Big milestone today for the DAO: the launch of staked INV. Staked INV, or sINV, tackles a number of challenges for the DAO, opens up new markets, and brings new INV holders to our community.
Background
INV staking rewards, which have been live since early 2022, 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, as well as 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. So we launched sINV.
sINV Design
sINV, short for staked INV, auto-compounds DBR and INV rewards into a single ERC-4626 vault token.
The 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.
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.
Also similar to 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.
An important distinction of sINV is that unlike sDOLA, where demand for sDOLA does not result in a continual increase in the price of DOLA, sINV will generally serve as a continual source of market buy pressure for the INV token as DBR are continually auctioned for INV and deposited in the sINV vault, while differences in price between sINV and INV will be quickly leveled out by arbitrageurs.
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.
Use Cases & Reasons To Use sINV
Ease of Use. More of a benefit, but a commonly cited need for sINV is based on user desire to avoid the manual claiming of INV staking rewards. As sINV rewards are autocompounded for the user, there is no need to manually claim rewards
Holding INV outside of FiRM. A principal use case for sINV is the ability to hold INV without staking on FiRM.
Holding INV on non-Ethereum mainnet chains. sINV gives users on non-Ethereum L1’s and L2’s the ability to hold INV and accrue rewards.
Participating in INV liquidity pools. sINV allows users to deploy their INV to liquidity pools without worry that they are missing out on earning the benefits of compounded rewards.
Loan collateral. While there is no announced third party oracle for sINV, third party lenders are expected to list sINV as collateral in the coming weeks and months.
Cross-Chain Expansion
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.
As always, do your own research and nothing here should be construed as investment advice. If you have questions, come see us in the Inverse Finance discord server!
