As Proof of Stake and delegated Proof of Stake models continue to gain momentum, POA Network is creating the first stable coin chain which uses delegated Proof of Stake for Sybil control and consensus.
This new model will enable chain validators and delegators to stake tokens and receive incentives for signing blocks on the network. Bridge fees and interest generated by DAI locked in the protocol will be used to provide staking incentives which are up to 1.5x higher than current DeFi lending rates for DAI.
In this post, we will explore the STAKE token (previously named $DPOS) and the unique incentive model in which users place STAKE and receive xDai rewards. We will also lay out the proposed distribution schedule and types of distribution available for STAKE. For a list of changes related to this new version from the previous version, please see the end of this post.
STAKE is a new ERC20 token designed to secure the on-chain payment layer and provide a mechanism for stable POS incentives. Users (validators and delegators) provide STAKE as collateral when participating in the consensus process. In exchange for providing STAKE (and supporting a node), users receive rewards in xDai, a stable token. The initial use case described below covers the xDai Stable chain, but other chains may use STAKE as well (multichain staking).
A dedicated staking token provides a separation of concerns on the chain. Two tokens exist simultaneously, and each has a specific purpose - either as a transactional token or a staking token for validators and their delegators.
This flexibility is important for the xDai Stable Chain, where xDai is used as the transactional token. xDai’s value always corresponds 1:1 with DAI, so the price is predictable and stable (within a small margin). It is designed for users who want to make purchases or send currency that maintains its value, with no time delays or high fees.
STAKE is a volatile ERC20 token with a fluctuating value. However, using the TokenBridge mechanics underlying the xDai Stable chain, the protocol is able to offer incentives to validators and delegators in the stable xDai currency while protecting the chain with STAKE.
When the xDai DPOS protocol starts, a large seed amount of DAI is locked in the bridge (and converted to xDai in the protocol). This locked DAI is provisioned to a lending mechanism where it accumulates interest, and this interest in turn provides staking rewards.
The amount of locked DAI will determine the maximum amount of STAKE that can be placed in the protocol. Max STAKE amount in USD will be considerably less than the total locked DAI amount. However, incentives for staking pools will be calculated based on interest from the total amount of DAI locked in the protocol. This difference between the amount of locked DAI and the amount of STAKE provides the opportunity for higher staking rewards.
Staking rewards will be paid in xDai, creating a stable reward mechanism. Validators and delegators can earn stable incentives on their stake at much higher rates than current DeFi lending interest amounts.
We will explore these incentives in greater detail, including a breakdown of how bridged STAKE can earn 1.5x APR over platforms like Compound and how bridge fees introduce additional incentives in a follow-up post. The remaining information is related to STAKE supply and distribution.
STAKE Supply and Distribution
The STAKE token has a fixed supply of 27,000,000. During the initial exchange offering (IEO), a limited 3.7% of the total STAKE supply (1,000,000) will be available to the public. See below for a breakdown of the total STAKE supply and distribution parameters.
Note: The xDai network upgrade to staking will take place 84 days (12 weeks) after the IEO, and the token release schedule is denoted in days following the IEO.
|Distribution Type||Amount||Initial Lock||Distribution Schedule|
|xDai Ecosystem Fund||10,881,023||Yes||Begins 336 days post IEO, continues for 672 days.|
|xDai Foundation Reward||4,000,000||Yes||Begins 84 days post IEO, continues for 252 days.|
|Private Seed Round||1,408,451||Partial||25% released at IEO, 10% at day 28, remaining 65% distributed during the next 224 days|
|Private Offering Round||2,500,000||Partial||25% released at IEO, 10% at day 28, remaining 65% distributed during the next 224 days|
|Private Offering Refundable Round||4,210,526||Partial||15% released at IEO, 5% at day 28, remaining 80% distributed during the next 224 days|
|Public Offering (IEO)||1,000,000||Partial||50% released at IEO, 50% at day 84 (network upgrade date)|
|Exchange Activities Fund||3,000,000||No||-|
Token Release Schedule
Tokens will be released according to the schedule below, with daily distribution after they are unlocked. Once released, tokens will be available on an ad-hoc, daily basis. They will not be automatically distributed (PUSH strategy), but available on request (PULL strategy).
xDai Ecosystem Fund
This fund is responsible for incentivizing the ecosystem to promote adoption. DApps, games, wallets and other innovations will be supported and promoted.
- Total: 10,881,023
- Locked for first 336 days after token offering
- Released at day 336: 1,088,102 (10%)
- Released for the following 672 days starting at day 337: ~14,572 daily.
xDai Foundation Reward
The foundation reward recognizes founders, advisors, and partners.
- Total: 4,000,000
- Locked for first 84 days after token offering
- Released at day 84: 800,000 (20%). This release corresponds with the xDai stable chain transition to delegated staking.
- Released for following 9 months (36 weeks) starting at day 85: ~12,698 daily.
Private Investors Offering Round
An exclusive offering available to a group of pre-approved investors.
- Total: 3,908,451. This includes 1,408,451 offered in an initial seed round, and the remaining 2,500,000 offered to investors
- Released at IEO: 977,112.75 (25%)
- Released at day 28 following the IEO: 390,845.10 (10%)
- Released for following 224 days starting at day 29: ~11,341 daily
Private Investors Refundable Round
A second private offering with an option to apply for a refund if certain conditions are met. We will provide further details regarding these mechanics in an upcoming post.
- Total: 4,210,526
- Released at IEO: 631,578.90 (15%)
- Released at day 28 following the IEO: 210,526.30 (5%)
- Released for following 224 days starting at day 29: ~15,038 daily
STAKE Tokens will be offered in an Initial Exchange Offering (IEO). Only 3.7% of the total supply will be initially offered to the public.
- Total: 1,000,000
- 50% released during initial offering (500,000), 50% released 84 days after offering (500,000 at network upgrade date)
Exchange Activities Fund
Exchange listings and market maker services require additional fees. This allotment will fund these activities to ensure token availability through exchanges.
- Total: 3,000,000
- Released at IEO: 3,000,000 (100%)
STAKE and xDai
Using STAKE as a staking token allows individuals to earn incentives in exchange for protecting the integrity of the chain. STAKE will be produced in a limited quantity with a hard cap of 27m tokens, some of which are unlocked over time.
STAKE will provide Proof of Stake protection for the xDai staking chain, a chain which uses a stable coin for fast, extremely inexpensive transactions. xDai has already been adopted by many in the crypto community as a way to send stable currency and pay vendors quickly with minuscule fees. The dPOS model will further decentralize this protocol and provide staking opportunities and reward incentives for interested STAKE token holders. In addition, STAKE will create a funding stream for the xDai ecosystem to fast-track mainstream adoption.
Changes from previous version. This initial version of this document included a model based on the $DPOS token and a rewards release schedule. Important changes include:
- Renamed token from $DPOS to STAKE
- Replaced staking reward emission with xDai incentives based on locked DAI
- Split private funding round into 2 rounds which will include separate pricing and an option for refund in round 2.
- Split public round into a 50/50 unlock model, where 50% of tokens are released at initial offering, and 50% released at network upgrade.
- Updated reward distributions from a weekly PUSH distribution to a daily PULL distribution method.