[Proposal] Unified Benchmark Rate Protocol
Introduction
Following the positive reception of the recent Temperature Check and community call for the LSD Benchmark Rate Protocol, this is a follow-up proposal for Blockswap DAO. This proposal outlines the implementation of a unified benchmark rate protocol for Liquid Staking Derivatives (LSDs) across the Ethereum ecosystem.
The aim is to provide a single, fixed rate for DeFi protocols to use as an Ethereum consensus rewards benchmark. This will offer higher capital efficiency and liquidity across LSDs. As mentioned in the Temperature Check, the proposed first tokens for the benchmark rate protocol are stETH (Lido), rETH (Rocket Pool), and dETH (Stakehouse).
Previously in the Temperature Check it was mentioned that there would be a technical proposal. In lieu of this, the code has been made available for everyone to review.
Link to code updated April 28, 2023.
Motivation
The need for this protocol has been identified due to several pressing concerns raised by the Blockswap DAO community, Blockswap Labs, and the broader DeFi ecosystem.
The community has expressed a desire for improved liquidity to facilitate trading between dETH and ETH. Integrating dETH into the Benchmark Rate Protocol as a key asset, can provide users with seamless access. When incentivized, this could spark demand for dETH. There is no other LSD beyond dETH that can offer atomic redemption guarantees, therefore it would be beneficial for the entire ecosystem to see a wider adoption of sustainable derivatives.
This protocol’s first strategy aims to establish a unified rate for all staking derivatives. This will allow DeFi protocols to develop around fixed rates and simplify yield management thus enhancing capital efficiency.
For the DAO, this initial strategy can act as a platform to build additional resources for Blockswap assets and other LSDs. As demand grows so can the number of strategies available to dETH and LSD holders. It is encouraged that the community continues exploring and capitalizing on the potential of LSDs in DeFi. Many strategies and protocols could not be built before the granular yield composability of dETH.
Technical Information
We encourage the community to examine the code in the Benchmark Rate Protocol repository and provide feedback in the DAO discussion channels. Additionally, we invite everyone to participate in testing the protocol on Goerli testnet. This is to ensure its robustness and security before mainnet deployment.
Find the Benchmark Rate Protocol repo here.
Below is a visual representation of the Benchmark Rate Protocol. Keep in mind that the repo and the below are simply initial designs. When it gets to production there will inevitably be changes required.
BSN Token
50,000,000 BSN will be allocated to LSD depositors. There will be two paths to receive BSN tokens by participating in this protocol.
- Depositing to the kETH Vault: Users who deposit stETH, rETH, or dETH directly into the kETH vault will be eligible to receive BSN tokens as rewards. Once the assets are deposited, kETH tokens will be minted and locked for a 30-day period. During this lockup, the kETH tokens will be automatically staked to receive BSN emissions. After the 30-day lockup period, users have the option to withdraw their assets, remain in the pool, or exit to dETH/ETH.
- Staking in the dETH Vault: Users who opt to stake their assets in the dETH vault will also be eligible to receive BSN tokens as rewards. Similar to the kETH vault, there will be a lockup period for assets staked in the dETH vault. However, users staking in this vault will not receive kETH tokens. Instead, they will directly earn BSN rewards for their staked dETH during the lockup period. After a lockup period, users have the option to withdraw their assets, remain in the pool, or exit to dETH/ETH
By providing these two methods for earning BSN tokens, the proposal aims to incentivize user participation in the protocol, offering flexibility and catering to the preferences of different stakeholders in the DeFi ecosystem.
Proposal
- Blockswap DAO empowers Blockswap Labs to design, develop, create, support, and execute the above in a way they think is best for Blockswap DAO.
- The DAO sets aside 50,000,000 BSN for distribution to bootstrap the protocol over 120 days after the protocol is publicly released. Any remaining tokens at the end of the period will be returned to the DAO.
- The community can provide feedback throughout testing on protocol design and token distribution.
Conclusion
This proposal presents a groundbreaking protocol that can add value to the LSD marketplace. By creating a Benchmark Rate Protocol that supports deep integration of dETH, it will streamline liquidity and drive demand for the dETH token.
Together we can provide Ethereum a novel approach to enhancing the utility of LSDs and fostering greater capital efficiency in the network. This will come with the widespread adoption of dETH for its granular composability. It will help the community unlock immense potential for the future of decentralized finance and contribute to the advancement of the Ethereum ecosystem as a whole.
Achieving a quorum for a proposal in the Blockswap DAO requires the participation of at least 200 million BSN tokens. However, due to the limited distribution of BSN tokens currently in circulation, reaching the necessary quorum may prove to be challenging. To address this, multiple proposals and temperature checks may advance to a vote simultaneously. This approach ensures that the proposals’ advancement generates enough community interest and engagement, rather than being hindered by the limited availability of BSN tokens.
