Decentralized finance (DeFi) meets decentralized governance.
That’s the idea behind StakerDAO, a new decentralized autonomous organization (DAO) for investing in existing proof-of-stake (PoS) blockchains.
Introduced Wednesday by Tezos Capital CEO Jonas Lamis, the new DAO will allow participants to vote on where to best earn rewards as validators in a given network.
“StakerDAO is a new platform for governing financial assets,” said Lamis. “We want it to be secure, decentralized and compliant.”
The lead investor in the project is crypto hedge fund Polychain Capital. Other participants were not disclosed, nor was the amount invested.
“It’s about maximizing yield but it’s also about carefully curating a portfolio of these underlying staking assets,” Polychain’s Olaf Carlson-Wee said.
StakerDAO will focus on existing PoS blockchains such as Cosmos, Tezos, Terra and others, he added.
Beyond the similar name, Carlson-Wee said MakerDAO (in which Polychain was an early investor) was the primary inspiration for StakerDAO.
“The MakerDAO project is very interesting because it managed to create a DAO where the MKR token generates value to holders based on the success of an underlying DeFi smart contract system,” Carlson-Wee said of the popular decentralized lending protocol, adding:
“I think that model wherein a DAO can generate value based on an underlying DeFi protocol is something possible beyond just MakerDAO.”
MakerDAO is a two-token system most well-known for its DAI stablecoin, where borrowers pledge their ether to get dollar-pegged DAI in return. To get their ether back, they have to return the DAI, plus a fee payable in DAI or the MKR token.
But while MakerDAO is built on ethereum, StakerDAO will live on the Tezos blockchain.
Where MakerDAO has its MKR governance token, StakerDAO will have STKR. STKR is the vehicle through which investors can expect to make money, Lamis said.
“Whether it be from direct profits that come [from the DeFi projects it builds] or through some token buyback and burn model like MakerDAO has, we expect profits to accrue,” he said.
As such, STKR tokens will be offered as a security, Lamis stressed, wholly-compliant with U.S. securities law.
Abiding by the law
While full regulatory compliance with U.S. securities laws normally means restricting access to tokens to a limited group of accredited investors, Lamis stopped short of specifying what exact qualifications he imagines will be required to own STKR.
“I don’t want to get ahead of myself on how that’s going to roll out just yet. It’s not something the lawyers want to talk about yet [either],” said Lamis. “When you start dealing with the U.S. Securities and Exchange Commission, you have to be very conservative in your vision.”
Lamis envisions launching StakerDAO and its token-holder voting system by the end of 2019.
In addition, he expects the launch of new DeFi applications voted on by STKR token holders as early as Q1 or Q2 of 2020.
While these applications could include new stablecoins (similar to DAI), lending protocols and derivatives platforms, that’s not all the StakerDAO platform will be capable of doing, Lamis said.
How it works
At the beginning of each year, STKR token holders will elect five council members to make governance decisions on what projects and DeFi applications to build.
Then, on a 30-day cycle, proposals for StakerDAO council members to vote on will be introduced, deliberated on and ultimately executed.
This part of the iterative governance of StakerDAO was largely inspired from the Tezos blockchain, according to Lamis.
Having executed its first-ever system-wide upgrade finalized through a token holder voting process in May, Carlson-Wee said, the Tezos governance model was a testament to how “hard decisions” can be made in a decentralized manner on a blockchain.
Lamis added that the Tezos governance processes implemented on the protocol layer were ultimately why StakerDAO was built on the Tezos blockchain as opposed to ethereum. Ethereum currently relies on an informal and off-chain process of decision-making influenced by the collective will of protocol developers, miners and other community stakeholders.
“Tezos is by far the best-structured blockchain for managing governance over the long-term,” said Lamis. “We think it’s going to be the [most] stable blockchain for long-term governance.”
Jonas Lamis image via Tezos Capital