything, it’s just not necessary if we want to ensure the new holders receive the best value possible, whilst taking nothing away from current holders. Long-term holders will still be rewarded with cheaper initial NFT prices, access to earlier projects, more revenue distribution over time and will be able to take more advantage from all the secondary sales over time.
Staking is also less flexible. If holders interact with something they later deem suspicious, or for any other reason, they may want to move their Ethlizards to another wallet. With staking, you cannot offer this flexibility and you would lose the weighting you had gathered. Some third-party applications may also want to check which NFTs you own but relinquishing control means they cannot do this unless they look at the staking contract.
We’ve all been hit by this bear market and having flexibility in these times is massively important.
Albeit low, staking also costs more (gas) for each holder, as you interact with the staking contract.
The development of claiming contract is less complex if the team only have to distribute to the current owners and not calculate amounts based on weighting and who owned at different periods during the investment period.
Implementation
Nothing additional needs to happen. Each holder will still be able to claim their revdis whenever it’s distributed but the smart contract behind the claiming is much simpler.
Non-staking is the absence of certain complexities and it doesn’t introduce any.
Voting Options
A: Discontinue the currently proposed staking options and remove the time/weight-based distribution system (agree with this LIP).
B: Continue the staking and distribution system as described in LIP-3 (disagreeing with this LIP).
