The future of MarinadeDAO

General
#1

Hello Marinade Community,

I want to first say I am a big fan of Marinade and the team behind it. And I’d also like to recognize the community that has formed around Marinade. Had I known DAO governance was so active in this community I would have been participating much sooner.

To that end, I would like to begin to discuss the mission of Marinade as detailed in the 2022 mid-year update:

I think the accomplishments thus far are amazing. Few teams in the Solana ecosystem are executing so successfully.

I would like to discuss the objectives:

  1. Make Solana performant and decentralized (grow the security group by 15 to 40, grow our TVL by 23M SOL to 30M, contribute to 5% of block production) .
  1. Spread control over Marinade to the Solana ecosystem (18% tokens in circulation including 7% from unlocked team tokens, transfer all control over Marinade besides the program upgrade to MNDE token voting) .

I think these objectives are fine and I wouldn’t recommend changing course this late into the year. But I think as the DAO moves to take control, I would like to discuss what we as a DAO would like the objectives to be.

Personally I think MarinadeDAO’s goal should be to maximize for revenue on the short term in order to be able to fund expansion beyond the Solana ecosystem on the medium to long term.

I remain a Solana native as I do think it is the best blockchain in operation to this day and it’s the only one I use on a day to day basis. But that doesn’t change the fact that there is important activity happening on other blockchains. And that other important blockchains will come.

Decentralization is important beyond Solana and Marinade is one of the few projects that is poised to make a significant impact on decentralization at large, not just on Solana.

Practically I think this is also important from a defensive position. Make no mistake Lido is well funded and has made landfall on Solana. Marinade needs a strategy to be able to defend its position and to expand so that it can solidify its place in the decentralized stake market. IMO focusing on one blockchain indefinitely is not an option.

** To be clear this is not a proposal, this is a conversation starter.**

If you disagree please speak up! If you partially agree speak up. If you fully agree, let’s start fleshing out strategies, proposals and a plan to execute.

This would be a HUGE effort. If this becomes our mission we will need everyone in the Marinade community’s help. And we’ll need to go out and find more strong operators in the Solana ecosystem to help.

Thanks for reading,

adamdelsol

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#2

Hello Governors,

For now, you can check the discussion on our Discord starting here.

Cheers!

1 Like
#3

What chain would you have in mind off the bat? ETH feels pretty swamped with activity already. Are there new L1s rolling out in 2022 you feel have lots of upside? Or would this be a bet on existing ones like ALGO or AVAX or something?

I’m not a tech guy but it seems like if we did this, we’d want to bet on something that is very different tech from Solana as a hedge, but if we did that, our existing team might not be well suited to build immediately without a learning curve of another chain and we’d take our eye off the Solana goals we have. But if we did go to a chain that was more closely linked in tech to Solana, why would we believe it will surpass Solana’s userbase? Chicken and egg situation IMO.

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#4

I think we’d need to do some proper analysis to make this decision.

I’ve mentioned this in the forum, but it feels like it makes sense to get a foothold in ethereum just to start building trust over time. Then choose where we go from there.

Another way to approach this would be to see what validators would be interested in partnering with Marinade to bring it to a new chain.

Multichain world feels pretty inevitable. Also Marinade is never going to be the only liquid staking solution on solana, anymore. So there is risk of staying on one chain. Solana could fail. Eth L2, could take over, Aptos, Sui or something else could come and eat it’s performance lunch. I don’t think it will, but these are risks we should weigh against, missing out on some percentage of liquid staked solana.

IMO the biggest risk is getting gobbled up by other liquid staking solutions.

I think we’d need to fund and build another team to go after other chains. Easier said than done, sure. But there would be some sharing of resources and expertise, no doubt.

1 Like
#5

ibcnakamoto
ibcnakamoto1200×628 50.7 KB

Thanks adamdelsol! Just gonna put this here

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#6

Whilst I agree with the ethos, I don’t see how this is the right direction in the short- or medium term. The biggest risk to Marinade is the $MNDE price, which just hit an all-time-low at 3.5c / 4.97 MC a few hours ago. Currently, it is >100x cheaper for Lido than for Marinade to attract TVL (h/t https://twitter.com/0xtuba/status/1560140225971511297).

Rather than devoting resources on chain expansion – be that financially or only on the planning side – the DAO should critically examine spending, emissions, and potentially value accrual. With Lido’s higher MC/FDV, they can easily outspend Marinade, and anecdotal evidence from solend suggest this is already happening (2m stSOL deposits/ at deposit cap, vs 1.78m mSOL deposits), arguably due to the higher LDO reward rate of 3.18% LDO rewards vs. 0.88% MNDE. New entrants in the LSD space could also gain in market share as they have “less baggage” and present more upside to new users.

To be crystal clear: This in itself presents an existential threat to Mariande DAO. As $MNDE price keeps falling, even more emissions will be needed to attract the same level of TVL, whilst existing holders are suffer the large drawdown, likely hurting morale & limiting growth/ engagement of DAO participants outside paid contributors.

Expanding to other chains (aka. more spending, and less focus on the core Solana mission) would be another distraction, and and will be a major risk until the standing on Solana is solidified (years down the road). I agree with the comments made by @PlayerOfBits in discord.

–

Tldr:

  • Unless $MNDE numba go up, mSOL TVL death spiral risk imminent.
  • Going multichain would make the current situation worse.
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#7

For anyone not actively following our Governance channel on Discord, @tmnxeq refers to these three posts.

My main issue with going multichain, particularly at this stage,

is this one:

There is risk on splitting your focus. Not all platforms are equal, and the mentality and expertise that apply to one might not translate. It also dilutes your messaging and audience - you can see it in how LDO governance happens on Ethereum, with holders on Solana having little say afaik.

Marinade has about ~15 full-time contributors. Dividing its focus to build on a separate chain would be akin to building a second team, since even the market approach is likely to be different.

While not impossible, it behooves the DAO to ask if this is where the effort should be going (and if it is, which chain would we get the most value out of).

3 Likes
#8

Taking this one separately, since it is its own beast.

I am interested in $MNDE numba going up, for obvious reasons, but I think the data so far shows this description is extreme.

  • MNDE price has been in decline with the market, while Marinade’s staked SOL has remained stable or increased;
  • A lower MNDE price makes liquidity incentives less valuable, but OTOH, it makes it cheaper and more attractive for validators or teams running a validator to acquire and direct stake their way using the gauges - in theory, those teams would have an incentive to promote Marinade as a staking mechanism.

Finally, mSOL distribution among DeFi protocols doesn’t seem to linearly relate with the MNDE incentives. There is currently 7.2M circulating mSOL, however looking at the top places where incentives are going:

  • Solend will be receiving 47% of our incentives, but only has 23% of that mSOL (1.7M);
  • Orca’s mSOL/whETH was receiving 11% of the MNDE incentives, but seems to only have a smattering of mSOL;
  • Orca’s mSOL/SOL pool has almost 2x the liquidity as the whETH pool, even though it gets only 1/4 of the MNDE and has less than 1/2 the APY.

(Intentionally skipping Marinade’s mSOL-SOL pool, since you actually deposit SOL on that one, and Lifinity’s since they control it directly.)

This is only a cursory inspection, but it actually bears asking ourselves if the incentives are in any way driving TVL or where mSOL is deposited. In other words, we could even turn this question around: are those emissions actually buying us something?

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Are Gauges increasing mSOL adoption?
#9

My initial hopes too, but unfortunately that doesn’t seem to be the case in a sufficient way to offset sell pressure. Would love to hear more on what’s behind that. Too complex? No business case? No capacity?

Has anyone done the rough math on how much MNDE teams would need to buy to offset the sell pressure? How much are bought, and does the delta seem to be realistically achievable?

Looking forward, is there any reason to belief why this would continue hold?

(It certainly has been noted by Lido’s DAO.)

A while back, I argued that Marinade is too broad in the selection of incentivized LPs, and should focus on those with organic demand from traders & LPs. This might be at odds with the stated short-term goal of maximizing mSOL stake, yet could turn out to be the more sustainable strategy.

Since then, LM gauges have changed the approach to MNDE emissions, yet a high-level review of gauge effectiveness would tie in the suggested review of the DAO spending (here: the inflation & emission schedule/ approach) quite nicely. The outcome could prompt DAO-participants to re-think their individual gauge votes or the DAO to decide to change the approach & selection criteria more broadly.

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#10

Thank you for the conversation!

This is precisely the type of discourse I was hoping for when starting this thread.

The core of my perspective is that Marinade’s mission should not be decentralizing Solana. I think the decentralization of Solana is the primary charge of the Solana Foundation and they are in a much higher leverage position to accomplish that goal.

How much of the growth of the Nakamoto Coefficient can be attributed to Marinade’s efforts vs the Solana Foundation’s efforts?

My concern overlaps with @tmnxeq about the marketcap of MNDE hindering DAO growth in any direction. Short term concerns should be focused on driving revenue to the treasury in order for it to be able to take on larger initiatives whether it’s going multichain, offering new products, partnerships or new revenue streams. All of which mean growing the existing team or building out concurrent teams.

I also worry that Marinade’s position in the Solana liquid staking solution market will continue to be in jeopardy as Lido makes more moves in the Solana ecosystem. I think considering “split focus” as a risk will continue to be a limiting mindset. Lido is a threat to all non-staked solana and to Marinade’s currently staked solana. If Marinade is focused on decentralizing Solana as a mission it will not be able to defend its position because Lido is focused on staking every single lamport available.

I’m willing to admit going multi-chain at this point in time is likely not the appropriate response to the threat of Lido but I would love to hear more from the community about what Marinade should do in order to defend itself against the Lido threat.

I think the mission of decentralizing solana as the primary focus sounds great as a rallying cry but practically is flawed and could be detrimental to the long term future of Marinade.

6 Likes
#11

Coming from the same data you have on incentives, I am currently maintaining this set of opinions:

  • incentives are currently a way to provide attention to mSOL and MNDE utility (40M MNDE is voting on them vs 25M on validator gauges). The inclusion of synthetics, options, and upcoming Hubble collateral into gauges draws attention to mSOL use in the ecosystem beyond LP and borrowing
  • incentives might not buy any significant VL in one channel, but they can prevent losing TVL across the board. It’s been noted several times across different protocols that Solana DeFi is not really following the incentives rationally.
  • since the unstake period got lowered to one epoch, incentives from the perspective of risk mitigation might be significantly reduced as the SC and withdrawal risk decrease(d) with time
  • beyond incentivization, distributing MNDE still serves the purpose of decentralizing Marinade ownership (read: spreading it around). Reaching a loosely defined state of sufficiently decentralized could help when regulators get involved. (Everything changed when the nation-state attacked.)

I think cutting incentives by 30-50% could be an interesting experiment to find how much the incentives can get us. I’d be looking at these factors before drafting a proposal:

  • selling of MNDE across the incetivized channels
  • unstaked SOL available in the ecosystem
  • team temperature on Marinade/MNDE decentralization (currently a KPI being tracked)
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Reduce Liquidity Mining weekly rate by 75%
#12

As I’ve said in Discord, I’m not keen on pushing for ETH expansion anytime soon, but this is an exciting conversation. Thank you @adamdelsol for introducing the topic and thank you @tmnxeq for addressing the elephant in the room (Lido)!

Although Lido now has a little over 50% of Marinade’s staked SOL balance (3.99M vs 7.69M respectively), they don’t seem to be expanding very aggressively into Solana (at least in the immediate term). If you look at the data it’s pretty clear that the amount of new SOL stakers per day is decreasing / flat and not very large to begin with.

image

Looking at the flow of SOL tokens, it’s also clear that the majority of the balance was deposited in 2021, right around the time when they first launched their Solana offering.

I also get the impression that Lido does not really stand for decentralization and probably doesn’t really care much about increasing the Nakamoto coefficient of the Solana network, so would probably lack support from some key players (just my two cents, obviously don’t mean to speak for anyone else here).

…

Fully agree with @PlayerOfBits’s comments re: splitting focus and think that it’s important to remember that Marinade’s north star is increasing TVL here on Solana. Trying to make a push into ETH, or any other chain for that matter, could risk losing SOL LSD market share to Lido, Socean, etc…

With that north star in mind, I think it’s important to pick up the pace of collaboration / deal-making with more parties that are truly Solana native. More mSOL integrations are needed IMO, and hopefully the passing of Prop #10 leads to a healthier treasury and greater ability to make deals / retain talent. 30M SOL is an ambitious goal, and we need to stay focused on making progress toward that goal.

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#13

This is why you Marinade: two masterchefs, looking at the same data set, arguing different sides, in public.

No secret lizard-people overlord cabal here. :joy:

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#14

Well, this discussion has wandered far from OP. :smiley:

I have heard a few comments, but not that many, so treat this as anecdotal evidence. There are a few points:

  1. Individuals do not “get” a lot of our functionality, like how to best pick a validator on the gauges.
  2. Participants like validators do understand the value, given MDNE controls TVL; but as long as MNDE slides they have a valid reason to think they could potentially always buy lower.
  3. In my own view, Marinade is effectively an infrastructure play right now, which both raises the bar of entry for MNDE and reduces the audience size.

To address these, I believe we would need:

  1. Something that average individuals “get” the value without having to understand the complexities involved (eg. delegation + bribes);
  2. Growing TVL, since at some point for validators the opportunity cost of passing on extra SOL delegated offsets whatever “savings” you could get from buying MNDE lower;
  3. Some other way for average consumer-level users to benefit from either holding mSOL or MNDE.

Past performance does not guarantee future returns! :upside_down_face:

In other words: no, and I assure you we are not counting on it, but so far it has held true. I am well aware we may merely not have reached a point where the levee breaks, so I aim to address the points above as swiftly as we can.

Traders require good liquidity on their medium of choice, which so far we have lacked - a negative externality of a fair launch reducing the amount of MNDE initially out there. We are actively looking to address that, though.

But I’m afraid I’ve said too much. :zipper_mouth_face:

DAO is as DAO does! Happy to read your own conclusions or ideas on this topic - you’ll see that @gekonn and myself have an active discussion on the topic.

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#15

I can’t answer that question right now - I’ll set some time aside to look at Flipside data once the Solana Foundation has started delegating to stake pools. I agree that this should be a fundamental concern of theirs, though.

If you want a decentralized platform, and you are proof-of-stake, then it behooves you to decentralize your own stake as much as you can - that is the end goal of Marinade’s algorithm. I believe Marinade is a fundamental public good.

In fact, I’d argue that we are risking going down a “tragedy of the commons” path here. Marinade is focused on helping decentralize Solana. Anyone who stakes and holds mSOL, or who participates in Marinade’s governance, helps further that goal, which benefits the network as a whole.

However, any Solana user benefits from those actions without needing to take any action themselves.

We should strive to ensure that Solana doesn’t go the same path of so many other cases.

2 Likes
#16

If we bundle a supply shock (lower emission rate, lower total token supply) with a demand shock (gauge weight increase + bribes implementation + ME integration) we’d see a massive turn around.

If validators can do napkin math and estimate an ROI range of 30%-70%, rather than 20% at best, there’d be a huge impact.

The same would apply for investors – why should I invest any more money when price is going to get diluted into an oblivion.

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#17

We have been discussing this on and off. It’s ironic, but an unfortunate side effect of Marinade’s community-driven launch and eschewing of VCs was that MNDE had low initial float, so there is higher upcoming dilution. A purely-financially driven investor would take this into account.

There are a few practical ways around that, like selling long-term locked tokens to investors, but the most immediate one is making MNDE valuable to current potential buyers. If you want a governance token to have more value, then the thing that it governs needs to increase in value.

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#18

still needs to be met with some supply side updates. I think the #1 way to increase $mnde demand is to increase validator gauge weight power. Thought there was a proposal for this but couldn’t find it.

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#19

I don’t believe there has been one, even though a couple of validators have broached the topic recently and one may create a proposal.