SIP-422: Simple SNX Staking

Simple Summary

Introduce a debt-free staking mechanism for SNX holders on mainnet that distributes 5 million SNX in rewards over 1 year. Users can unstake at any time, but earned rewards are subject to a time-based penalty if they exit before the end of the program.

Abstract

This SIP proposes a new SNX staking initiative designed to be simple, transparent, and flexible. Users stake SNX and earn rewards pro-rata over 1 year. If users unstake before the program concludes, a penalty is applied to their earned rewards, starting at 100% and decreasing linearly to 0% throughout the staking period.

The penalty system incentivizes long-term alignment while allowing liquidity at any time. Forfeited rewards will remain undistributed the Treasury.

Motivation

Historically, SNX staking required users to manage sUSD debt, creating complexity and friction. With the launch of the 420 Pool and protocol-managed debt, there is an opportunity to offer a simple, flexible staking mechanism to engage passive SNX holders during the transition to Synthetix V4.

This initiative provides yield to SNX holders without the burden of debt, encourages long-term participation, and ensures Treasury recapture of forfeited rewards in case of early exit.

Specification

Staking Mechanics

• Network: Ethereum Mainnet
• Token: SNX
• Program Duration: 1 year
• Reward Pool: 5,000,000 SNX
• Reward Emission Rate: 5,000,000 SNX ÷ 31,536,000 seconds ≈ 0.15844 SNX/second
• Eligibility: All wallets that deposit SNX into the staking contract.
• Entry/Exit Flexibility: Users can deposit or withdraw SNX at any time with a 7-day cooldown period. Principal SNX is never penalized; only earned rewards are subject to penalties.

Penalty Mechanism on Early Withdrawal

• Applies to: Earned SNX rewards only (not principal stake).
• Penalty Rate:
  • Starts at 100% penalty at program launch.
  • Decreases linearly.
  • At program conclusion (after 1 year), penalty = 0%.
• Penalty Formula:
  • Penalty % = 100% - (second_number / 31,449,600) * 100%
• Examples:
• Withdrawal at week 13 → 75% penalty.
• Withdrawal at week 26 → ~50% penalty.
• Withdrawal at week 39 → ~25% penalty.
• Withdrawal at week 52 → 0% penalty.
• Penalty Destination: Forfeited SNX via early exit will remain with the Treasury.

Rationale

This mechanism offers several key benefits:

• Simplicity: Users no longer manage debt or complex vesting mechanics.
• Flexibility: Users can exit at any time, with clear penalty-based consequences.
• Transparency: The penalty rate is predictable and easy to display on UI.
• Treasury Alignment: Early exit penalties return value directly to the Treasury.

It creates a smooth glidepath toward long-term SNX holding without locking users into rigid structures.

Technical Specification

Smart Contract Requirements

• Accept SNX deposits and enable withdrawals.
• Track user's deposit amount and cumulative rewards.
• Calculate linear rewards based on proportional stake.
• Apply a withdrawal penalty to earned rewards based on the current program week.

Configurable Parameters

• Total emissions distributed over 1 year
• Ability to pause deposits or withdrawals (emergency powers)

Test Cases

1. Full Term Completion:

• User deposits on day 0.
• User withdraws after 52 weeks.
• No penalty applied; user receives full earned rewards.

1. Midway Exit:

• User deposits on day 0.
• User withdraws after 26 weeks.
• 50% penalty applied to earned rewards.

1. Late Entry, Early Exit:

• User deposits at week 10.
• Withdraws at week 39.
• Penalty based on week 39 (25%) applied to all earned rewards.

Reference Implementation

Staking will occur via the existing TreasuryMarket contract. Reward logic will be calculated offchain.

Security Considerations

• Ensure accurate calculation of user rewards and penalties.
• Protect against manipulation of withdrawal timing or re-entry exploits.
• Conduct security audit prior to deployment.
• Provide monitoring tools for Treasury inflows from forfeited penalties.

Copyright

Copyright and related rights waived via CC0.