Summary
This proposal seeks to introduce and launch Staked INV (sINV) within the Inverse Finance DAO. sINV offers a way to bring the INV governance token to users who do not trade on Ethereum mainnet, gives Ethereum mainnet users a way to own INV without the need to manually claim rewards, and creates opportunities to make sINV available as loan collateral on third party lending markets.
Background
INV staking rewards are intended as a type of anti-dilution protection for INV holders, protecting them against current and future INV emissions from liquidity and other DAO operations. To receive INV staking rewards, and DBR streaming rewards, requires staking INV exclusively on FiRM on Ethereum mainnet. This design results in multiple opportunity costs for the DAO:
- Potential INV holders on non-Ethereum mainnet chains (e.g. L2’s) do not have direct access to INV, reducing demand for INV
- Current INV stakers must manually claim DBR streaming rewards, which some view as inconvenient and, during periods of high gas costs, expensive.
- INV holders interested in participating in DEX liquidity pools may hesitate due to perceived loss of staking and DBR streaming rewards, despite incentives provided by the DAO to compensate for such loss.
- INV holders interested in utilizing their INV as loan collateral on third party lending markets are unable to do so without suffering dilution.
In the interests of maximizing INV tokenholder value, the introduction of a more portable, auto-compounding version of INV is an attractive option for the DAO.
Staked INV: A Step Towards Expanded INV Ownership
We propose the creation of a wrapped or “staked” version of INV, sINV, where INV staking and DBR streaming rewards are auto-compounded into a single ERC-4626 vault token.
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The proposed design for sINV closely mirrors the design of the yield-bearing sDOLA vault token launched earlier this year. INV held in the sINV vault receives a stream of INV staking rewards according to the prevailing xINV staking rate advertised on FiRM, but also additional INV derived by converting DBR streaming rewards to INV at the prevailing DBR streaming rewards rate on FiRM.
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Similar to sDOLA, sINV uses a dedicated XY=K auction, where DBR streaming rewards are sold for INV using a Dutch auction. The auction permissionlessly allows anyone to buy DBR using INV, with the price of DBR (per INV) continuously reducing every second until a DBR purchase is made at which point the price will increase. As with the virtual XY=K DBR auction, it is expected that MEV bots will be the main driver of the auction, completing arbitrage transactions between it and the DBR/INV pool on Curve as soon as it becomes profitable.
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Similar ot sDOLA, sINV operates on a weekly reward cycle, resetting every Thursday at 00:00 UTC. The INV accumulated from the auction during each cycle is then distributed continuously to sINV holders pro-rata in the subsequent cycle.
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sINV may be wrapped and unwrapped only on Ethereum mainnet and users may unwrap and withdraw their INV from the sINV vault at any time with no withdrawal delay.
Cross-chain Support for sINV
- An important reason for bringing sINV to market is to enable cross-chain portability and utility of INV in ways that are not currently available to users. As an ERC-4626 vault token, we believe Chainlink’s Cross Chain Interoperability Protocol is the safest and most reliable option for bringing sINV to other chains, particularly Ethereum Layer 2’s like Base, Arbitrum, and OP Mainnet. The approval process for sINV is already underway with Chainlink and with approval of this proposal, rollout of sINV to new chains will begin in the coming weeks.
Deployed Contracts
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On-Chain Actions
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