XP-5 exploring the potential options for rXTK staking

Potential options for rXTK staking

  1. rXTK
    1.1 What is rXTK?
    1.2 What is the issue with rXTK?
    1.3 Quantifying how much yield rXTK holders will miss out on
  2. Potential options for rXTK staking
    2.1 The options
    2.2 Comments from the team
  3. My proposal

1. rXTK

1.1 What is rXTK?

rXTK is redeemable XTK allocated to xBNTa and xSNXa LPs, as well as all xSNXa holders. It was allocated to compensate liquidity providers who lost funds in the xBNT and xSNX exploits, 2% of XTK supply was allocated to the rXTK contract, vested linearly over one year and made available to LPs. LPs have been distributed rXTK proportionally to their dollar value losses.

To compensate xSNX holders for the ETH extracted from the xSNX contract, an additional 0.2% of XTK supply was allocated, distributed proportionally to xSNX holders.

Net total distributed was 22,000,000 XTK, of which only 17,946.74 XTK has been claimed.

1.2 What is the issue with rXTK?

With the release of the first multi staking module, xXTKa, XTK holders are now able to use their XTK in a productive manner and earn yield via fees generated from xToken Management products such as xAAVEa, xSNXa, xINCHa and xINCHb, etc. On top of this 4% of XTK’s supply has been earmarked for distribution to xXTKa holders as staking incentives, with the first incentives period distributing 1% of XTK over 3 months starting from Monday, July 26, 2021. Unfortunately rXTK holders are unable to take part in xXTKa staking in its current form, causing them to miss out on a non-zero amount of yield as well as being inflated out of their percentage ownership of the total XTK market-cap relative to xXTKa stakers. This has raised questions from the community on whether changes could made to rXTK to fix this.

1.3 Quantifying how much yield rXTK holders will miss out on.

Currently with a circulating supply of ~100mm XTK and ~62mm XTK staked in the xXTKa module, XTK holders can earn around 67% APR from staking incentives alone. Which I’ve highlighted in green. If all rXTK was staked that would bring the current circulating supply up to ~122mm XTK and ~84mm of all XTK staked, the APR of which I’ve highlighted in red.

xXTKaEstimateAPRfuture

With an APR of ~48% and ~22mm XTK in the rXTK contract, rXTK currently stands to miss out on ~10.9mm XTK in rewards incentives alone in the 307 days between when the xXTKa went live and rXTK fully vests. This is not to mention the yield from xToken Management products being distributed to xXTKa holders, which I am unable to calculate now. However I have previously made my best attempt at calculating fee revenue from xToken Management products here. Using my extrapolated annual revenue of $675,816.10, that would result it around $568,426.14 worth of XTK (5,075,233.39 XTK) being distributed to all xXTKa holders over the time period. rXTK would make up around 25% of the total XTK staked, therefore earning a further 1,268,808.34XTK. My numbers however are just a best attempt at calculating fee revenue and do not take into account any new products being launched in the future, nor fluctuations in AUM over the past.

2. Potential options for rXTK staking

2.1 The options

As I’ve come to understand it, there are four potential options, each increasing in complexity and requirement of dev resources and time. The options are:

  1. Make no changes to rXTK.
  2. Increase the amount of XTK in the rXTK contract to a level commensurate with if it was staked.
  3. Retrieve the XTK from the rXTK contract, then deploy a new rXTK contract that will enable staking in the xXTKa module.
  4. From the Community Vesting Pool temporarily allocate XTK equivalent to the total XTK in the rXTK contract to be staked as xXTKa and earn rewards. Once rXTK is fully vested, withdraw all XTK from xXTKa, returning the full amount allocated back to the Community Vesting Pool and distributing all yield to the rXTK contract.

2.2 Comments from the team

After discussing with mjc716 from the team the viability of each option he had these comments:

Option 2

“I really think this is the only realistic option. figuring out the details of it may take a little figuring out, but there’s no real technical lift”
“we can fairly easily mimic full or partial returns to stakers by airdropping XTK into rXTK contract”

Option 3

“We could retrieve the XTK from the rXTK contract and deploy a new merkle claims contract, but hooking that new contract up to the staking contract is a lot of added complexity on the staking contract.”

Option 4

“this strikes me as a way overcomplication… and then manually allocate to people based on off-chain calculations of how long they stayed in rxtk pool? Don’t see it.”

3. My proposal

While I believe it is important to allow rXTK to earn a yield equal to what stakers in the xXTKa module do, I also believe it’s in the best interests of xToken as a whole to have the majority of dev resources and time spent building out future products that will drive value to XTK overall. For these reasons I’m proposing we move ahead with option 2: Increase the amount of XTK in the rXTK contract to a level commensurate with if it was staked. To do this an allocation of XTK from the Community Vesting Pool will be required to bolster the balance of the rXTK contract. I estimate the upper-bound of that to be ~15,000,000 XTK, with the actual number likely lower as the APR for xXTKa has been steadily decreasing over time as a larger percentage of XTK gets staked. The actual number required can be calculated when rXTK is fully vested by comparing the change in the ratio of xXTKa:XTK from when the xXTKa module went live till rXTK becoming fully vested. Upon which a lump sum deposit of XTK can be made to the rXTK contract. As an added bonus this method will incentivize a greater number of rXTK holders to hold their rXTK until fully vested, increasing the likelihood they recoup their full loses incurred from the exploit.

Edit: corrected the error of 314 days until rXTK fully vests to 307 days and re-did the calculations.

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Thanks for putting this together, @CosmicCollusion. I fully support this proposal, and as I’ve stated on Discord, it represents a crucial gesture that the dev team and community are doing what they can to support those that got hit with the devastating hack as much as reasonably possible. Ideally, I would have liked to find a way to generate the rewards without having to pull such a quantity from the Community Vesting Pool, however as you noted this is quickly offset by the opportunity cost of devs having to work out a more complex solution rather than more impactful initiatives. I also doubt that it will come close to the 15mm XTK upper estimate.

To be clear, I think @mjc716 may have misunderstood some aspect of my proposal with Option 4, as it didn’t necessarily have anything to do with how long individuals stayed on the rXTK contract – a needless complication. However if Option 2 is approved by the community, then exploring this further would be moot.

Thanks for putting this together.

I would be in support of something like a quarterly calculation of past 3 months XTK staking returns, airdropped proportionately into the rXTK contract. This would come from new Community Vesting allocation, on top of current allocation to XTK Mgmt staking module.

So in short, a lump sum deposit of XTK into rXTK roughly 3 to 4 times through the rest of the year when rXTK vesting completes.

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@baronholbach I said in discord your idea had merit. Conserving the Community Vesting Pool for use on impactful matters should always be on XTK holders minds. But I think you hit the nail on the head re opportunity costs. Re-directing resources towards building out a more complex or ‘perfect’ system for a subgroup of XTK holders vs. building future products that benefit all XTK holders doesn’t seem like the best tradeoff. I also believe that allowing rXTK to stake would be considered an impactful gesture from the team and go a long way in gaining positive sentiment from all those affected by the exploit as well as those yet to join our community, but have watched from the sidelines how the entire process was handled.

@mjc716 I initially proposed one lump sum for ease of implementation as well as incentivizing rXTK holders to hold for the full vesting period. However quarterly deposits would have the added benefit of gaining clarity on the rate of XTK being deposited and how much the final amount required will end up being. Either would be perfectly acceptable methods in my mind.

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I would support this quarterly lump sum deposit in some form, but would really like to see more community engagement here before we move forward with any plans

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I would certainly appreciate the opportunity to stake my rXTK while it matures. I also favor the end of quarter XTK distribution model. It makes more sense than a single lump deposit and rXTK holders are more likely to receive what they “should” receive rather than an estimated amount that may end up an over or under compensation.

I support quarterly lump sum deposits in the rXTK contract to make up for the inability to stake. Makes sense, easy to implement, lets team focus on bigger things and makes people who suffered losses happy.

Great and well-reflected job putting this together.

Happy to see exploit victims being considered on-par with regular XTK holders and not below.

That being said, calculating and airdropping seems like the rational thing to do instead of spending dev resources on a temporary feature. I’d assume there are many more pressing issues around platform growth to attend to.

Thank you for working to make us whole.

This is a great proposal and I’m in support of option 2 as well. It definitely appears to be in the “path of least resistance.” and as long as all parties are good with it and it doesn’t appear to hinder/hurt development/operations in order for development to progress, it’s a big plus.

Great proposal. Easiest option here looks like #2 and imo as long as the rewards are provided prior to the vesting end date then it gets a vote from me.

Would love to be able to stake my rXTK, I lost a good sum and it did tick me off when I saw great inflationary yields on single sided XTK that i wouldn’t be able to accrue esseentially devaluing my restitution. This would put rXTK holder in equal footing with XTK holder, should get passed, has my support.

quarterly airdrops make sense but staking does also so long as it doesnt take away too much time from the team.

I’m in favor of Option 2 for the reasons referenced above including mjc feedback.

I’m not sure how to equitably address the issue of early claimers in this context. Under the circumstances, I would have no issue with the couple of early claimers being eligible to manually appeal for the delta, i.e. what they would have received had they claimed exactly when they did do so had the revised amount of XTK been in the contract. This total exposure amount could be calculated in advance, held back from rXTK for possible appeal, and the balance credited to rXTK on the last day of any appeal period. While I suppose an argument could be made that they claimed early and thereby forfeited additional benefits, I would encourage against taking this view simply because the early claimers probably did so by accident and (at least theoretically) might not have done so had they known that the initial XTK distributed was subject to future refinement. (Disclosure: I have not yet claimed my rXTK.)

Thanks for the proposal.

This is a great idea. As others have said, allowing holders from the exploit the same opportunity to stake can’t be a bad thing. I doubt anyone can give a valid reason why they shouldn’t be able to stake.

Hi @mjc716 based on a universal level of support and general sense of rectitude around this proposal, are we able to confirm moving forward with the quarterly airdrop plan? Thank you to everyone who chimed in to support compensation for rXTK holders!

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