Unveiling Saddle's Tokenomics
It’s finally time to unveil our proposed tokenomics upgrade for SDL.
We’re pulling from the best tokenomics from every corner of DeFi to put together a unique stack of incentives that is grounded in adding value. In order to maximize value to SDL stakers, we therefore aimed at 4 goals:
- Attracting and keeping liquidity
- Encouraging participation
- Encouraging SDL buy pressure
- Decreasing sell pressure and encouraging staking
To this end, and if the current tokenomics proposal goes through, we plan on first implementing a modified vote escrow tokenomics based on Ribbon Finance’s Ribbonomics before the SDL token unlock (~1 month’s time). Going forward, we hope the community will consider expanding the tokenomics stack by implementing: LP locking for increased SDL rewards via Frax’s LP Boosts, bond issuance using Olympus Pro so Saddle can own and potentially rent out liquidity to other protocols, enable users to take out Saddle LP-token backed stablecoin loans with Rari Capital’s Fuse, and finally to give SDL stakers airdrops and admin fees from select SEMPI partners forking Saddle. This tokenomics stack will achieve the 4 goals outlined above and drive maximal value to SDL stakers.
Attracting and keeping liquidity
- Emitting SDL tokens to LPers
- Emitting SDL at a faster rate the longer LPers opt to lock up their liquidity for weeks, months, or even years
- Allowing LPers to use their liquidity as collateral for stablecoin loans
- Purchasing liquidity with SDL from LPers who wish to sell their LP tokens for discounted SDL
Encouraging participation
- Granting SDL stakers governance rights
- Granting SDL stakers indirect governance rights over Saddle forks (SEMPI partners)
- Granting SDL stakers indirect governance rights over protocols renting our liquidity
- Granting SDL stakers voting power over how much of SDL buy backs go to stakers vs. to the Saddle treasury to maintain LP incentives
- Granting SDL stakers governance rights over deploying Saddle’s treasury owned liquidity however the community sees fit
- Granting stakers the right to vote on the terms of protocol-to-protocol liquidity providing deals
Encouraging SDL buy pressure
- Using 60% of Saddle administration fees to buy SDL/FEI LP tokens to distribute to stakers thus increasing buy pressure for SDL while also being backed by stables
- Using SEMPI partner administration fees to buy SDL/FEI to distribute to stakers + keep the treasury at healthy levels to continue providing LP SDL incentives + grow Saddle owned liquidity
- Using trading fees from liquidity we rent out to buy back SDL/FEI to distribute to stakers as rewards + keep the treasury at healthy levels to continue providing LP SDL incentives
Decreasing sell pressure and encouraging staking
- Having a capped supply of 1 billion tokens
- Granting stakers the ability to lock up their SDL to collect Saddle administration fees paid out in SDL/FEI LP tokens
- Granting stakers the ability to lock up SDL for veSDL from weeks to years to vote to boost SDL token emissions for particular LPs in the following week
- Having veSDL decay linearly thus incentivizing continual staking which a) decreases sell pressure, and b) ensures SDL staked at a lower price in the past isn’t of equal value to SDL staked later at a higher price
- Having locked staking whereby the longer LPers lock up their LP tokens, the more SDL they earn
- Granting stakers locking up their SDL the ability to collect free airdrops from our SEMPI partners
- Granting SDL stakers indirect voting power over other protocols’ (who rent our liquidity) governance and therefore fee structure which ultimately ends up in SDL controlled coffers and as SDL/FEI rewards for stakers
- Granting SDL stakers the ability to collect trading fees from other protocols earned by Saddle providing them with liquidity from Saddle’s treasury of purchased liquidity
We encourage any comments to be posted to the proposal on Discourse here while voting is open. After voting closes on March 10, 2022, we encourage you to hop in our Discord to chat with the community or the core team.
For those curious about the ‘why’ behind each of our tokenomics decisions, a full-length write up of our tokenomics will drop soon here. To stay tuned for that update, follow Saddle on Twitter.