Ether.fi TEMP Check: Season 4

Protocol & Proposals
1

Introduction

Following the success of ether.fi season 1, 2 and 3, ether.fi proposes extending the seasons initiative with the introduction of season 4, targeted at fostering community engagement and support in the restaking space, while continuing to support the success of integrations in the Ethereum ecosystem.

Objective

  • Create a sustainable plan for future points seasons and rewards
  • Support our partners through the continued expansion of integrations
  • Foster an ecosystem of category leading liquid restaking tokens and AVSs.

Timeline

  • Start Date: Sep 15, 2024
  • End Date: NEVER
  • Seasons run every 4 months, starting after the end of Season 3.
  • Every season will have a unique set of rewards that will be revealed through the season.

Mechanics

StakeRank, StakingFrens and the Diamond Campaign, amongst others, were all mechanisms utilized throughout season 1-3 to grow the restaking mindshare and community. These campaigns have all achieved tremendous success, however as the protocol grows, so does the need to further simplify the mechanisms to allow for incentivization across all asset verticals that ether.fi now operates in. With this in mind for S4, the mechanisms are designed as follows.

  • ether.fi Loyalty Points continue to accrue at a rate of 10k per ETH per day, subject to boosts and multipliers for DeFi partners.
  • Season rewards will consist of a variety of reward tokens, including:
    • ETHFI token rewards
    • Partner token rewards
    • LRT² governance token rewards (see below)
  • Up to 2,000,000 ETHFI per season may be directed towards season rewards. This may be modified or increased each season.
  • Rewards allocation will be based on accumulated ether.fi loyalty points during the season.
  • Season rewards are separate and in addition to normal staking and restaking rewards.

Introducing LRT²

LRT² is a new protocol for distribution of LRT rewards. It is a collaboration between all major LRT protocols on Ethereum, with plans for expansion to include other L1s.

The purpose of LRT² is to wrap rewards distribution from a large number of AVSs into a single rewards token and create an industry standard.

LRT² will consistent of two tokens:

  • The LRT² rewards token, which wraps all restaking rewards.
  • The LRT² governance token, which governs reward token whitelisting and parameters.

The benefits are:

  • Industry standardization.
  • Supply sink for AVS rewards.
  • For small stakers, rewards aggregate. No need for multiple claims as all rewards will accrue into one unified token.
  • For LRT protocols, this provides alignment on reward mechanisms and efficiency through standardization of reward distribution.

Additional information

  • The proposed LRT² governance tokens will be allocated to protocols joining ether.fi in the development of a unified restaking rewards aggregation layer.
  • Community members would be informed about how they can qualify for incentive distribution and participate in Seasons 4+ activities through the protocol’s Discord, Twitter and other socials.
  • Seasons 4+ incentive distribution would follow the same vesting schedule of previous Seasons.
  • The intended design is subject to change through the season as feedback and suggestions from the community emerge.

Conclusion

Through the continued dialogue and feedback from our community, we’ve refined our program to distill the core functions into an easy to approach and understandable format. ether.fi loyalty points take center stage this season, comprising the singular metric to unlock future rewards. We foresee the upcoming shift in the restaking landscape towards sustainable yields at scale to mark an inflection point, wherein the partnerships we have fostered with AVS and Networks shall fuel the next wave of growth. ether.fi’s pillars of transparency, risk, and reputation play an increasingly important role as the breadth of our products and depth of our markets cross assets and ecosystems. We envision this season to be one of the most impactful to date!

Next steps

Receive community feedback on this Temp Check over the next 4 days and incorporate into a proposal for snapshot.

Thank you for your continued support.

35 Likes
2

nice, let’s reward people that kept their funds diligently from season 1 till now

7 Likes
3

These aren’t traditional ‘seasons’ at this point, this is more akin to yield farming.

  1. Make the seasons much shorter.
  2. Get rid of vesting.
3 Likes
4

I think it is a good decision. Please carry on

1 Like
5

I’m ready for season 4!
Let’s grow together!

Thx!

1 Like
6

Thank you for presenting such a comprehensive and forward-thinking proposal for ether.fi Season 4. It’s evident that a lot of thought and effort has gone into building upon the successes of the previous seasons while setting the stage for continued growth and innovation in the restaking space.

Strengths I Appreciate

Long-Term Vision: I commend the focus on sustainability and the clear objectives laid out for creating a sustainable rewards plan, supporting partners, and fostering a leading ecosystem. This forward-looking approach is essential for maintaining momentum and driving long-term success.
Introduction of LRT²: The move to standardize rewards distribution with the introduction of LRT² is a significant and welcome innovation. Simplifying the process for stakers and aligning protocols under a unified rewards mechanism will undoubtedly strengthen the ecosystem and make participation more accessible.
Community-Centric Approach: I appreciate the emphasis on community engagement and the openness to feedback. It’s crucial for the community to have a voice in shaping the future, and this proposal seems well-positioned to accommodate that.

Considerations for Further Refinement:

Timeline Flexibility: While the concept of a “never-ending” timeline shows confidence, it might be wise to build in periodic reviews or checkpoints. This would ensure that the program remains adaptable and relevant as the ecosystem evolves.
Communication Clarity: As the program grows and new mechanisms are introduced, it’s important to maintain clear and consistent communication, especially for newcomers. Continued efforts in simplifying processes and educating participants will be key to maintaining trust and engagement.

Overall, I’m excited about the potential impact of Season 4 and look forward to seeing how this proposal evolves with community input. Thank you for your continued dedication to transparency and growth within the ether.fi ecosystem. I’m eager to participate and contribute to the success of this initiative.

11 Likes
7

Loyal participants should be rewarded and it’s nice to see a projects that’s ready to do this.
This will bring even more people into Etherfi.
I’m 100% in support

4 Likes
8

@ether.fi Really appreciate your work in the Ethereum Ecosystem.

Loved your season 2 rewards for the small stakers.

Hopefully expecting Ether_fi would recognize and rewards the loyal small stakers and stakers that maintain daily Check-In streak as well !!!

3 Likes
9

Its good for keep the attention but I think a lot of people are tired next and next seasons.

2 Likes
10

Good decision, finding new way to align new and previous users is key to the success of the protocol

2 Likes
11

Carry on friends But just incentives for the small staker I mean community is number one right?

Most of the project cares about whales but I see ether.fi on season 2 gives rewards for small stakes and I want this to happen in every season

4 Likes
12

I think your first priority should be loyal user who participate season 1 to untill season will runs.
2nd, You can launch your season for but never forget Your first season user. Because they are the real Asset in your platform.

3rd, Reward should be justifying. Ethereum fallen already. For that user very much concern for their asset. So Reward should be justifying. “More allocation More reward” When user benefited, They are participated in your next season.

4th, In season 4, Your allocation should be increase.

2 Likes
13

With only 2 million etherfi token per season the rewards are going to be very small for so many of your users that after 2 months their etherfi rewards won’t cover bass. You often look after these people with additional tokens but with a drop of 2million its not going to be practical. Just a yield farming with regular deposits to accounts that users can watch build up and claim when they want. Kind of what are doing already with the liquid vaults how that etherfi can sit there and be claimed when a user wants.

1 Like
14

I agree. Why not implement a farming model and send rewards as etherfi instead of continual airdrops.

1 Like
15

This idea is very nice, however i think Season 1 stakers, they must be rewarded a big allocation of ETHFI tokens !

3 Likes
16

This is certainly an interesting proposal, but we believe it leaves many open questions that are yet to be answered.

As for the season 4 incentive program, the parameters here seem reasonable as it appears to allow for 0 to 2 million ETHFI, which theoretically can be covered by the buy-backs using free cash flow, which are discretionary as well ranging from 5%-25%. We assume the team/foundation will implement best practices with regards to incentive management.

The elephant in the room here which seems to be drastically under-discussed in its depth is the launch of the LRT² Protocol. While it is nice to finally see an example solution of how rewards will be accrued, this seems to leave many open questions which, through robust discussion, we hope can be addressed in full to understand if this is truly the best solution.

Firstly, it’s important to acknowledge that EtherFi will have a disproportionate amount of sway with regards to AVS rewards. With roughly 50% of total stake on EigenLayer, EtherFi restakers, as a collective, are poised to be the largest recipients of rewards, therefore the mechanism of the reward distribution matters greatly.

With this proposed method of LRT², the approach seems to be one of “alignment” with AVS. While the EigenLayer marketplace is architecturally permissionless with regards to who provides crypto-economic security, it is important to note that many, if not all, LRTs such as EtherFi, maintain offchain relationships with the builders of these AVS. This makes complete sense, the AVS and LRTs naturally rely on each other for mutual success - the AVS needs stake delegation + distribution channels, and the LRTs need restaking rewards.

However, the approach with LRT² seems to put the integrity of these relationships ahead of natural market forces. With LRT², our interpretation is that rewards are accrued to the LRT² rewards token contract, then restaked to the quorums which allow them. The token in theory, should trade at fair value to the basket of assets constituting it. There is not any information regarding whether or not the token will be able to be unwrapped and how exactly that process would take place.

This is important for a few reasons:

If the underlying tokens are staked, a cool-down period would be required

If people wish to realize their rewards for restaking, they will have to sell their LRT² rewards token

Assuming many restakers are profit-oriented and wish to realize their restaking rewards, excess sell pressure could cause a soft “de-peg” to the fair value of the LRT² token

From our perspective, we assume that restakers are profit oriented and are seeking to realize their actual restaking rewards. At the same time, we understand that this design could be a potential mitigation strategy from the “tragedy of the commons” type scenario where there is a race to sell restaking rewards tokens, which would lead to compressed yield across the board.

However, we also believe that intervention in trying to stop, or hinder market forces from naturally playing out may prove futile.

On the flipside, if these questions are addressed with regards to unwrapping, and how restaking rewards can actually be realized, we may have a more clear understanding of how this could play out.

Furthermore, we also believe the introduction of a new governance token that governs LRT² for whitelisted assets and other “parameters” may not be an optimal design choice. An additional governance layer introduces yet another layer of entropy and a possible attack vector. For example, purely profit oriented restakers, who we believe constitute the vast majority of the restakers around today, would likely just dump this “worthless governance token”. An opportunistic whale, overtime, could potentially accumulate enough of these LRT² governance tokens to implement a successful hostile takeover and change key parameters in their favor.

We think whitelisting assets is a redundant process if this truly is to be a “standard” across all LRTs. If an LRT opts into the standard, what reason should their reward tokens risk being excluded? This is especially important as the EtherFi LRT holders would likely be the largest holders of the LRT² governance tokens which whitelist certain assets. In short, we are not supportive of another governance layer.

Lastly, while we think this design is sub-optimal, we should also acknowledge that these sub-optimal choices are a direct result of the environment we have found ourselves in. For AVS, our personal view is that paying out rewards in governance tokens is inefficient and unwanted by restakers. Staking a high-quality, highly-liquid asset like ETH in order to receive low-liquidity, low-float, governance tokens is not a sustainable design. Our personal view is that all services built on EigenLayer should be paid in ETH, or stablecoins, and then those should be distributed directly to restakers pro-rata. Additionally, the LRT² is helpful for “smaller stakers” as it is all in one claim, but the multiple claims would be fine if we scaled the base layer in some way, which the entire Ethereum community is slowly beginning to acknowledge is a key friction point for new and existing users.

In conclusion, we’re excited to see a bold idea come through here, but we think it leaves a lot of open questions for many key stakeholders in the ecosystem. We hope to see some of these open questions addressed & the community will ultimately have the final say. Thank you to the EtherFi team for bringing this forward, we look forward to an evolved discussion on this topic.

2 Likes
17

Was wondering what was going to happen after szn 3 ending in a few days. Great news! :partying_face: :tada: :piĂąata:

1 Like
18

4months is kind of too much, adjust it to 2 or 3 months
still fair

2 Likes
19

We were. Ie Season 1- 2000 tokens season 2- 200 tokens.

2 Likes
20

I like the idea of the LRT² aggregated rewards but would find a theoretical example of how this might work useful (eg. EtherFi receives x number of token Y and x number of token Z and… what, exactly?).

Also not sure about this: “Community members would be informed about how they can qualify for incentive distribution…”

Don’t we qualify by (re)staking with EtherFi? This sounds as though there would be extra steps to access the rewards our (re)staked ETH had earned.

2 Likes