This is a proposal to allow private sale investors to: 1) stake some of their locked TRU as part of the vesting schedule and 2) use some of their locked TRU to vote on governance proposals.
Background / Motivation
As we all know, a 2 years vesting schedule was put in place for both the team and private sale buyers. It was only close to 3 years after the private sale that this was set up. Although this initiative received support, it was never clarified that locked TRU wouldn’t be able to be used for staking and/or voting on governance proposals. As a consequence private sale buyers have been heavily penalized in the participation of the rewards structure and governance in comparison to anyone who bought in at launch or hereabout, but have also been unable to participate and support the TrueFi ecosystem to a larger extent.
This is a topic that has been at the center of many debates since October/November, and we wish to find a fair solution so that early investors are not as penalized in comparison to later purchasers.
We understand that this topic has raised various concerns and that it has been seen as a risk for penalizing the long term growth of the protocol. We therefore would like to propose a solution that we believe is fair and tries to meet expectations of both opposite views.
We propose that locked token holders be able to 1) stake some of their locked/unlocked TRU in order to participate in the rewards system fairly and 2) use their stkTRU generated from locked tokens to vote on governance proposals.
Three concerns have been addressed by the community over the last months around this particular subject: 1) allowing locked tokens to generate rewards will create additional selling pressure 2) non private sale investors will be diluted in the rewards scheme 3) in the event of a default, locked tokens could be brought into circulation as a result of the 10% slashing rule.
We aimed, in this proposal, to address all concerns as follows:
1. Additional vesting: in order to avoid creating short term selling pressure, we suggest that all rewards generated as a result of staking locked tokens be similarly locked until a 9th unlocking event in November 2022.
2. Maximum locked staking: in order to minimize the dilution of the rewards from TRU staking, we would suggest that only 75% of the locked tokens be allowed to be used for staking.
3. Unlocked/locked minimum ratio: Additionally, in order to be able to stake locked tokens, we would suggest adding an obligation to maintain a ratio of unlocked/locked staked tokens of 30%/70%. As an example, if you would want to stake 100k TRU, you would need to ensure that you have at least 30k unlocked TRU. This addresses two points: 1) in the event of a default, or multiple defaults, no locked tokens would be brought into circulation as the 30%/70% unlocked/locked ratio ensures that sufficient unlocked TRU can be used for slashing in case of multiple defaults. We would suggest, that in the case of a first default, and that the ratio is brought under 30%/70%, the cooldown period automatically be started until the ratio is brought back up to the minimum required (this may require more technical thinking). 2) as a result of this minimum requirement, additional buying pressure could be seen from private sale investors as to keep staking more locked tokens, one would need to purchase unlocked tokens on the market (so the ratio is maintained) and hence benefit current TRU holders collectively.
NB: This ratio should be adjusted as we go through more unlocking events. Ideally, this should be done dynamically (going from 30/70 to 100/0 linearly until November 2022) but we believe this could be implemented as a static one to start with and be adjusted accordingly as we go through the vesting process.
4. Giving back to the protocol/community: as a way to try and meet expectations from both ends and benefit the long term growth of the protocol, we would like to propose that 25% of the rewards generated from the locked tokens be either: 1) burnt, 2) added to the SAFU, 3) given back to the pool of rewards (may have technical limitations), 4) used for marketing purposes (such as for an influencer fund), 5) a mix of those.
We believe this is a fair proposal that addresses all previously mentioned concerns and would greatly benefit the TrueFi ecosystem if implemented as well as involve further private sale investors in the participation of building a long term successful protocol/ecosystem.