SIP | Deploy RARE Staking to Ethereum Mainnet

Governance Proposals Implemented
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Amendment: August 14th, 2023

In order to incorporate community feedback from @LeonardoDaNFT, the proposal authors have decided to make the following change:

  • The unstake burn fee should be set to 0% (previously 1%)

This allows us to observe the degree to which exploitation actually exists in a live environment, given that we believe gas fees will serve as an adequate disincentive early in the system’s adoption. Further exploration of a dynamic burn fee as proposed by @LeonardoDaNFT has begun, and may be introduced as a modification of the system in a future proposal if appropriate.

Summary

Following the successful deployment and testing of RARE Staking on the Goerli testnet, we propose that the protocol be deployed to Ethereum mainnet, and that the DAO Council claim ownership of all contracts associated with this deployment. In addition, we propose that the Bazaar be updated so that 1% of every sale (taken from the existing 3% network fee) is diverted to the seller’s rarity pool, if one exists.

Motivation

Provide platform agnostic infrastructure for decentralized curation and the generation of crowd-sourced reputation data at scale, with the primary intent of increasing discoverability and strengthening connections between artists, collectors, and curators. We believe this is a long term project that will shape the future of cryptoart, and that it should be carried out in an iterative and collaborative manner. Having learned many valuable lessons from the alpha prototype deployed to the Goerli testnet, we believe the best course of action is to deploy to the Ethereum mainnet, and connect staking contracts to the bazaar so that we can test the economic and social models in a live environment, ensuring the system as a whole provides value to the community and continues to scale effectively over time.

Background

The mechanism design of the RARE Staking Protocol is described in the whitepaper, published at the beginning of the alpha test period in which the smart contracts were initially deployed to Goerli for public experimentation, and updated recently to include gas optimizations identified as a result. The current state of the protocol can be viewed in this github repository, which will be deployed to Ethereum mainnet upon the passage of this proposal, though the council has the ability to authorize any final changes prior to the deployment for the purposes of gas optimization and security. The code was initially audited by Quantstamp prior to the launch of the contracts on Goerli, and was recently audited again, following the aforementioned optimizations made during the public testing phase. On both occasions, the audit passed without any major concerns with only minor changes being suggested by the auditors.

Specification

Part 1: Configurable Parameter Values

In addition to outlining the mechanism design and technical specifications, the whitepaper describes the configurable parameters available within the staking system and a detailed description of the design tradeoffs that should be considered for each. Initial assumptions for these parameter values have held up well under testing during the alpha period. The proposed value for each of the system’s configurable parameters are as follows:

  • Round Countdown Duration: 7 days.
  • Bonding Curve Equation: Remains unchanged from the testnet deployment, with coefficient values of a = 2 * 10^28 and b = 10^13.
  • Unstake Burn Fee: Remains unchanged from the testnet deployment, with 1% of tokens each time a user withdraws from a rarity pool being burnt to disincentivize high frequency staking and un-staking (NOTE: following the ammendment on 8/14/23, the unstake burn fee will now be set to 0% upon passage of the proposal)
  • Reward Swap Discount: Remains unchanged at 90% of each successful reward swap going to the associated rarity pool and 10% going to the executor of the transaction as compensation for the gas required to facilitate the swap.

We encourage future protocol contributors and governance proposals to modify these parameters as needed to promote system stability, efficiency, and security based on similar levels of testing and community evaluation.

Part 2: Deployment of Staking Protocol & Transfer of Ownership

Upon passage of this proposal, Charles Crain (CTO of SuperRare Labs and RareDAO Council member) or his representative will perform the following steps to deploy the staking protocol and facilitate the transfer of contract ownership to the DAO multi-sig:

  1. Run the RareStakingDeploy script with updated parameters described in Part 1.
  2. Transfer ownership of the RarityPoolFactory, RewardAccumulatorFactory, and RareStakingRegistry contracts to the DAO Council multi-sig.
  3. Complete the process by initiating transactions from the DAO Council multi-sig to claim ownership of the RarityPoolFactory and RewardAccumulatorFactory contracts.

Once the council signs and executes the claim transactions for RarityPoolFactory and RewardAccumulatorFactory, the DAO will have full and exclusive ownership and upgrade authority over the Staking Protocol.

Part 3: Modification of the Bazaar Smart Contract

As described in the whitepaper, the RARE Staking system is marketplace agnostic, so long as fees are diverted to stakers and curation data is provided back to the protocol. We have outlined a process by which marketplaces that wish to integrate the RARE staking protocol and compensate stakers can divert said fees to the relevant rarity pool for each sale in the “Funding Rarity Pools” section of the whitepaper. Accordingly, we propose that the Bazaar (i.e. the collection of smart contracts underpinning RareDAO’s on-chain marketplace and auction house functionality) be updated to support rarity pools in anticipation of staking data’s adoption at the marketplace level.

In addition to the steps described in Part 2 to deploy the staking protocol smart contracts, upon passage of this proposal Charles Crain or his representative will also perform the following steps to update the bazaar:

  1. Deploy a new version of SuperRareBazaarBase, which contains updated logic for the auction house and marketplace allowing 1% of each sale (one third of the current network fee) to be diverted to the seller’s rarity pool, if one exists.
  2. Complete the process by initiating transactions within the DAO multi-sig to point SuperRareBazaar to the updated marketplace and auction house logic.

Once the Council signs the transactions required to upgrade the Bazaar, the protocol will automatically check if the seller in each transaction has a rarity pool, and if they do, divert 1% of the total sale amount to that rarity pool, with the remaining 2% of the network fee being sent to the DAO treasury as normal.

Benefits

We believe the web of trust and preference generated by this system will provide powerful tools for the discovery of content and the people who create it, as well as decentralized signals of community support. There are many ways in which these signals could be used by the DAO, such as whitelisting trusted network participants, incentivizing adherence to artist royalties, and even the distribution of treasury assets. If you’d like to dive deeper, we encourage you to read the “Applications” section of the whitepaper, as well as recent blog posts published by SuperRare Labs describing how staking provides equitable and scalable infrastructure for discovery, community development, and reputation.

Drawbacks

Gas Fees

Because this system is built to accommodate both small and large signals of support, and it was intentionally designed to balance financial and social incentives, long term successful adoption will likely depend on affordable transaction fees. We are confident that the fees are low enough for early adoption, however we encourage future protocol development to further optimize the contracts for gas costs and evaluate scaling solutions that would lower the cost of economic participation in this system .

Static Parameter Definitions

In an attempt to minimize protocol complexity, we propose that the protocol be deployed initially using a fixed reward swap discount and unstake burn fee. In some community discussions it was raised that this is not optimal because it does not take into account factors unique to each pool or to each staker. However, at this early stage, we are committed to maximizing security and minimizing gas expenditure - and one of the best ways to accomplish both is by limiting complex logic and storage requirements at the protocol level. As further gas optimizations are implemented and ethereum scaling solutions become more viable, we will be in a better position to evaluate more complex protocol functionality.

Proposal Execution

Upon passage of this proposal, the following shall be resolved:

  1. SuperRare Labs is authorized to deploy the Rare Staking protocol to Ethereum mainnet as described in Part 1 of the Specification Section.
  2. SuperRare Labs is compelled to transfer ownership of the RarityPoolFactory, RewardAccumulatorFactory, and RareStakingRegistry contracts to the DAO multi-sig following execution of Resolution 1.
  3. The DAO Council is compelled to claim ownership of the RarityPoolFactory and RewardAccumulatorFactory smart contracts following the execution of Resolution 2.
  4. Following execution of Resolutions 1, 2, and 3, the RarityPoolFactory, RewardAccumulatorFactory, and RareStakingRegistry contracts shall be considered components of the DAO’s core protocol as defined in the Community Approved By-Laws, and shall only be upgraded in compliance with the procedures described therein.
  5. The DAO Council is both authorized and compelled to upgrade SuperRareBazaar to accommodate any changes needed for the diversion of funds from the network fee to the staking protocol following the execution of Resolution 1, as described in Part 3 of the Specification section.
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Please join us in our for a community discussion today 8/2 at 2PM ET: DAO Town Hall #33

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I find it a little disappointing to having opened up discussion on the forum regarding configurable parameters, yet I have not seen any iteration or data posted in response.

I especially think the 1% unstake burn fee is poor design. As a participant if I stake on an artist for over a year however, if my rewards from staking are not greater than the 1% burn. I would have lost token. I think this design disincentivizes to staking on non-selling artists, or artists who would generate low rewards to the rarity pools.

I also think 1% is too low disincentivize higher frequency staking. I could imagine a case where a staker has alpha leading up to a high profile sale, and games the system by swapping in and out of the pool quickly only around the primary sale to capture the rewards.

Again I am naive however, a simple dictionary lookup comprising of rounds staked mapped to a decaying burn fee shouldn’t add an outrageous amount of storage or computation to the contract. I think this feature is well worth investigation due to its impact on the long term protocol behavior.

In the SIP it is mentioned; ‘Initial assumptions for these parameter values have held up well under testing during the alpha period.’

I am curious what metrics the team has examined to prove validity of the v1 staking.

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Hey LeonardoDaNFT,

Apologies for not getting back to you.

After looking over your concept of a decaying penalty, I think that it is correct approach. With lessons learned from our audit and gas optimizations around claiming I have an idea on how to implement it with minimal increase in storage costs. The rough idea is to use a counter for the number of staked rounds and an offset counter incremented only once a round has been fully unstaked. This creates a window of sequential keys for the mapping of the amount staked per round that we can use to penalize according to the distance from the current round in a decaying manner.

For example assume the burn fee reduces to 0 after 3 rounds. say if you have staked 25 RARE for 4 rounds (total of 100) and then unstake round 40 RARE on round 5, the stake rounds 1 and 2 would be tapped into. Round 1 would be exhausted without penalty to be returned to the user, round 2 would lose 15 RARE but would get the 15 * (max_penalty * 1/3).

IMO this is a very promising solution but often implementing reveals unforeseen challenges. We’re balancing wanting to get everything perfect and wanting to get the protocol out into the world to get feedback.

With the upgrade paths in place, I suggest we reduce the penalty to 0 for the initial launch and here is why. The gas costs for staking and unstaking are non-trivial, roughly $10 at 25 GWei. Fees for excessive pool hopping would add up quickly and the speculative nature of rewards do not guarantee a return. This allows us to get the system into the wild and start learning about other, unknown, game-able aspects to the protocol. At the same, time I, or anyone else who would wish to contribute, can flush out the decay system.

The metrics we examined were focused on round duration and the reward swap discount. We monitored volumes through the bazaar contract to get an idea of how reward accumulation would be working if it were on main net during the alpha. Although the volumes are somewhat diminished given the market conditions, the one-week timeframe allowed a few users to achieve solid enough sales that justified people paying gas to claim for that round and reward accumulation. The round system is lazy, I.e. if nothing happens the round doesn’t increase and rewards can continue to accumulate in the accumulator. Thus, the 1 week is a minimum round duration that felt appropriate since there were some people with enough sales.

The reward swap discount is balancing the incentive to get the rewards converted in a timely manner without cutting into the pool rewards. The amount of sales flowing per week made the 10% reasonable since there were some pools that would justify the making the conversion.

Would love to get your thoughts on a zero burn fee for the beta launch.

Charles

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@LeonardoDaNFT Charles added more context. Does this address your initial points? Thanks for taking the time to share your feedback!

If you’re able to make it, we have our next bi-weekly DAO town hall August 16th at 2PM ET. You can RSVP and add it to your calendar :point_right: Discord

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@LeonardoDaNFT , thank you for your feedback and continued input. As Charles mentioned above, we believe the best approach would be to launch the protocol with a 0% burn fee while we develop the model for a dynamic fee which can be proposed as a separate protocol upgrade once sufficient testing and community review has been performed. Not only would this give time for development, but also to ensure that the solution we’ve identified is secure, scalable, and adequately addresses your concerns.

Along similar lines, I’d like to welcome additional community input on the proposal. Should further changes be found necessary, I’ll roll everything together into an amendment on Friday August 11th which will be added to the top of the proposal. This will provide clear documentation of the changes made to the original proposal while still allowing for a degree of version tracking, and allows for a few days for review of the amendment by the community and the DAO Council prior to the next DAO Townhall, which will be held next Wednesday August 16th at 2pm ET in the SuperRare discord server.

At that point, if the amended proposal is found to be satisfactory and receives council sponsorship, it will be clear to go up on snapshot for a formal vote from a procedural perspective. But procedure aside we want to make sure we the solution we propose addresses community concerns and are committed to building collaboratively!

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Thanks for the thorough response everyone.

I really appreciate the thought out response from @lordcharles, my main concern was that the discussions seemed to have been opened up, yet ignored. After reading your response, I think the idea of the gas incentives/disincentives as burn fee are acceptable to start v1 of the protocol.

As long as there are appropriate paths to upgrade the protocol, I am perfectly okay and excited to watch the roll out the rare protocol with the discussed parameters.

I especially think that in this market we should also try to incentivize as much activity as possible in the so the zero burn should help with that effort. If there are bad actors, it means at least there are actors and participants which is a positive sign regardless. We can then use their behavior and iterate from there.

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I think its a fair point that people will get inside info on pending sales and if not discouraged the whole element of the staking to boost and artist will be undermined and these staking lists will be more akin to a “who’s about to make a sale” lists

I loved the idea where it was about backing an artist (not backing a sale) but requires strong reasons to commit long term surely

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Long time coming.

Very in favor of seeing this deployed to mainnet.

Biggest question I have is how to encourage staking in the depths of a bear market where sells are less frequent.

I think there’s a lot of merit in being staked to an artist as a form of social status - versus largely relying on the gains to be made from either a) being early to a pool or b) receiving a % of proceeds from sales.

I’d encourage looking into Guild.xyz as a means of starting a more vibrant collector chat community for stakers - though generally am very in favor of the proposal as a whole.

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Love this idea Coop. I’ll look into Guild.xyz

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As a DAO council member, I am excited to sponsor this SIP and support the RARE DAO team’s big step towards encouraging more on-chain curation and finding alternatives to the old-fashioned & non transparent art market curation that relies on very few, biased actors. Incentivizing curation through financial rewards is a challenge that will require many experimentations & steps towards broader adoption and long-term value. Today, going to mainnet after thorough testing and community feedback is the first step. So let’s be bold and steak!

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Your sponsorship is now recorded on this SIP, thank you @flakoubay. The community looks forward to having you in the town hall tomorrow! :tada:

We hope to see you there @coopahtroopa @Antxx & @LeonardoDaNFT

:globe_with_meridians: DAO Town Hall #34
:spiral_calendar: 8/16/2023 @ 2PM ET

:point_right: Link to Discord

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I’m excited to sponsor this proposal as well. This is am ambitious step forward for the DAO and protocol. If done well it will have a profound impact on the future of curation and the art market as a whole

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All for anything that helps artists! Excited to sponsor as well

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Incredible to see the council energy around this! Your sponsorships has been recorded, thank you @SuperRareJohn @ntomaino :tada: :clap:

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@flakoubay It was great to have you on stage today and to have your support along with @ntomaino for this SIP! With the procedural requirement met, this proposal has officially moved forward for community voting.

:point_right: This proposal is now live for Snapshot vote at Snapshot. The voting period closes next (7 days) Wednesday 8/23 at 3:30PM EST.

:video_camera: Catch the town hall recording here.

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Update: Community voting for the [SIP-16] Deploy RARE Staking to Ethereum Mainnet has met quorum and closed in favored for moving the proposal forward.

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Update: Milestone achieved. :tada: :clap:

The SuperRare Labs Team & Rare Protocol (formerly SuperRare DAO) has implemented RARE Staking on the Ethereum Mainnet and has transferred the contract ownership over to the RareDAO/Foundation. The txn can be view here.