Proposal
We propose to burn 100% of the FIS tokens that continuously flow into the treasury address. This action is intended to reduce FIS inflation from 10% to around 6%, transitioning the token towards a deflationary model.
Motivation
Given the current circulation of FIS tokens, we recommend implementing a burn strategy to control inflation. FIS tokens are currently used for rewarding LSaaS adopters, covering the protocol’s daily operations of the DAO and marketing efforts. The existing treasury can support these needs for several years.
As StaFi transitions from an rToken-based model to LSaaS(Liquid Staking as a Service), changes to the FIS tokenomics will further diversify income and strengthen support for FIS. With costs covered and continuous income, we believe we can effectively manage and reduce FIS inflation.
The initial goal is to reduce inflation from 10% to 4-6%. Once the protocol generates more value, we can aim to further reduce inflation to 1-3%. This will be achieved by activating the burn function, established in the chain’s genesis, and burning all inflated tokens flowing into the treasury.
As a first step, we propose burning 100% of inflated FIS that goes to the treasury, moving towards a deflationary model for StaFi.
FIS Circulation
Overview
FIS tokens were first generated on September 7, 2020, with StaFi Chain operational for nearly four years. Currently, the circulating supply is 145.829 million FIS. From the 10% inflation rate, 6.2% of inflated FIS goes to stakers and validators, while 3.8% is allocated to the address trsry(33DgUpArHKJgYMepNaqkXFEzYipuD8UYfZsXDmG8ZbHStWAw) in the treasury. All data can be viewed from the Explorer or the Subscan.
Inflation
StaFi has 2 appchains, StaFiChain and StaFiHub, FIS inflation is crucial for incentivizing validators and stakers to secure the network, similar to PoS models in Ethereum and Cosmos. And it can be seen as an important way to make the chains decentralized.
The inflation rate is fixed at 10% in the genesis of StaFiChain, with dynamic distribution based on staking rates, it determines how many FIS goes to trsry and how many FIS goes to the **stakers and validators. Further more, part of trsry is allocated 2mil FIS yearly to reward validators in StaFiHub.
FIS Treasury
The StaFi Treasury was made public in 2023 and consists of three main components: inflated FIS, vested FIS from genesis, and protocol income generated from services like rETH and rATOM. Detailed information is available here. This paragraph provides an update on the Treasury.
Inflated FIS
The address (trsry) (33DgUpArHKJgYMepNaqkXFEzYipuD8UYfZsXDmG8ZbHStWAw) currently holds the majority of inflated FIS and continues to receive inflated FIS from StaFiChain. As of August 19, 2024, the total amount in this address is 18,458,032 FIS. Part of these funds are used to incentivize StaFi Hub validators, total 4mil FIS is distributed to addr stafi1exjtrqc6xlqvp502dwk5ac5y8867lk8444jv0x as the pool to reward validators,
Vested FIS
Five multisig wallet addresses hold a total of 19,773,464 FIS, with 96.7% (19,123,343 FIS) staked.
| Multisign Wallet Address | FIS Amount | Staked |
|---|---|---|
| 32khQjt9vK6HBcUGgVJsxQXwRXPz5E9E83WKuvfMoK5CnPw9 | 1,782,342 | 1,782,342 |
| 34wBXY2fzPnfikEXpGbUzqWV3r2B44iJgV5wPaB5YNrxpj3Z | 3,112,346 | 3,112,315 |
| 33aRRH6B8YyUBBhR2Cppj6s7S8dJfsmMpievnLiMY4JRUsmD | 3,130,309 | 3,130,226 |
| 31FTe87cgmBdp4DueiCrEqVNoc4mpmwERQ2nGPyHduASuAEa | 4,153,830 | 4,153,823 |
| 335ye5dGBCM74P1m6gfNytbUfk5cHVXnqBDvUakqvGANDp1Q | 3,066,911 | 3,066,911 |
| 31VApuoJa5raPEzjQNKRjyrwuRsbN7YjHzrypxnPCwXLUAfo | 4,527,726 | 3,877,726 |
Two genesis addresses hold total 6,155,429 rFIS, which equal to total 11,833,196.7096 FIS in stake.
| Address | rFIS Amount | Equal to FIS |
|---|---|---|
| 36JkR8Gzx2tAUaVzHeRQhbsfL5J14j1hrCrYo1F851FLcM4V | 3,737,606 | 7,185,173.7744 |
| 31XQjajM9x14JvUoXE6tMqkRzf2NfGxqmk45szTwHsF7vkq7 | 2,417,823 | 4,648,022.9352 |
Additionally, a portion of the FIS from the genesis allocation was designated for StaFi Hub. This staked value was intended to secure the network’s consensus and serve as an incentive for the rTokens campaign at the launch of StaFi Hub. Currently, this address holds 5,922,505.151361 FIS.
| Address | FIS Amount |
|---|---|
| stafi1n0tpw5wtzderaftx8lfuzve39sx3gzsdgsjjqn | 5,922,505.151361 |
Protocol income
Protocol income is generated from fees charged by rToken services. You can find detailed information here. As of August 19, 2024, the total value of protocol income in FIS is approximately 2,373,903.
| Token | Amount |
|---|---|
| rETH | 102.75 |
| rFIS | 579,790 |
| rATOM | 2,890 |
| rMATIC | 5,220 |
| rBNB | 40.45 |
| rSOL | 26.11 |
| rIRIS | 278,000 |
| rHUAHUA | 56,290,000 |
| rSWTH | 247,310 |
| rSEI | 144.83 |
Summary
The StaFi Treasury currently holds a total of 55,987,197.860 FIS, including 6,155,429 rFIS, which accounts for roughly 38.39% of the total supply. Of this, 55.82% is staked, while 44.17% remains in the treasury. Protocol income has accumulated approximately 2,373,903 FIS(value in FIS).
Usage
Currently, treasury spending is made public on a monthly basis in the DAO forum. The focus of spending has shifted from DeFi incentives to LSaaS development and adoption. As LSaaS adoption grows, we know that spending will increase accordingly, although it is currently modest.
FIS Burn Proposal
We propose burning 100% of inflated FIS every 30 days that newly flow into the treasury address if the community passes the proposal. The current reserved FIS in the treasury remains sufficient to cover future expenditures, resulting in:
- A total treasury of 55,987,197.860 FIS + Protocol income + 0% inflation FIS.
- A decrease in FIS inflation from 10% to approximately 6%, depending on the staking rate.
Tip: Current FIS in address trsry should be transferred to the multisig address before activating the burning.
Reasons
There are several compelling reasons to activate the burning mechanism on StaFiChain:
- The burning mechanism was originally outlined in the 2019 White Paper, and now is the appropriate time to implement it to reinforce the value of the FIS token within the StaFi Protocol.
- The current FIS reserves in the treasury are sufficient to cover anticipated expenditures for the coming years, based on the spending history over the past four years.
- With the ongoing launch of more rTokens, protocol income is increasing, and the transition from StaFi rToken to LSaaS is expected to further boost revenue. We are confident in this direction and believe it will provide strong financial support for the protocol.
- Reducing inflation from 10% to 0% should be the ultimate goal of the community. With protocol income covering all treasury expenses and providing rewards to stakers and validators, this would move StaFi towards a deflationary model.
Future Burn
The goal of FIS is to establish a deflationary model that adds value for token holders. While the current burn proposal is a significant step, there are additional deflationary strategies we could consider in the future, including but not limited to:
- LSaaS Growth: As LSaaS aims to help StaFi regain a strong position in the future LST/LRT market, we anticipate an increase in protocol income. Although the current reserves may not support a buy-and-burn mechanism at this time, it is a potential strategy we could adopt in the future as income grows.
- Further Inflation Reduction: After implementing the current burn proposal, we could consider lowering the inflation rate of StaFiChain from 6% to around 1-3%, further strengthening the deflationary model.
- Decoupling rToken from StaFi Chain and StaFi Hub: As StaFi progresses towards decoupling rToken from its appchains, FIS and rFIS could be migrated to an Ethereum contract as the primary chain. This would streamline processes by reducing unnecessary actions related to appchain cross-chain transactions.
All of these proposals must undergo thorough discussion within the community before being put to a vote. If approved, they should be carefully evaluated in light of the current business environment.
Next Steps
- Discussion: The community must engage in a thorough discussion in the DAO forum, followed by a vote by FIS and rFIS holders after fully discussing.
- Action: Upon approval, the development team will prepare for the upgrade, with the community finalizing it on a later date.
