Decentralization is one of the cornerstones of every blockchain project. Having a more decentralized project means that it’s also becoming more robust and resistant to attacks of any kind. With this proposal we aim to help improve decentralization of staking on Polygon even more and that way contribute to the decentralization of the Polygon but also Lido. Also the advantage of using Lido on Polygon is that users won’t need to have matic locked in a staking contract, but will be able to use stMATIC inside the defi ecosystem on Polygon which then greatly improves incentives for users to delegate and stake their tokens.
Proposal’s base is to create a liquid staking token (stMATIC) that will accrue staking rewards and represent staking positions with Lido validators on Polygon. The stake deposited to the Lido contract on Ethereum mainnet will be distributed to these validators following a logic similar to the Lido Ethereum liquid staking solution. Full logic will be implemented on the Ethereum mainnet, and the users will need to move stMATIC to Matic chain via bridges if they so like. This version of Lido will have a fee mechanism similar to that of stETH, allowing splitting fees between node operators and Lido treasury (e.g. to be used for insurance funds). Lido node operators, and parameters such as the fee, will be controlled via the governance of LDO holders on Ethereum. In the initial version, governance decisions will be carried out by the Lido DAO. If the decisions become more frequent or complex, there is a possibility to spin a new DAO. Ideally, in the future, there will be a multi-chain DAO that will decide on all the decisions of LIDO-built solutions like stETH, stMATIC, stSOL etc.
A more detailed approach is defined under: Timeline and Future work & Next steps.
Quite successfully for some time now, Polygon (ex. Matic) has been the DeFi chain of choice for many. Because of that, the utility for Matic tokens is real and vast. Due to the staking mechanism on Polygon (Matic) which locks matic tokens inside a smart contract on layer 1 (mainnet). Those same tokens can’t be used for other DeFi related dapps and protocols on the Matic chain itself. Due to the reason mentioned above, we propose using Lido design for ETH staking and to create a similar solution for staking Matic tokens (more details in the following sections).
Why Shard Labs?
We are a startup founded in 2018, and we accompany our clients on the path to a holistic digital transformation. Profound blockchain tech knowledge coupled with business understanding allows us to create unique solutions and deliver excellence.
We believe and enjoy working on blockchain, especially when projects bring alliances, partnerships, and talent from every aspect of the blockchain ecosystem.
Shard Labs is a team of researchers and developers oriented towards cutting-edge initiatives such as this one. The team has extensive experience working with multiple solutions and clients such as Ethereum Foundation, Polygon, Polkadot, NEAR, etc.
Our lean team of blockchain software developers ensures all components of successful project execution, from strategy and conception to digital solutions.
We are determined to improve the Polygon ecosystem by bringing liquidity staking (stMATIC) to contribute to the Polygon DeFi ecosystem even more.
Some of the projects we currently work on:
- Sourcify project (Client: Ethereum Foundation - Solidity team) GitHub - ethereum/sourcify: Solidity re-compiler that can be used to verify that bytecode corresponds to certain source code
- Geth fork (Client: Ethereum Foundation - Solidity team) GitHub - sourcifyeth/go-ethereum: Official golang implementation of the Ethereum protocol
- Identity directory (Client: Polkadot) - GitHub - Shard-Labs/identity-directory: Substrate identity directory
- Ganache fork for Celo blockchain (Client: Celo) GitHub - Shard-Labs/celo-ganache-monorepo
- Rainbow bridge modification to work between between NEAR and Binance (Client: NEAR) GitHub - Shard-Labs/rainbow-bridge: 🌈🌈🌈 NEAR <> Ethereum Decentralized Bridge
- Dappnode networking and devops related stuff (Dappnode) dappnode · GitHub
Timeline and Future Work
- Phase 1: Research and specification [Jul 2021]
- Phase 2: MVP Development and testnet deployment [Jul - August 2021]
- Phase 3: Production v1 development and audit [August 2021 - December 2021]
- Phase 3: Mainnet deployment of v1 [January 2022]
- Phase 4: Maintenance and support for v1 and planning for v2
Suggested Incentive Structure
It is a great challenge, but also an opportunity to build a Lido solution for the Polygon ecosystem. We are determined to put our best resources into this project to make it the best possible and grow the dedicated team and the project itself in the future.
We are proposing the following incentive structure that aligns with the long-term success of the Lido DAO as well as Lido on Polygon:
- Lido Token Incentives: Using vested tokens distributed according to agreed milestones
- Revenue Share: Agreed ongoing revenue share between Shard Labs and the Lido DAO
For delivering liquid staking solution we propose a following:
- 500,000 LDO tokens issued with vesting with 6 months cliff and 6 months vesting when Lido for Polygon manages to capture 2.5% of the staked MATIC supply
- 500,000 in additional LDO tokens vesting over a 6 months when Lido for Polygon manages to capture 25% of the staked MATIC supply
Revenue share incentives between Lido DAO and Shard Labs: will be used to incentivize future growth and cover development and maintenance costs. As the lead development partner of Lido on Polygon, we suggest that Shard Labs receives 20% of the fee going to the Lido DAO treasury, while the treasury itself retains the rest.
If the agreed KPIs are not reached, but the product is developed and delivered, we suggest the compensation of 100,000 $ to cover the basic development and audit costs.
We are excited to bring Lido to the booming Polygon ecosystem as we see this as the start of another milestone in Lido development.
We also want to thank Chorus One for their help with the proposal.
We are in contact with multiple stakeholders from the Lido and Polygon ecosystems. There is already a first version of the technical specification that can be viewed and the feedback provided. We will also work on the frontend integration for https://stake.lido.fi/.
We are open to proposals and feedback from Polygon and Lido communities on this proposal and the proposed specification.
Our next step is to issue a Snapshot vote to determine whether the Lido DAO favors supporting our proposal and the spec. If it passes, we will build an MVP and release it in the Polygon to boost it’s DeFi ecosystem even more.
Team breakdown per phase:
|MVP||1 senior||0||0||1 senior|
|V1||2 senior||1 senior||1||1 senior|
|V2||2 senior||2 senior||1||1 senior|