CIP-draft: Should CowDAO implement a Staking Rewards Program?

Summary - Should CowDAO implement a Staking Rewards Program?

The purpose of this CIP is to gather support within the community to pass a vote to implement a Staking Rewards Program rewarding Stakers with $COW Tokens. This will reduce circulating supply, fostering a healthy ecosystem for holders and the DAO.

Motivation

This CIP proposes that CowDAO releases $COW tokens from it’s treasury using a smart-contract via a simple user interface to reward $COW Token Stakers for staking $COW Tokens. This will encourage token holders to stake the asset and will advance CowDAO benefiting all holders by reducing circulating supply, directly impacting token supply/demand dynamics.

Benefits of $COW staking are:

  • Ongoing staking rewards encourages $COW to be staked;
  • Reduced circulating token supply impacting market supply/demand dynamics;
  • Staking incentives makes $COW more desirable to others;
  • It may encourage more people to own the token and bring new users to the CowSwap platform aligning with CowDAO’s values;

Proposed distribution:

  • Stakers receive $COW token staking rewards proportional to their stake at a rate of 10% per month.

Specification

It is proposed that the community can discuss this proposal in various forums such as Discord, Twitter, the CowDAO forum, etc., and that this CIP is tabled for voting on Snapshot.org for voting.

It is envisaged that the CowDAO team shall:

  • Share this CIP in other forums (Discord, Twitter, etc.);
  • Table this CIP for voting on cow.eth snapshot space for a nominated period after enough participants are available for a fair vote;
  • Release a claimable POAP for those who participate in order to encourage voting; and
  • If the vote passes the CowDAO technical team shall make $COW redeemable at the prescribed rate to eligible Liquidity Providers only.

Voting

A quorum is proposed that would require 35M vCOW tokens required to vote YES in order for this proposal to pass. Additionally, in order for a proposal to be approved, YES votes should account for >50% of total participating votes. (simple majority). This means that at least >17.5M votes in the affirmative is required to pass.

Rationale

  • Incentives holding and staking the $COW token
  • Reduces circulating supply impacting supply/demand dynamics;
  • It may encourage more people own the $COW token, which in-turn may encourage further interactions with the CowSwap protocol; and
  • I believe it is what the cowmunity wants.
11 Likes

Agree, benefits are relevant. In my opinion, we should add some utility/capability to $COW token to be align it with the protocol core value proposition and business model or with something from the protocol ecosystem. I hope this is first step

2 Likes

agree, there is nothing to discuss

I’m not opposed to this proposal per se, but would like to understand a bit more the utility behind a staking system for CoW Protocol. I understand it’s a common thing to do in the “tokenomics toolbox”, but I have trouble to see the long term value it generates.

If the goal is reducing supply, shouldn’t the protocol first wait to see how liquidity and volatility of CoW plays out if it became tradable? With GNO being locked for 1 year, liquidity has become significantly worse.

From the proposal it’s not clear to me if there is supposed to be a lock period, or if tokens could be unstaked at any point in time? For the latter, CoW Protocol should eventually implement a “smart contract order” which can automatically unstakes and sell tokens like sOHM in one atomic transaction (making them effectively as liquid as the unstaked version).

4 Likes

Interesting points. I believe the tokens should be unstakable at anytime, however the incentives encourage people to stake their assets for a longer time period reducing the amount of tokens sold as soon as a liquidity pool appears. This is good for the token value in the short term to medium term and staking rewards can reduced/removed in the future once the market has established fair value.

Hi all, I’m a DXdao contributor and we recently facilitated a single-sided staking campaign for the SWPR token on Swapr and think it would be a great place to host a COW single-sided staking campaign.

The DIY-farming platform allows you to customize multiple rewards with any token as well as the ability to lock the tokens for a certain amount of time, or you could cap the number of COW tokens that can be staked.

And it looks BEAUTIFUL:
Screen Shot 2022-03-11 at 12.23.09 PM

you can read more about the SWPR single sided staking campaign here:

5 Likes

Staking Rewards Program? Its a good idea. Have many benifits for the value of $COW token.

if we are to deploy staking, we should implement veCOW tokenomics with locked staking periods for boosted voting, LP yields & staking rewards

the $CRV/$FXS staking model has proven to work very well and it makes a lot of sense for holders who are willing to commit and lock their $COW tokens for a period of time to have a greater say in governance + received boosted yields in return

happy to spearhead this with ppl from the cowswap team to lay out a more specific staking proposal for voting - we should do this right from the get-go

you can reach out to me via my twitter: https://twitter.com/realpennybags

1 Like

I have come to voice my concearns, the idea here is one that discounts inflation as a problem.

We are minting tokens solely for stakers which means liquidity providers will be worse off and since the liquidity doesn’t increment with the staking APY it’ll dillute price and send us tumbling down.

Example:
There is 1M USDC / 1M USD COW in a liquidity pool.
I have 10,000 USD of Cow Staked.
My Cow after x-amount of time is now 11,000 USD of CoW without any price appreciation.
I sell and remove 11,000 USDC from the Liquidity Pool.
Liquidity Pool is still 1M USDC / 1M USD Cow.
Now take that and multiply it by all the stakers and the pool gets drained at a much faster rate.

Inflation without utility is a death sentence for the Token.

3 Likes

yes,
will support this proposal

1 Like

Staking reward programs for tokens that can be unstaked anytime is a really bad idea for long-term value of the token. Professional stakers only care for yields, they dump the reward tokens immediately to ensure the yield and the moment yield drops they leave the pool and sell their tokens.

I think there should be a staking program with a lock-up period. Ideally similar to CRV as @Uncle_Pennybags suggested. The longer the staking period the more veCOW the stakers receive, which are equal to more voting power and larger staking rewards. I also think that the trading fee incentive should be exclusively available to veCOW holders.

1 Like

I agree with you, staking as protocol mechanism need to have purpose. veModel is great for various use cases but most effective is for attracting liquidity/TVL (Curve, Balancer) with a bribing mechanism. The question is what do we want to improve on the protocol (governance system, token price, market strategy)?
A token is an incentive tool that should be used to achieve protocol/community/DAO goals and make no sense to only produce inflation.
Lock mechanism can only have a positive effect

1 Like

@netrunner.eth

I feel it would make more sense to offer up tiered Staking levels. Nothing complicated, super simple:

1 - 4,999 $COW = lowest percentage

5,000 - 9,999 $COW = medium percentage

10,000 and over = highest percentage

I think a simple tiered level that encourages Users to acquire more $COW to reach the desired 5k and 10k levels, with a decent jump in percentage per level to encourage Users to reach these levels.

Just as an example for illustration purposes:

1 - 4,999 $COW = 3%
5,000 - 9,999 $COW = 10%
10,000 and above $COW = 15%+

These above percentages are just examples to illustrate how we would want to encourage Users to acquire more $COW to hit the higher levels. Notice the large jump from Tier 1 to Tier 2. This will motivate Users to acquire enough to enter Tier 2 of 5k $COW.

Also, this may make sense to make this a limited time offering, like 12-24 months to earn,.not a forever program. We could also implement a “warm up” period for rewards to start and/or a cool down to unstake like protocols like Aave.

Imagine Tiers 2 and 3 have no warm up period, so any users staking 5,000+ $COW can stake immediately, while users with 4,999 or less $COW must wait 10 days in order for rewards to start, or Tier 2 also has its own 5 day warm up, etc… you get the idea!

Disagree.

I believe this is in fact rather complicated. And leads in effect to what @Tenzent stated in his comment above;

We are minting tokens solely for stakers which means liquidity providers will be worse off and since the liquidity doesn’t increment with the staking APY it’ll dillute price and send us tumbling down.

2 Likes

In my opinion, single-sided staking (aka paying users to not sell) is a hare-brained idea that we should definitely NOT pursue. For more details, I encourage you to read Cobie’s latest post:

Somehow, over time, the word ‘staking’ has been repurposed and redefined. Instead of receiving rewards for contributing to chain security with collateral at stake , modern “staking” just seems to mean idk we give you more coins as a reward if you don’t sell your current coins lol.

These modern staking mechanisms do not have any function in the ecosystem to which they belong. They don’t do anything in any practical or technical sense. They don’t make an ecosystem more robust. They are a shell game, using the name of a different thing to obfuscate their actual purpose, which is to encourage less selling.

When POS protocols issue rewards to stakers, they are buying chain security. It’s a worthwhile use of equity. When DeFi projects offer liquidity mining programs, they are buying growth and TVL. Depending on how the program is designed, it can also be a worthwhile use of equity. Spending equity for things that makes the protocol more sustainable, larger or more secure seems worthwhile.

But these “staking” mechanisms (that do not do anything at all except pay users more coins for staking) are giving away equity for nothing except to reduce potential sellers’ liquidity.

If you don’t stake, your share of the network or protocol is inflated away by new emissions. Plus, staking has no risk! You can’t lose coins, because staking doesn’t do anything! So, lock up your coins! Secure them off-market today… In fact, we’ll pay you to do it!

Simply paying users for not selling, payment received in the same asset that they are not selling, seems like pretty late-stage in the games of ponzi creation.

8 Likes

G’day gents!
Suppose there is some kind of staking, why stake a single in the first place ?
If we stake v2 lp tokens , bal 90:10 or 80:20 pool tokens we d still have the effect of locked assets but also locked liquidity, which is more beneficial for the ecosystem

1 Like

Staking COW with a locked period and receiving vCOW will be great. My voting power is the same from the beginning and I want more. CoWSwap has the highest voting turnover in space, so this is far from some critics, but how to increase voting power?

agree, the stake is a legacy flaw from L1 blockchains consensus mechanism - PoS, and pure staking for token inflation makes no sense. using inflation for rewarding LPs is a short-term event and I really don’t know what benefit DAO (token holders) and protocol have from rewarding farmers - to me that looks like staking (giving token short-term capital efficiency). In my opinion, CoWSwap needs horizontal integrations with AMMs to increase size of the barter market and rely more on its own trading matches. Does it perhaps make more sense to do a treasury token swap with some “target” protocol?