Stake DAO collects a 15% performance fee on profit and a 0.5% withdrawal fee across all strategies. The fees are collected in the native currency of each strategy (i.e. USD, BTC and EUR) and will soon be distributed to Herd members that lock their SDT to participate in the governance.
In this brief article, we explain how users can deposit SDT to receive xSDT, and how DAO fees will be distributed to xSDT holders.
SDT staking and the xSDT token:
Stake DAO token holders can now deposit their SDT into The Sanctuary (contract on etherscan).
Do not send tokens directly there, use the UI on StakeDAO).
When a user deposits SDT, the contract automatically issues xSDT to the user, representing their share of the SDT held within The Sanctuary (see Fig 1).
Rewards will be distributed 48 hours after launch in order to ensure equal opportunities for entry to all Herd members.
xSDT can be redeemed for SDT via The Sanctuary contract at any time.
Upon exchange users will receive SDT in proportion to their share of all of the SDT held within The Sanctuary. Users are free to exchange any amount of their xSDT for SDT at any point in time.
Mechanism for distributing DAO fees:
Distributing DAO fees is a two-step process:
1. Stake DAO converts strategy performance fees into SDT via Decentralised Exchanges (e.g. performance fees generated from the Passive BTC Strategy are denominated in BTC, therefore, Stake DAO will convert the BTC to SDT via decentralised exchanges).
2. The newly acquired SDT are ‘gifted’ to the Sanctuary.
The mechanism of ‘gifting’ SDT to the Sanctuary differs from the mechanism for staking SDT into The Sanctuary — ‘gifted’ SDT deposits do not create xSDT.
As a result, the total amount of SDT within The Sanctuary increases overtime whilst the xSDT supply corresponds to user deposits. This means that overtime the proportion of SDT returned per xSDT increases. As a result, xSDT holders can redeem more SDT overtime as the value of xSDT increases. (see Fig 2).
Note: This rewards distribution method was first introduced by Sushiswap, in which SUSHI token holders can deposit their Sushi and receive xSushi.
When will the performance fees be distributed?
The DAO will distribute fees at random times to prevent people from gaming the distribution mechanism. The first distribution will take place at least 48 hours after the release of this publication.
Why are the performance fees converted into SDT?
Converting the DAO performance fees into one asset (SDT) allows for more efficient distribution.
What can be done with xSDT?
The xSDT token will be an essential part of the Stake DAO ecosystem. The first use case is of course to collect the performance and withdrawal fees from the DAO. The second use case allows you to create proposals as well as vote on our governance platform.
Stake DAO will continue to introduce additional use cases for xSDT, stay tuned…
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Updates to SDT emissions per strategy
Thanks to our whitelisting on Curve DAO, Stake DAO is in a unique position to offer boosted yield across all its Strategies.
With increasingly larger deposits flowing into our strategies, a rebalance of SDT incentives is appropriate in order to achieve maximum boost on all Stake DAO strategies in the shortest period of time whilst maintaining SDT liquidity. Therefore, SDT emissions per strategies have been updated to increase the Perpetual Passive Strategy from 0.625 to 1.000 SDT per block, whilst decreasing the Passive BTC strategy from 0.625 to 0.25 SDT per block. (The BTC strategy was reduced because it brings less value to the DAO due to its lower yield on capital deployed compared to other strategies).
Uniswap LP: 1.5 SDT per block
Sushiswap LP: 1 SDT per block
Perpetual Passive Strategy: 1 SDT per block*
Passive EURs: 0.625 SDT per block
Passive USD: 0.625 SDT per block
Passive BTC: 0.25 SDT per block*