Build and launch a fully fledged Liquid Staking Solution on Avalanche and afterwards on Fantom, to democratize staking and create additional income streams for Wonderland in this market.
Link to previous [DAO Discussion] and [RFC] thread:
[DAO Discussion] Avalanche Liquid Staking Proposal
[RFC] Build Avalanche Liquid Staking for Wonderland
Diversify Wonderland treasury revenue streams by adding liquid staking to our portfolio, in line with Dani’s 2022 vision for the Frog Nation
Provide a High Level Overview:
Frog Nation is growing rapidly: Popsicle Finance is launching on Polygon, and there are proposals on the Abracadabra forum to expand to Harmony and Polygon. Andre and Dani tease us daily about Fantom; Sushi is coming to Avalanche with the charge led by frogs; and we have the upcoming launch of the sports betting platform.
It’s been a wild ride the last few months, but it’s nothing compared to what 2022 holds in terms of growth and diversification for every frog lucky enough to be here. We consider ourselves among them, which is why we are excited to see how liquid staking fits into Dani’s vision.
As proof of stake chains grow (and new ones launch every day), liquid staking becomes an even more critical base component to keep capital flowing while also maintaining democratisation of these chains.
Provide Low Level Details:
- Avalanche’s staking TVL is over $12B. Staking requires a minimum staking period of two weeks and a minimum staked amount of 2,000 AVAX for a validator (at current prices around $200k USD) or 25 AVAX for delegation.
- Staked AVAX is illiquid until unstaked. Creating a protocol to free up the liquidity users would normally have locked up in staking will help DeFi on Avalanche to boom even more.
- The annual staking reward on Avalanche is 9.82%. Based on Avalanche’s current market cap of $25.7B, the total addressable market for staking is roughly $2.5B per year.
- Lido, one of the largest liquid staking solutions, offers liquid staking on both the Terra and Ethereum chains (but not Avalanche). Adoption is currently 17.6% and 13.4% of staking users respectively.
- If we can capture 5% of the total addressable AVAX staking market (approximately 8% of existing staked supply), this means gross staking rewards of $125M per year.
- If Wonderland take a 10% fee for running the liquid staking service, Wonderland’s gross revenue would be $12.5M per year.
- At a more aggressive market share, 20% of the addressable market, Wonderland’s corresponding gross revenue would stand at $50M per year.
Business and/or technical requirements of the implementation of the proposal:
Breakdown of the timeline:
- Research: Q3-Q4 2021
- Initial technical specification: Q4 2021
- Protocol development: Q4 2021-Q1 2022
- Fuji testnet deployment and audit: February 2022
- Mainnet deployment: March 2022
- Avalanche protocol development: March 2022 onwards
- Maintenance, improvements, upgrades, and support: ongoing
- Protocol development for Fantom
More technical details of the project can be found in the original proposal in the DAO discussion
Compensation structure to deliver a fully fledged liquid staking solution:
- $1 million MIM up front as a retainer and for development costs
- $2 million MIM on delivery
- $1 million MIM at 1% market share
- $1 million MIM at 2.5% market share
- $1 million MIM at 5% market share
Revenue Share for the development team
- 25% revenue share for the first year
- 20% revenue share for the second year
- 15% revenue share for each year thereafter
The liquid staking solution assumes a 90:10 split of staking rewards between users and Wonderland DAO. As the bulk of the team’s revenue now arises from revenue share, we propose that it not fall below 2.5% of total staking reward, to protect the team’s downside risk if the DAO chooses to reduce its reward share below this 90:10 split.
The minimum 2.5% revenue share to the team has been changed since the overall revenue share to the team has been reduced.
The compensation structure in regards to the gated unlocks needed more clarification on the milestones:
Market share means the proportion of currently-staked AVAX tokens (currently around 235M tokens, or 60% of the total supply of AVAX) captured by Wonderland liquid staking.
Avalanche’s own Validator Stats page will be used as the reference point for market size and "total AVAX staked with the liquid staking solution’s owned or delegated validators”
Original comments from author: