Author(s): Sperax Team
Reference: Staking protocol doc, SIP-33
Created: March, 1st, 2023
Labels: #Product Features
Simple Summary / Abstract
Staking rewards are generated by the SperaxUSD protocol only on Arbitrum (L2) network. SPA staking functionality is currently present both on Arbitrum and Ethereum, at the same time, the majority of staked SPA (95%+) and staking wallets (99%+) live on Arbitrum.
The process of transferring staking rewards generated by the SperaxUSD protocol on Arbitrum to stakers on Ethereum and the equalization of fixed-rate rewards (Incentive Rewards) on the two chains is currently centralized and requires manual intervention. To optimize this process, the Sperax team intends to decentralize and streamline staking rewards distribution.
The stakers on Ethereum will get the option to move their veSPA balances from Ethereum to Arbitrum, keeping all the staking parameters (veSPA balance, lockup duration) unchanged. The Yield Share rewards and the Fee rewards will be distributed on Arbitrum only and not transferred to Ethereum. Until the team builds the contract for Ethereum stakers to transfer their veSPA balances from Ethereum to Arbitrum the veSPA stakers on Ethereum shall receive a fixed yield at the rate of 7200 SPA tokens per week which would make the staking APR equal to 3.2% - taking into account emissions redirections as foreseen by SIP-33. Staking more SPA on Layer 1 would be paused once this proposal passes.
Motivation
-
Currently, SPA can be staked both on Arbitrum and Ethereum, though there is a huge difference in the amounts staked on both networks. A significant share of staked SPA (95.3%) and staking wallets (99.7%) live on Arbitrum, and only a tiny part - on Ethereum (4.7% and 0.3%, respectively).
-
The rewards are generated by Sperax USD protocol on Arbitrum only. The process of transferring rewards from Arbitrum to the stakers on Ethereum stays centralized and requires manual intervention, as well as the process of equalization of fixed-rate rewards distributed to the stakers on both networks.
Overview
With the purpose of its quick adoption, the staking protocol has been launched both on Ethereum (L1) and Arbitrum (L2). Its rewards have their origin on Arbitrum - their source is USDs protocol yield (Yield Share rewards) and mint/redeem fees (Fee Rewards), supported by fixed-rate rewards (Incentive Rewards) sponsored by Treasury. A part of all rewards is partially transferred to the stakers on Ethereum and this transfer is a centralized and manual task.
Currently, ~233M SPA is locked on both networks for more than 3 years on average which is an equivalent of ~728M veSPA.
However, the major amount of staked SPA (95.3%) and staking wallets (99.7%) live on Arbitrum.
Thus, the proposal is: to make it possible for veSPA stakers to move their veSPA balances from Ethereum to Arbitrum.
All the stakers on Arbitrum (including those who will transfer their veSPA balances from Ethereum) will continue getting all the rewards: Yield Share Rewards, Fee Rewards, and L2 incentive rewards (if any) apart from benefiting from the bribe and other rewards. If a user decides not to move the veSPA balance to Arbitrum, even after the option to transfer the balances have been provided they will not earn any rewards.
Until a contract and mechanism are built to transfer the rewards from L1 to L2, the veSPA holders on L1 shall receive fixed rewards per week at the rate of 7200 SPA tokens per week which would make their current APR on L1 to be equal to 3.2% if no more tokens are staked on L1.
This will defragment, streamline and decentralize rewards distribution as there will be no need to move rewards cross-chain in a centralized way. Also, it will help users to optimize network fees for staking/claiming/restaking given the transaction fees of Arbitrum are 10-20x less than on Ethereum.
Calculation of fixed rewards on L1
-
Fixed rate (does not include SIP-33 provisions)
For the fixed rate calculation the average of the 5 most recent SPA distributions on Ethereum is taken as a reference: 26.4k SPA weekly.
-
Fixed rate (after alignment with SIP-33)
As per SIP-33: 383,550k SPA (total additional weekly emission) will be redirected from veSPA emissions to bribe veSPA holders. This means that once SIP-33 is implemented on Arbitrum - the share of this total emission on Ethereum (proportional to staking on Ethereum) must be deducted from the above-mentioned Fixed rate (which didn’t include SIP-33 provisions).
~5% of total staked SPA/veSPA lives on Ethereum and the proportional share of additional rewards on Ethereum is 5% of 383,550k SPA which gives a fixed rate after SIP-33 implementation equal to 7.2k SPA (this means APR 3.2%):
26.4k (fixed rate without SIP-33 provisions) - 19.2k (5%x383.5k) = 7.2k SPA (fixed rate after alignment with SIP-33)
Technical Specification
Set up the functionality that will allow users to move their veSPA balances from L1 to the same account (wallet) on L2.
Until veSPA stakers on L1 are able to transfer the balances, given that SIP-33 is implemented, - distribute 7200 SPA fixed rewards per week for L1 stakers. Pause staking of more SPA tokens on L1.
Yield Share Rewards generated by USDs protocol and Fee Rewards will be distributed to L2 accounts only, the rewards will not be transferred to L1.
The details of the migration mechanism will be further shared in a separate post and SIP. For wallets that do not have any tokens staked on L2, the migration should be relatively simple. All the parameters of the veSPA balances will be retained within the limitations of the technology. For wallets that have balances, some logic may be required to ascertain the lockup period associated with the new total balances.
Voting
For:
Support decentralization of staking reward distribution and the pausing of staking SPA tokens on L1
Against:
Keep the current model of staking and rewards distribution on Arbitrum and Ethereum
