Improved DHT Staking Model

GM Hedgehogs, I hope everyone is doing well. dHEDGE and Toros are continuing to build and innovate during this bear market.

We have some exciting news around DHT Staking. The dHEDGE core contributors have been brainstorming and modelling to improve staking and are excited to share the details.

We will have this up for discussion before putting it through a formal DFP governance proposal.

Summary

DHT Staking is being rejuvenated and improved to closer align staking rewards with healthy protocol objectives

Currently, DHT is emitted to stakers through one of two methods:

  • As direct incentive for staking DHT, proportional to the allocation of vDHT held via a lockup calculation, and

  • Via performance mining - a method that rewards investing in well performing pools. Investors are eligible for a max of 100 DHT a month rewards without any DHT staked; however with staked DHT these rewards increase.

Proposed is to:

  • Simplify the method of accruing voting power via accruing a staker’s vDHT linearly over time, starting at 0… vDHT accrues to parity with the staked DHT after 12 months.

  • Only emit DHT rewards to users staking both DHT and pool tokens. Staking DHT alone will not be subject to staking rewards. Rewards are emitted when staked DHT (vDHT) is paired with some staked dHEDGE pool tokens.

The amount of rewards a staked (vDHT, DHPT) pair receives varies with two factors: the amount of time the pair has been staked for (Duration Bonus), and the investing return that pool has returned since being staked (Performance Bonus)

  • The Duration Bonus is a linearly increasing factor from 0 to 1, which increases with time until maxing out at 6 months

  • The Performance Bonus is a linearly increasing factor from 0 to 1, which increases with the returns of a pool performance. This maxes out if/when a pool achieves 100% returns. (e.g. 10% pool performance = a Performance Bonus of 0.1

The effect of these changes will:

  • Improve the utility of DHT token as a method of boosting investing returns
  • Simplify the earning of governance power
  • Increase the attractiveness of holding DHT to increase investing returns

In addition it is proposed that staking of DHT move away from Ethereum mainnet to both Polygon and Optimism.

For a more in depth explanation with an example go to: New DHT Staking - in depth explanation - Google Docs

Looking forward to all thoughts and feedback. :slight_smile: :hedgehog: :rocket:

2 Likes

How do you define Pool Performance?

How Pool Performance bonus is calculated? Is it overall Pool Performance or personal Pool Performance?

Quote: “Pools generating a loss receive a 0 Performance Bonus, which in the context of the overall staking rewards formula will generate 0 staking rewards”. As I see this staking model is incentivizing riskier behavior for people who want to maximize the Performance Bonus and get more staking rewards. If the performance is negative, then there is no staking rewards. So that people who try to maximize rewards, would have a chance to have an unrealized loss + no staking rewards.

If I conservatively invest in Stablecoin Yield (1.64% - 6.07%), increase would potentially equate to 0.0164 - 0.0607 performance bonus. Meaning if I invest 1000$ and stake 6000DHT for one year, then I could potentially get Staking Rewards = 1 * 1000 * 1 * 0.0164 * 6 = 98.4 DHT or 1 * 1000 * 1 * 0.0607 * 6 = 364.2 DHT per year of staking!!! :smiley:

If we look at max reward (100% return) in this case: 1 * 1000 * 1 * 1 * 6 = 6000 DHT, meaning 100 % APY on DHT tokens. Which is highly unrealistic. More realistic return 1,64 - 20 % on average, meaning realistic 1,64 - 20 % APY for DHT stakers on average. With possibility to multiply rewards by 0. Improved staking? :upside_down_face:

Also I don’t really like the idea that you propose to force early investors (stakers) to invest (risk) more cash to “potentially” get some staking rewards (please correct me if I’m wrong), instead of finding a way on how to incentivize early adopters and thank them for early support. For me it looks like monetizing existing holders (DAO), instead of finding a way on how to growth an existing user base and scale dHedge.

Overall, the idea is excellent from dHedge owners perspective!

Does Protocol Treasury quarterly bonus stay the same? If yes, then it’s great for dHedge DAO too in the long term. The only tradeoff is more cash to invest and less staking rewards to get! :slight_smile:

1 Like

I have a question about switching to a different chain of rewards. My wallet does not support L2. Have you already made a mechanism to migrate wallets to other addresses to be able to receive rewards.
I also do not agree that in order to be rewarded everyone should increase investment risks

Pool performance Bonus is based from the time the user stakes the DHPT until they choose to unstake.
So its the individuals ROI from when they stake their pool tokens.

It is meant to encourage safe but positive performing pools. Yes there is an element of risk but its important to encourage investors towards pools that are continuing to beat their previous highwater mark. This ensures that dHEDGE can can continue to grow the Protocol Treasury via the admin fee. Which benefits stakers.

Its not forcing anyone to do anything, but in the current model DHT stakers are not necessarily users of the platform/investors in dHEDGE pools. This new model is designed to align the goals and create a flywheel effect. Ideally this creates buying pressure on DHT via new users purchasing DHT along with DHPT. This equals better APY via staking etc…

Thanks for your response, How would you incentize early adopters? What would you suggest to grow TVL?

This is still up for discussion on the exact migration from old to new.
So you don’t use L2 at all?

You don’t necessarily have to increase your investment risks. EG you have $350 which could be made up of $150 DHT and $200 DHPT.

My wallet doesn’t support L2

  1. Implementation of referral system
  2. Make promotion material with a dynamic generation banner where you can get information about pool profit in real-time. This image can be put on many forums in signature.
  3. Native integration with mobile wallets after making a referral system.
  4. Make professional videos with manual how-to-use the platform.
  5. Demo mode when investors can try without risk of losing and try the interface.

I think this is an excellent idea, as it disincentivizes withdrawing funds from the dhedge platform.

Will the pool returns be assessed on since inception, or based on a recent period of time?
Why does dHEDGE want to encourage participation in only high return pools and discourage participation in low return pools? What does linking pool returns accomplish here? This appears to me to be a de-facto reward for successful pool managers.

1 Like
  • I would suggest to keep the possibility to Timelock assets for 1, 2 and 3 years but with higher duration bonus, due to lower flexibility. 1.5, 3, 4.5 respectively. Performance Bonus multiplied *2 for two years stake, *3 for three years stake. The user will have a possibility to select a flexible or fixed lock. I think TimeLock is important feature and it’s worth keeping it. dHedge is a marathon, not a sprint.
  • For early adopters I would suggest to make a snapshot of current 1, 2 and 3 years stakers and airdrop them an Early Adopter NFT based on their stake and TimeLock period, with possibility to later claim specific amount of DHT tokens after 2-5 years of vesting period. The more you wait, the higher are the rewards.
  • Launch Toros loyalty program. Level 1 (1 pool invested) - 10% discounted performance fee. Level 2 (2 pools invested, 1 referral invited) - 20% discounted performance fee. Level 3 (3 invested, 5 referral invited) - 30% discounted performance fee for Toros pools only. dHedge is better with Toros.
  • Boost community marketing. Connecting community with dHedge brand and creating mutual experiences. Creating long-term relationships with existing users and converting them into loyal evangelists. Growing talents within the community. This means, taking good care of the community and letting them work together with you.
  • Improve functionality of dHedge community. We are a huge, growing DAO. This means we need to be functional as a team as well as community.

Advantagethe_five_dysfuctions

  • Improve trust, confront difficult issues and focus on collective outcomes as community. I don’t say that we don’t have it, dHedge is very well functional as a team, but we have space to be more functional as a community too. IMHO. Maybe we need to pay more attention to fundamentals - trust aka transparency. And merge dHedge team and community, so we become a whole. If we are a real DAO, community also needs to know the values and goals of dHedge.
  • Supply dHedge branded merchandise, swag. I am proud to be part of dHedge family.
  • Provide free education for managers. The existing community needs some kind of Learning Center (Trading psychology, Risk management, Algo trading etc) so that they can growth as professionals and feel supported along the way. I think this is essential. It’s not expensive, but very rewarding. People would be grateful that you taking care of them and their future.
1 Like

How does staking you dHEDGE Pool Tokens work? Or will work?

I read the details, there will be no actual “staking” of Pool tokens, just holding them means “staked” in this instance.

I think the new proposal has its flaws as well. If DHT rewards go to those who have at least 6 DHTv for every dollar in DHPTs, then it might deter users or speculators from holding the asset as there may be no reward for them as the protocol grows and they do not invest in any of the pools. The current stock market works in such a way, where investors seek dividends only. And the stock goes up as the company’s earnings do. If the protocol is doing well, there should be no other incentive for users to purchase the token. What if an investor does not want to be invested in pools during a downturn, like now, but has many DHT staked? These are things to think about. Still very early in the innings

Over time, users who are staked, will accrue more DHT emissions and therefore retain their ownership percentage of DHT tokens, while those who do not will become diluted from performance mining and staking rewards. There is already an incentive to stake, focus should maybe be elsewhere for now imo

2 Likes

The pool return is the difference in performance between when a user stakes his DHPT and then unstakes.
EG. User A stakes DHPT: current performance is 10%, then in 6 months time the pool performance is 60%.
If User A decides to unstake, then their performance bonus is calculated 60%-10% = 50% therefore 0.5

Its encouraging user to invest in positive performing pools. Its important for dHEDGE pools to earn fees, to incentize Managers to keep performing along with the 10% admin fee that grows the Protocol Treasury

These are good ideas!

Referral system is almost complete.

No, you will need to stake your DHPT. Holding them does not mean ‘staking’

Yeah that’s an interesting point. If comparing to stock market/earnings/dividends then the dHEDGE Protocol Treasury is where the protocol fees go. One of the aims from this new model is increasing this treasury.

I like 2:
Make promotion material with a dynamic generation banner where you can get information about pool profit in real-time. This image can be put on many forums in signature.

Which wallet are you using that doesn’t support other networks?

If an investor is worried about investing in pools during a downturn, many of the top dHEDGE pools during this time are low risk, yield farming pools. Investors can invest in those during a bear market. Additionally, if they are bearish, they could invest in a manager who is shorting, who reflects their own outlook on the market.

Argent, they do not have at the moment support with OP and Poly network

After collecting the overall feedback on the new DHT Staking model here are the main points and the suggestions:

Issue:

  • Concerns with risk of a pool generating a 0 performance bonus, which Increase capital risked for zero rewards. Potentially promoting more riskier behavior. I.e. investing in potential higher performing pools compared to conservative pools.

Suggestions:

Reduce max performance bonus from 100% back to e.g. 50%

Issue:

  • Suggestion of an added multiplier/option:

Timelock - where funds can be locked for 1,2,3 years.
If locked user gets an x multiplier depending on time frame.

Suggestions:

Not an issue - point of the new design is to keep users engaged with the platform - and to discourage set-and-forget

Issue:

  • Clarification on Protocol Treasury and quarterly bonus in new Model

Suggestion:

Protocol Treasury is low at the moment, would be good to keep growing [set a target, e.g. $100m] funds on protocol before further disbursements. Long-term view rather

Issue:

  • Early/current stakers are not rewarded in the new model. Potential early adopter NFT, that can have a use case in the new staking model.

Suggestion:

Give current stakers a promoted/maxed out vDHT Duration Bonus in new staking model.

Possibly not an issue for DHT earning, could be an issue in Governance.

Issue:

  • Creating an option for current stakers that are long DHT. ie don’t want exposure to other assets.

Suggestion:

dHEDGE pool that holds only DHT. This pool token can then be staked with DHT in new model.

Issue:

What will happen at DHT migration? Will we run both V1 on Ethereum for a while or instantly drop v1 and move to staking v2.?

Suggestion:

Drop v1 asap. Ideally no overlap.

1 Like