Staking is Nigh

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Staking is Nigh

Consider the scenario in which there is a security incident related to the Captive Insurance staking pool contracts:

  • Monetary Loss (money)
  • Reputation Loss (social)
  • Community Loss (|>)

What is the worst loss of the 3? In the worst case?

Monetary Loss: Centralizing LP positions within the vault contract logic could become a target for exploits. In the worst case this would result in a complete loss of all liquidity for $FOLD.

Reputation Loss: Manifold Finance suffers public distrust and directly impacts efforts to conduct business development/etc.

Community Loss: Due to the below-average performance of the project’s token, most of the users staking are not mercenary capital: they are ‘retail’ (re: non-professional).

One of the purposes of the Captive Staking contract is to pay people providing liquidity and to make $FOLD a risk-share token. Currently, the risk being underwritten is less than the risk of a contract exploit or issue. Said another way, smart contract related risk outweighs the rewards currently. Furthermore, IL risk is the major risk when considering deposit size.

Streams vs. Lock-up

We can achieve a better outcome by using payment streams instead of the deposit and lock mechanism in the captive insurance contracts. The motivation for locking deposits for 14 days is to prevent what originally affected the v1 staking contract: users depositing right before payout and then withdrawing right after, in effect stealing a portion of the overall payout. With payment streams the payout is not a single discrete event, instead its accrued over a period of time.[1]

Reward Distribution

  • Instead of locking your deposit for 14 days, you will instead have to stake for 14 days without reward.

  • Offchain we index users’ positions, and calculate the stream disbursement

How it works in principle and Tracking Accrued Rewards

  1. Have both ETH and FOLD.
  2. Provide LP in the Uniswap V3 Pool at the defined ranges.
  3. Wait at least 28 days to get some additional rewards.
  4. Rewards pushed to those who maintain the criteria.

What Happens to the Captive Insurance Contracts

A % of the rewards that are distributed will be retained and deposited into the Captive Insurance protocol. We will at first use it to maintain Protocol Owned Liquidity. This also means we will transfer ownership to the new MultiSig address.

Q: What %percentage is retained? A: 20%. Completely arbitrary, lets defer to when we see it in practice and re-asses.

After a period of time and getting a much more thorough audit and review, we can have users migrate to the contract. The risk is simply too great to reasonably be confident. Putting the entire community in a situation in which they are ruined with respect to their position is at best short-sighted and at worst criminally negligent.

Community Call schedule and reflection

We will have the community call this Saturday

:calendar: iCAL: https://calendar.google.com/calendar/ical/c_a0a6cb9d2710f99ad7a3c4244c88495a2b7873b0fac02965a05b8904ff7d2e40%40group.calendar.google.com/public/basic.ics

:calendar: Google Cal: Manifold Finance Public

Reflection

I want to state that it is not that I think there is any particular security issue with the contract, its that the mere tail end risk vs reward is skewed. It would be:

Path Forward

We’re taking a measured approach to protect our community’s interests. Rather than rushing deployment, we’re prioritizing security through:

  • Extended testing periods
  • Multiple security audits
  • Gradual feature rollout
  • Community feedback integration

Our goal is to create a robust, secure staking system that serves our community’s shared interests. Those of you that have been here since the early days deserve the prudence and care to be taken that has been entrusted in us. Over the course of the last few weeks, many of you have demonstrated long-term commitment to the project. Protecting those interests is my highest priority. If you have questions, please post in the comments below or if you can attend the call on Saturday, I encourage you to do so.

January 7th will be the date in which we will start tracking positions. We will provide a guide and dashboard so you can see your accrued rewards.

  1. see https://docs.drips.network/the-protocol/advanced/fractional-amounts#streaming-rate-has-a-sub-token-precision ↩︎

1 Like
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I and many other holders of fold are susbtantially exposed to fold and would need to sell fold in order to be able to stake with eth required next to it. Being able to do single sided staking with fold would be very welcome in order to be able to fully participate with my fold position.

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I second this. So my question therefore is: will I be able to stake fold if I don’t own eth?

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yeah, it would certainly be much much better if we had the chance to do solo staking… not a fan of IL nor selling my $FOLD for $ETH

5

  1. What mechanism produces the LP staking yield? Its unclear from this post. Is it xga mainet launch? What % goes to stakers?

  2. How many validators are using avs boost? Is $80/year enough to incentivize validators?

  3. “Offchain we index users’ positions, and calculate the stream disbursement”

that means this is done by hand? Are you using an abacus? This can’t be coded and automated? Seems very 20th century.

  1. Walk me how we go from beyond incentivizing LP to captive insurance.
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if i can offer my opinion, i believe i see only one solution to the concerns raised by the comments preceding mine: there is a rhyme, in a conceptual sense rather than phonetic, to the one we’ve developed here in this playground of cents on the dollar. github dot com/QuidLabs/IMO/blob/main/src/MOulinette.sol#L444

you may observe how creating an LP deposit is done in the most efficient way possible. if there’s a source of the necessary second token already on our books, then we can simply move this from one form of being accounted to another, no slippage, no questions asked, just adjust. only do the actual swap (incurring slippage) if absolutely necessary.

this is USDC, though, and we have a particular incentive model for how we attract USDC specifically. now that we’re armed with some perspective, back to the original issue in question: we need ETH to clamp onto FOLD and deposit into Uni. where are we going to get it? well…there’s an AVS sidecar. that means ETH that’s being re-staked is passing through it.

here’s what is possible. instead of re-staking the ETH directly. you can let it sit, and grab it on-demand whenever someone wants to lock FOLD into Uni. in the exact amount that you need to satisfy that particular LP deposit at that particular moment in time.

doesn’t that get in the way of all the AVS footwork? interestingly, not! we can use the LP deposit as what gets re-staked. Eigen has this cool feature that they shipped in August that allows you to use any ERC20 for re-staking.

now…the only question is…how the heck do we get an ERC20 out of the LP deposit. this is solved in a very particular way with quid. it will not apply directly to the problem we’re trying to solve together here. with that said though, i believe it shines some light on an approach. and we can figure out the details of that approach if this sounds promising.

Bunni has been explored, but in my personal opinion, it’s not the simplest solution and we might come up with something even better.