[Proposal] Restaking mSOL to direct stake

Tokenomics
#1

Greetings,

This proposal explores the Directed stake feature, specifically the potential commitment mismatch between MNDE holders required to stake their tokens in governance for 30 days to direct stake and mSOL holders simply holding mSOL on their wallet or even using in DeFi to direct stake.

Next, the DeFi mSOL tracking system built to enable mSOL directing stake is becoming extremely hard to maintain due to the rapidly changing mSOL ecosystem.

What do you propose?

  • Introduce a way to stake mSOL by reusing existing contracts for staking MNDE in governance
  • same staking mechanics already in place for MNDE directed stake: 1/30 vote power for 1-day lockup growing linearly to 100% vote power at 30-day lockup, constant/cliff locking options, linearly decaying vote power when starting to unlock/cliff lock going below 30 days
  • for mSOL to be eligible for directing stake, it needs to be staked
  • mSOL used in DeFi and mSOL held on wallets will not be eligible for directing stake

What is the rationale behind the proposal?

  • unify commitment for directing staking both for MNDE and mSOL holders: the DAO requires MNDE to be locked for 30 days to get 100% vote power, while mSOL can currently be used both in DeFi and to direct stake, the value of mSOL used for directed stake is ~10x of the value of MNDE used for directed stake
  • remove dependency on a custom off-chain snapshot system: the system is dependent on multiple third-party endpoints, and maintenance effort grows together with more DeFi mSOL use cases supported

What is the expected positive impact of this change?

  • the SOL directed by 1 mSOL will grow with fewer people participating since the system would require commitment
  • given the bigger leverage on mSOL in directed stake, the community should find the terms of validators’ commission rebate programs very attractive
  • mSOL TVL becoming stickier with more users involved in the mSOL-directed stake governance
  • better alignment by enabling only long-term mSOL holders to steer the delegation strategy via on-chain contract vote records and token locking

Any other considerations?

  • in case some self-staking mSOL holders strongly prefer instant liquidity over directing stake, this proposal might result in a negative TVL outflow for mSOL
3 Likes
#2

I think it’s a good idea.

I’ve mentioned this before, but I think this would be even better if a ve system like Lifinity’s were introduced for both MNDE and mSOL locking. This would create a market around early unlocking at a premium and entering locked positions at a discount, which would create a new revenue source for Marinade. But I guess that would be for a separate proposal. See here for more details: https://twitter.com/durdenwannabe/status/1702252823130615914

1 Like
#3

I’m not sure this is a positive as I’d imagine higher participation is considered better?

I don’t agree with this argument that is essentially locking=good. Locking typically results in worse liquidity and also make mSOL less attractive for use in defi

I do see how this is annoying but perhaps can use this as an opportunity better. For example require outside contributors to maintain for their platform integration. which looks better for the dao

1 Like
#4

Btw this reminds me of Multicoin’s article on long-term staking, if Marinade ever wanted to expand this to even longer lock periods.

1 Like
#5

Thanks for the feedback.

I agree higher participation is great, and I think higher long-term committed participation is even better, which is the point of this proposal. I wanted to point out that if the mSOL directed stake system became saturated because of little to no commitment to participate, the proposed change might shake things up.

I’m not trying to argue locking is good or bad, but that’s how the DAO governance works with MNDE already, and it uses the same mechanics for MNDE-directed stake. It feels intuitive to match the commitment from mSOL holders wanting to participate in directing stake; after all, the delegation is critical infrastructure, and we should prefer long-term commitment over rapid, quick changes in the stake delegation. This makes it more predictable for validators receiving the delegation and healthier for the network to prevent exiting stake positions within hours or even minutes at the end of an epoch.

The Marinade core team looked into other possibilities to maintain the mSOL DeFi tracking system, including outsourcing it to protocols but any solution leading to a design not requiring to trust the other protocol looks like an overkill at this point.

1 Like
#6

Thanks. Yes, I was part of the discussion group for the long-term staking topic, and I’m pretty much in favor of exploring further. This proposal of mSOL restaking could be the first experiment of such thinking on Solana.

1 Like
#7

I’ve mentioned this before, but I think this would be even better if a ve system like Lifinity’s were introduced for both MNDE and mSOL locking. This would create a market around early unlocking at a premium and entering locked positions at a discount, which would create a new revenue source for Marinade. But I guess that would be for a separate proposal. See here for more details: https://twitter.com/durdenwannabe/status/1702252823130615914

Liquid vemSOL could be interesting to explore in later phases and through a separate proposal. Thanks for sharing!

1 Like
#8

ah i only said good because it was listed as a “positive impact”.

Hmm i actually dont see how this is the case, as MNDE is the governance token and msol is actually just the product the dao operates. but even if that is the case once could argue then why not just remove locking for mnde if same rules is important.

I think everyone would prefer msol to remain competitive in defi and this is really a big shift away from that. So i really worry that not finding some middle ground would be a big setback unless the desire is to really just shift heavily into only marinade native.

1 Like