[WIP #2] - Build Avalanche Liquid Staking for Wonderland

Seems like the compensation format needs to be properly discussed before moving forward

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So where do we vote?

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Where were all the complainers at when we were discussing this in its first stages. Wake up ppl, Wonderland has set a 3 step framework for its proposals/improvements. You don’t show up on its final stage to request changes.

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I could not agree more, the DAO discussion started on Sunday, 2 January.

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I raised my concerns in previous discussions, a general clarification of cost base is not unreasonable.

If I presented a business case in this format to a main board or pool of investors outside crypto I would expect to be asked all of these questions. Infact I’d be seen as incompetent for not providing a complete proposal.

No point in attacking people with a different opinion.

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Morning!

A lot has changed in the proposal based on community feedback. At Sifu’s request, I wanted to clarify a couple of points to ensure voters know that, where there’s ambiguity, Wonderland is being protected :green_heart:

Firstly, from the proposal:

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.

After discussion, we agreed with the community that we would reduce the team’s revenue share over time:

  • 25% revenue share for the first year
  • 20% revenue share for the second year
  • 15% revenue share for each year thereafter

We obviously don’t expect Wonderland to maintain a 2.5% minimum revenue share to the team now that the team’s revenue share is reducing!

So to be clear: the minimum revenue share for the team is also reduced in line with this:

  • Minimum 2.5% team revenue share for the first year
  • Minimum 2.0% team revenue share for the second year
  • Minimum 1.5% team revenue share for each year thereafter

I want to make it clear that we don’t expect Wonderland to have to increase its user revenue share over time – it’s in everyone’s interests that the rate can stay low in order to be competitive if other DAOs build this :frog: :handshake:

Secondly, again from community feedback, the proposal has moved the majority of up-front payments to gated unlocks, so that the team is only receives these payments when the finished liquid staking solution reaches particular market share milestones:

  • $1 million MIM at 1% market share
  • $1 million MIM at 2.5% market share
  • $1 million MIM at 5% market share

The intent from the community was, again, to ensure everyone’s incentives align: the team only make money when Wonderland makes more money :green_heart:

In case “market share” is ambiguous, I wanted to confirm that, like with other proposals linked in the original RFC, this 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.

We’ll use Avalanche’s own Validator Stats page as our reference point for market size, and use “total AVAX staked with the liquid staking solution’s owned or delegated validators” for the share of this market.

Put simply: “of all the AVAX currently staked, how much of it is controlled by Wonderland liquid staking?” is the thing we want to align our incentives on :slightly_smiling_face:

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You are putting words in my mouth, i did not attacked different opinions, i want everybody engaged, everyone can bring something to the table, just don’t get ppl showing up on a stage that is not open for scrutiny.

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Apologies for the long post but I think it is very important to discuss these ideas in greater detail.

Some background. I am a full-time (technical) worker in the blockchain industry and have particular experience with Avalanche on one end and liquid staking on the other. So here are my 2 sats on what I could gather from this proposal and how I see something like this should/could work.

Regarding architecture

First of all: there is still very little info available. I see that the technical design would be available 2021Q4 but I can’t find it. That being said it seems to me that the goal is to develop/deploy it on the C-chain pending some upgrades on the network. IMHO this is a mistake. Liquid staking (LS from now on) on Avalanche is a primary candidate for being a subnet. Properly done, this would me make much easier (via a custom VM) to execute the necessary txs to the P-chain and make it all much more efficient. But the real benefit is that it could be done in a generic fashion to support any subnet (not only the main net thus). Finally, the protocol token could/would gain extra utility by being the staking token in this subnet.

Another issue is that it takes no consideration of the future Avalanche governance. Stopping to think about for a moment and you can see that it is no trivial matter. User/holders of AVAX will eventually have governance rights on the network. How is this handled in the LS solution? Will the protocol keep all the governance rights (terrible idea)? Or will it implement a solution so that holders of the LS token can vote by proxy (complicated)? What if the LS tokens are used on DeFi and are not in the users wallet? We need answers to this. I have an idea on how this could work but it falls out of the scope of this feedback so let’s move on.

Next: what is the method for validator selection? This is very important as it impacts decentralization directly. Will it be open for any validator (that satisfy a minimum requirement)? Evenly distributed? Or will it be based on a validator whitelist? Who/how is this decided?

Regarding non-technical aspects:

I will emphasize this here because I think its the most important feedback I can give. Liquid staking is an on-going full time job. Forget developing for Avalanche “then move on” to other networks. You will need a full team working on this after deployment. Integrations are the name of the game and you will need to specially support lending platforms and derivative/synthetics. You will not win the AMMs. AVAX as first mover and stablecoins do that way better. If users don’t have where to use the LS token they won’t stake.

Taking into account that BenQi is planning to release a liquid staking solution I think it will be hard to compete with them unless you integrate with all others. Regarding derivatives I am not aware of any truly successful ones in Avalanche yet. Might be a good thing for this proposal or not.

Another thorny issue: incentives tokenomics. Essentially all LS solutions use the standard DeFi 1.0 LP incentives and this is very hard to keep going and do it right. It needs constant tuning. I think that a better approach is to leverage some DeFi 2.0 primitives like POL so that the protocol controls the important liquidity pools as to safeguard the future of the protocol.

Conclusion

I respect the need to move quickly but I think that this idea is way to rough the way it is present right now. Many questions need to be addressed seriously and a technical document has to be released addressing at least some of the point I raised above: governance, validator selection, subnets and tokenomics. Regarding funding other people way better than me can provide input.

I am very hesitant reading that the plan is to develop on Avalanche and move on. Right now I cannot support this idea.

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Many of the other “complainers” including myself expressed these concerns at stage one. This is supposed to be a DAO, and part of that is civilized back and forth discussion. Sometimes that calls for being critical. Calling people “complainers” or “haters” or whatever is just childish. This is why we have a forum, why we vote, and why we speak our minds on these proposals.

Some of these people that you’re calling “complainers” probably have experience with even larger business deals.

There has been a slight revision to the incentive structure since the first post in general but we still feel it hasn’t been well justified.

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supporting this 100%

Wouldn’t it be possible to get a higher return if you become a validator in FTM, POLYGON, HARMONY networks instead of investing so much for validation in AVAX?

This proposal is for AVAX and FTM after. Other chains could be added in the future.

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You took it personally, I apologize if so. But mind you that Im not native english speaker, so i have misused the word. And as you said, a civilized discussion was taken and many users were quite vocal about their opinions, here and over discord. The proposal got to this stage with a collective consensus.

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I’m skeptical about this as it seems very early, there are other dev teams (Benqi) presumably closer to a finished liquid staking product

Hopefully this was considered by Daniele and team in the vetting process

Well no one said we’d be the only people in the game. And the Dev team on this project have been working on this since Q4 with a target date of Q1 for go live. We’ve significantly lowered our risk by paying the dev team when the protocol hits Market Cap metrics instead of paying $6 million up front which was the original proposal.

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I propose there is not enough detail as to what to expect and how funds are allocated. This proposal is way to high level. Needs much more granular detail.

  1. What are the milestones to achieve beyond quality gates of 1%, 2%, 5%, etc., ROI
  2. What are the expenses that justify 25%
  3. The payment schedule is backwards - you achieve more you make more. Up front cost could be high given kickoff and expenses. Very typical of any project

Think going back to the drawing board on this one although I see the overall value but not enough details to sign-off on this one.

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  1. What do you mean by milestones ? The proposal has a timeline of what is to be done up to deployment on FTM.
  2. There has been discussions about expenses/price in the RFC and General discussion by the member of the team making the proposal. However, you may not agree with those. Keep in mind that after two years this goes to 15%/(1.5% of total revenue).
  3. The payment was changed this way because the discussions that led to this WIP, the community did not like a big payment upfront since revenue is based on the % of the market we get. The payment were made that way to ensure the team does their best to achieve the “promised/suggested” %.

No. A collective decision is when it’s voted in. That hasn’t occurred yet, so we’re voicing opinions. Not all of them will be positive. Get used to it.

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This is an interesting idea, but I will vote against it as written.

First, the payment/costs seem unreasonable.

This proposal would pay a Dev team $3 million dollars for a piece of code work plus up to $3 million dollars in bonuses. It would also provide a PERMANENT cut of revenue. Depending on which comparable you use, these royalty rates start either at the premium end or go beyond premium. Under these terms, Wonderland will not break even until $25m of revenue.

I also don’t understand the point about not allowing revenue to fall below 2.5% of the total staking reward. It would make sense if this was a joint initiative, but then I would expect the proposal to explain what the patterns will contribute. If the Devs are service providers to Wonderland, then isn’t $3m in guaranteed payments and up to $3m in bonuses enough? Particularly because the Devs don’t seem to have any responsibilities to help achieve the revenue goals?

Second, the proposal outlines an addressable market, but does not explain the risks involved with this expenditure. It provides an upside, but what are the risks to execution? I don’t mean fine print / legalistic risk statements, but rather what is the likelihood that this can work? What is required to be successful? What other obligations is the DAO going to have to undertake in order to penetrate the addressable market?

If the Wonderland team wants executive roles, then it’s fine with me. But if business proposals are put up for a vote, then they should have a balanced assessment of the risk/opportunity.

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terms should always be discussed up until the vote is over