Stake DAO Progress Report Q3 2021

12 min readOct 21, 2021

With explosive growth across nearly every metric of progress, Q3 was a phenomenal quarter for the DAO. Stake DAO matured its TVL, product offering, and partner ecosystem, while welcoming thousands of new users to the Herd.

With this, we present our Progress Report for Q3!

Agenda

TL;DR (Introduction + Short Roadmap for Q4)
Total Value Locked
P&L
Sanctuary
Trading analysis
Palace and NFTs
Wallets analysis
Platform traffic analysis
Stake DAO APYs
Roadmap for Q4

Data Source

The data used in this Q3 report is taken from internal analysis, on-chain data, as well as from external sources such as The Block, Token Terminal, and Dune Analytics.

TL;DR & Q4 Roadmap

Current TVL across the Platform exceeded $400M;
Cumulative Protocol Earnings topped $4.5M since inception;
Market Cap/ TVL and P/E ratio highlight the fact that SDT is highly undervalued on the market.

The DAO has significantly expanded the size of the contributor team, and it is expected Q4 will see a lot of game-changing improvements for Stake DAO. Here is a brief Roadmap:

Launch more unique Option Strategies (in partnership with Opyn) to reach all-time-high APYs across stablecoins, ETH, and BTC, and more.
Double down on the Bond program with Olympus DAO, allowing Stake DAO to maintain deep liquidity for SDT, limit future inflation, and bring additional revenues to the DAO;
A new architecture of the DAO is currently in development, which should bring more transparency, decentralization, automation, and strong value-add to the DeFi ecosystem. The PPS will be key to this new architecture: it will aim to become the most attractive in the market and a strong effort will be made toward a restored sdveCRV/CRV peg.

Total Value Locked

Stake DAO’s Total Value Locked (TVL) has exhibited a steep growth trend after the market crash in May, rising from $100M to c.$400M in just a couple of months.

The increase in Total TVL has been driven by an increase in existing Strategies TVL such as the ‘Passive EUR Strategy’ (increasing from $12.5M at the beginning of June to over $20M at present) and ‘Passive USD Strategy’ ($7.5M at the beginning of June to $15.8M at present), and the integration of new Strategies such as ‘Passive ETH’ ,’ Passive FRAX’, ‘Passive stETH’, ‘ETH Covered Call’, ‘BTC Covered Call’ — A number of further new strategies have been added since the end of Q3, with many more to come.

Protocol Staking has also contributed to the TVL increase especially in the last 3 months (TVL more than tripled in this period from $44M to slightly less than $165M), mainly due to the team’s increased focus on foundation delegation which enabled Stake DAO to receive a 1 million AVAX delegation from Avalanche, and large deposits on Solana. Deals of this nature not only significantly increase TVL, but are major revenue generators for the DAO. We expect this trend to continue also in Q4 as we add 3 new additions to our Staking-as-a-Service offering, along with foundation delegations.

The brand new ETH Option Strategy (‘ETH Covered Call’) managed to reach the 750 ETH threshold in just 1 month from launch. As of September 30, it accounted for more than $2.6M in the DAO’s TVL. The strategy has just started to warm up and we expect more flows to come as soon as it proves to be a successful strategy over a substantial track record.

As of September 30, Stake DAO Options strategy APYs stood at 31.5% and 32.6%, for ETH and BTC covered calls respectively, significantly outperforming the competition.

Derivatives are a key cornerstone of Stake DAO’s ambition to become the main decentralised gateway to DeFi, and option strategies are the first step toward a full comprehensive offer for derivative trading. Just since the end of Q3, two new option strategies have been launched at the forefront of innovation. Many more are to come.

P&L

Stake DAO’s Revenues rose steadily in the last few months, with a short interruption in the months following the May crash.

Strategy-based revenues have suffered from the strong reduction in APYs on Curve, which has been offset mainly by the shift of building on top of Convex rather than just Curve. Overall, strategy revenues have been relatively stable during Q3, ranging between €300k and €500k per month.

On the other hand, revenues generated by protocols have skyrocketed following the change in fees charged to Polygon’s foundation and the Avalanche foundation delegation. They now cover most of the DAO’s costs.

No NFT sales took place during Q3, and revenues generated from secondary market NFT sales were very limited.

On the other hand, costs have also increased significantly during Q3, resulting mainly from the acceleration in smart contract activity, surge in gas costs, and start of core team rewards.

The DAO cost structure includes mainly the following items:

Gas costs: they are recorded under the Strategies vertical. They significantly increased due to the new contracts deployed, the maintenance of the gas-thirsty option strategy, and the rise in gas costs.
Devops costs and taxes: They are recorded under the Protocols vertical. They include the various costs linked to running protocol validators and servers. They were reduced during the course of Q3 due to optimisation actions.
Core team rewards: since August, the DAO has compensated the team with a total amount of c.27k sdam3CRV LP tokens monthly to reward the efforts of 20 to 30 contributors.
Other costs refer to OpenSea fees charged when selling NFTs.

In Q3, monthly net earnings have increased to exceed $600k in September, due to the increase in both Strategies and Protocols revenues.

Cumulative net earnings since inception have now reached over $4M. The one-month rolling average of annualized revenues stood at $7.0m at the end of Q3.

Sanctuary

TVL in our Governance Vault has been steadily increasing during this period, reaching 6.2M SDT locked as of September 30, for a total of $17M.

SDT locked in Sanctuary currently represent 36% of total Circulating Supply, and have been stable to around 30%+ since inception. The SDT staking is therefore seen as relatively attractive compared to liquidity providing, even though the Sanctuary APY decreased significantly during the course of Q3. This reflects the fact that SDT holders are generally bullish on SDT and would rather look for a limited APY in the Sanctuary than suffer the potential impermanent losses that would occur in case of significant SDT price move. It also highlights the attractivity of the Palace, bringing a significant additional APY on top of the Sanctuary’s one.

Market trading analysis

Stake DAO’s market capitalization dropped significantly during the crash in May. During the course of Q3, the DAO’s effort to build new innovative strategies and bring cross-chain solutions lead the market cap to grow significantly. Between June 30 and September 30, the Market Capitalization was nearly multiplied by 4, going from $11m to $42m. The new NFT powers, and NFTs issued, the arbitrage and option strategies, and large partnerships have built a strong dynamic around SDT, allowing for higher APYs and reduced inflation.

Daily volume over the period has been flat around $300k daily volume. The DAO is taking actions to increase the daily volume with a target of $3m daily volume, which should enable Chainlink listing.

Source: Coingecko

Even though the market capitalization grew significantly, the Market Cap/ TVL Ratio only rose up to 0.15 as of September 30, which seems still low compared to the market. Furthermore, the Price/ Earning Ratio reached 6.9x at the end of Q3 (calculated as Market Cap/ 4-week rolling average annualised return). Although this represents a significant increase since its lowest in June (2.1x), it is still low compared to multiples seen in the tech and finance industries.

As of September 30, the SDT/ETH pair had a total liquidity of $5.4M on Ethereum Mainnet, and $0.5m on Polygon. At the end of September, the DAO started an Olympus Pro bond program which will enable it to progressively acquire its liquidity, and increase total liquidity depth. Acquiring its liquidity will also allow Stake DAO to generate additional revenues and reduce inflation.

Figures as of 30-Sep-21

Palace and NFTs Marketplace

The Palace TVL remained flat over the last few months with around 2M xSDT locked — however the launch of the new Premium Avalanche Arbitrage Strategy at the end of Q3, and the release of 222 new NFTs, led to a +50% increase in Palace TVL.

Furthermore, the release of analytics and a simulator linked to Pythia and Tempest rewards enabled users to understand the true value of Stake DAO NFTs, and realise that the largest part of SDT staking APY was actually coming from the Palace.

The first generation of NFTs (Pythia and Tempest) rewards users that bring the most value to the DAO, with an additional APY boost and their various positions. The DAO allocates 0.1 SDT per block to this reward mechanism, corresponding to 4652 SDT per week. As depicted on the chart below, this reward mechanism leads to an APY boost for NFTs stakers ranging from below 5% to more than 70%. On average $110 worth of SDT is distributed every week to each NFT staker.

The launch of the Avalanche Arbitrage Strategy created a new use case for a new batch of NFTs. As users were staked for very long in the Palace, only one of them was sold on Opensea, and 221 were available for Palace stakers.The point prices were selected so that a maximum number of Palace stakers could have the opportunity to get an NFT.
By taking nearly half a million of SDT out of the market, the arbitrage strategy had a positive impact on SDT price and on Sanctuary APY.

Below is an illustration of the number of SDT staked in the strategy for each NFT locked.

APY

Stake DAO’s mission has always been to offer the most competitive APYs on the market for a certain level of risk. Each one of Stake DAO’s strategies have achieved a significantly better APY than all competitor strategies for similar risk profiles. This can be seen as a great success and should bring more and more users to join the herd.

Moreover, Stake DAO is the only project offering compounding services and boosted returns on Curve pools also on Polygon and Avalanche. More platforms should follow soon.

Concerning the newly introduced Option Strategies, Stake DAO is also providing the best APYs across the entire market.

Wallets Analysis

Stake DAO’s ambition has always been to bring DeFi to the wider public. In this sense, the fact that the vast majority of Stake DAO users have small wallets means that this is a success. However, there is still a long way to go as the total number of users stays relatively small. During Q4, a focus on bringing Stake DAO to more chains should help reach more and more users around the world.

Figures as of 13-Oct-21, excluding the Frax gauge

However, Stake DAO cannot cater solely to “small fishes” and DeFi beginners as they bring a relatively small portion of the DAO’s TVL. Indeed, 92.5% of TVL is represented by wallets with more than $20k in Stake DAO’s strategies. Therefore, the DAO needs to also keep focusing on bringing more value and utility to whales and advanced DeFi users. The “best APY in the Market” positioning and the new advanced strategies should appeal to everyone while also benefiting the small fishes.

Strategies figures as of 13-Oct-21, excluding the Frax gauge

Platform Traffic Overview

In the last quarter, the DAO experienced a huge increase in daily user traffic across the platform. During the last week of September, more than 1500 users visited the platform on a daily basis, of which 800 surfed the website for the first time.

Platform views also skyrocketed at the end of Q3, to reach more than 30k daily views.

The user base is concentrated mainly in Europe, with a strikingly strong presence in France. If DeFi is the Future of France, Stake DAO definitely has a key role to play in it. A large presence in the US as well gives further comfort on future growth perspectives. Finally, a strong presence in the Philippines resulted from the first season of referral contest, and synergies with Blackpool.

Pages that are the most viewed are the one related to strategies and earning. A focus should be done over the next quarter to improve the user experience on the trading pages, which already provide optimal rooting to provide the user with the best prices and the minimum slippage in the market.

Roadmap

Q4 will be a decisive quarter for the DAO. Many goals need to be achieved so that the DAO reaches its first billion dollars of TVL.

The vision remains unchanged: Stake DAO aims to become a truly decentralized platform that brings the very best of DeFi into one place. To achieve this vision, the road will be quite long, but a few key pillars will be the focus of next quarter to get the DAO closer to this long term objective:

Cross-chain vision: Stake DAO is chain-agnostic and believes that the future of DeFi is in interoperability. During Q4, more chains will be available on Stake DAO, with new use cases. Avalanche has already been integrated, and more will come.
Lobby: Stake DAO’s DNA is to be at the crossroads of many different protocols, and enable its users to have the best experience on all of them. Through partnerships and a smart reorganization of the DAO’s architecture, the DAO aims at taking a central place in the DeFi ecosystem. This new architecture will notably include a new version of the PPS which will be more attractive and restore liquidity for its users.
A decentralized trading platform: Stake DAO will improve its user experience and its offering on the trading side so that users never feel the need to leave the platform, and to unlock the full potential of DeFi to email users.
Derivatives: derivatives is a largely underserved space in DeFi, and Stake DAO wants to stay at the forefront of innovation on this side, by building more unique strategies bringing a lot of value to its users, across different chains.
Link NFT and DeFi: Stake DAO believes it is one of the pioneers in building utilities for NFT, which will be a main challenge of the coming months. It will leverage this advance to keep being at the forefront of innovation on this topic, and bring more valuable NFTs to its users.

As previously mentioned, Q4 will be absolutely key for the DAO, with a main focus on building for the long term. The community (the Herd) is essential to make this a success, and it will stay the first priority of the core team of the DAO.