PRELIM: A Proposal to Overturn Current Staking Mechanism

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).

6 Likes

Thank you for being so clear. I’ll vote for no staking as it’s much simpler and introduce more flexibility to the lizards.

1 Like

Thanks for sharing your opinon, ser!

Just so others know, this is just for the discussion. We should have the snapshot up a bit later today (prelim).

2 Likes

Great discussion and I’m so happy there are people smarter than I am on this topic. One question I had: wouldn’t a no-staking policy mean that the value chart for our Ethlizards would fluctuate tremendously? It would go from a value of $40k (in the listed example) back down to perhaps $2k just after the revenue distribution occurs. Not saying this is good or bad but I don’t know of any other blue chip NFT that has wildly variable fluctuations over time in its value. Thanks!

Hey! Thanks. I hope you don’t mind me replying given that I’m obviously the bias one :grinning:

The idea here is that the floor price is based on value alone and avoiding any value created by scarcity. If we have multiple projects we’re invested in, which we’re very close to, we always have the promise of revenue in the future. As we approach dozens of projects (which is certainly my expectations and I believe Kieran shares that same goal), selling your lizard means you’re giving up your right to claim revdis on dozens of future distributions, thereby keeping value. (Imagine receiving revdis every couple of weeks or once a month).

I’m also an advocate for more utility to help with maintaining value, but that’s a separate topic!

If you allow the % staked to dictate the price, to some degree, then it’s my opinion that you’ll also see downswings when staking periods end because:
A: People change their mind during the few months/years they’re staked.
B: The floor receives that increase based on scarcity, not just the value of the NFT. That means it could make more sense for holders to sell, given that they’re getting a higher value which isn’t linked to worth but scarcity.

I hope I’ve made sense there, let me know if I’ve botched it!

Thanks much for the response. Your points make good sense. I would imagine it would take some technical expertise to calculate staking % by time and owner with multiple investments all having disparate start points…but assuming that’s not impossible. I’m sure it’s my own internal bias but rewarding loyalty through staking just makes empiric sense to me. All data aside, lol. In any case, thanks again for the explanation.

I was going into this ready to burn down this proposal as I actually do see the value of staking.

HOWEVER, the points made in this proposal are undeniably clear and valid.

Thanks for the thorough sharing of your vision.

For transparency purposes Ill also mention what specifically change my mind:

This makes a world of sense from an investor perspective. It also forces us as lizards to ACTUALLY look into getting good deals. Forced scarcity can work in the beginning, but locked staking is becoming a parlor trick used to squeeze liquidity out of investors. As long as the product (Revdis on GameDao investments and private opportunities and access) is working as intended, we will never have to worry about our floor price. We are not a PFP project anyways, a fact that I was reminded off again today.

So well done @cryptish.eth

3 Likes

Great job, thanks for drafting this Cryptish! :fire:

1 Like

I like all the points brought up and am leaning towards not staking now. Just wondering if you think we will have to claim rewards manually or of they will be auto-distributed to each Lizard address.

I personally think a claim is needed to keep people engaged, and those that aren’t will miss out. But if you don’t claim in a timely manner, how long should you have?

1 Like

I can understand the mindset of rewarding loyalty as I had this thought initially. The only issue with that, in my opinion, is that you reward loyalty at the expense of new people entering the ecosystem. Is that fair? You already got to join earlier at a lower price, why should you also get more than a new person joining?

If you were a new person entering the project, would you be off put by the fact everyone gets more revenue than you as well as buying lizards at a cheaper price just because they found out about the project first? I think that’s a big negative for new people to enter our ecosystem knowing they’d be at a disadvantage while waiting to get as much yield as others as well as paying a premium due to the project being more established. There’s a double penalty which imo, is off putting.

Thanks @cryptish.eth for writing up this proposal. You present a convincing argument for not staking and I am planning on voting in favor of this LIP.

1 Like

Hey @realpirates. Yeah, whether we have staking or not, you would still claim manually otherwise the DAO has to pay gas for each transaction, which would cost them thousands of dollars, whereas we pay a few bucks individually.

2 Likes

Hey @CrypTobias. I appreciate you getting involved!

One thing for you to think about is that you said you may have an internal bias “but rewarding loyalty through staking just makes empiric sense to me”…

Do you think staking is driven by loyalty or by greed, mostly?
As people can stake and still offer nothing to the projects we’re involved in or to Ethlizards itself, is it really loyalty?
As I mentioned, I think loyalty is helping the projects we invest in, building utility for other lizards, offering marketing services, creating content and whatever else you can think of and doing that consistently. That’s the sort of loyalty I think should be rewarded.

Praise your brains, regarding the dashboard that shows the current net worth of the lizards, is there a better way of showing that underlying value as an attribute of the NFT itself? The reason I ask is most new buyers will be visiting opensea (or another NFT marketplace) to buy lizards or use a sniping tool, if an attribute can be added dynamically at the owner’s cost if there is a gas fee required, it may be easier for people to buy in. I also, understand that any potential buyer should do a minimal research on the project and the value of the product they are buying but just wondering if we can do something to communicate the value in a different way than visiting a dashboard.
Regarding the proposal itself, I find it absolutely sound and reduces the risk of staking as I can lock away the lizzy in a hardware wallet and don’t need to interact with the contract and also the team can focus the time, effort and the money it takes to build and maintain the smartcontract in better ways.

Hey cyrptish
I’m beginning to question where you are headed with ‘involvement and investment’ from community members. To me they are separate. My investment or anyone’s investment shouldn’t be tied to engagement. Also if you want to continue going down that track. Engagement will need to be quantified. As it’s highly subjective.

1 Like

Hey @Teloolah. Exactly, I completely agree.

I think you may have misunderstood me as I’m not sure why you think I’m saying that?

People have made the claim that a benefit of staking is that you are more aligned with the DAO’s interests (supporting projects and getting involved). I’m saying that’s not true.

Above, I suggested that you can reward people for being engaged, with NFTs in those projects or whitelists, etc., and then if they’re interested, they’ll get involved.

Staking tries to get people involved by using their investment. I’m proposing to not do that.

Thanks.

1 Like

Hey @cryptophoenix!

I would definitely say we want people viewing OpenSea and seeing those juicy floor prices.

You definitely can switch the metadata to include dynamic information, which is something a few of us were chatting about in the Staking channel a few days back. You can then include two new traits, “Next Revdis Date” and “Current Worth” or something like that. Others aren’t keen on switching this metadata to our own servers and want to keep it on IPFS but I’m not fussed where the data is stored. Illuvium, as an example, use a URL that points to their own servers for the metadata.

I also can’t imagine too many people buying a $10,000 or a $25,000 lizard without checking why it’s deemed that valuable. If they do, more fool them, we’ll gladly take those royalties! Although, in Ethlizards case, if you buy one without checking, you actually get lucky and pick up a valuable NFT!

It’s easy to update our website and dashboard to communicate this out very simply and transparently.

Thanks for your feedback! Glad to hear it :lizard:

Its because you talk about ‘is it fair to have people stake and earn rewards for not being engaged’
I feel you often tie or and words of engagement with your arguments for not staking.
I’ll go through and point it out. If it was only about ’ disagreement with engagement equals staking’ I wouldn’t have an issue.

Hey @Teloolah. Please do point it out as I certainly didn’t mean that investments should be tied to involvement. I agree with you on that and it isn’t part of this LIP.

The only points I was trying to make, regarding engagement/involvement, is that Staking doesn’t help it as people can simply stake and stay uninvolved. The reason I said this was because there were some in Discord that said Staking can increase engagement/involvement.

If people do want to encourage and reward people for getting involved, then rewards like NFTs and whitelists, for those projects, seem like a good way to do it. Though, this is just a suggestion and isn’t part of this LIP.

Yep. I will. You may not have realised you were doing it.