Name of the Proposal: Drift Staking Allocation into the Safety Module
Note: This is the Second Draft of the proposal and is set to be voted on commencing 19 June 2025.
Acknowledgements: Thank you to something, namanc, Jack, Chanil and Light for contributing to the discussion.
The first post can be found here : Draft: DRIFT staking allocation
Mentioned Proposals:
DIP-1: Launch DRIFT Staking Vault & Fee Discounts for DRIFT Stakers: Realms
DIP-4: Drift Strategic Acquisition Proposal: Realms
DIP-5: Fund the Drift Incentive Fund: Realms
Overview:
This proposal outlines activating a program to allocate acquired DRIFT from the program outlined in DIP 4, Drift Strategic Acquisition proposal, to a distribution program to award DRIFT stakers. The Drift Strategic Acquisition Proposal outlines using $1mm from the Drift Protocol treasury to acquire DRIFT in a capital efficient programmatic way over the next few months. The acquired DRIFT will be distributed to DRIFT stakers of up to 20 % APR according to the outlined distribution structure. This proposal aims to initiate a powerful alignment mechanism between the DRIFT token and the community.
Context:
The Drift Staking Vault was launched via DIP 1 last year. The goal of the vault was to kick-start token utility and create a platform for further alignment mechanisms to be implemented. Stakers show commitment to Drift’s mission by staking DRIFT in the insurance fund, which protects against bad debt related to DRIFT in the Borrow/Lend product, and by committing to a 13-day cooldown period. In return for showing commitment to the protocol, stakers receive fee discounts and increased voting power. The Drift Staking Allocation would direct acquired DRIFT to be distributed to DRIFT stakers in the Drift Staking Vault further increasing token utility for DRIFT stakers.
Staking DRIFT is the first step to participating in the broader Drift Safety Module. The concept of a Safety Module has been historically pioneered by Aave (now Umbrella) and is a model the Drift Foundation is looking to adopt. The stake serves as a deposit into the Drift Insurance fund, a fully on-chain system for automatically covering bad debt and managing protocol risk. All staked DRIFT directly contributes to protocol security and automated slashing will take place in events of bad debt. Distributions that go to users who stake DRIFT will serve to reward stakers who are putting DRIFT at risk to secure the protocol.
Learn more about how the insurance fund works: https://docs.drift.trade/insurance-fund/insurance-fund-staking
The Drift Strategic Acquisition Proposal passed via DIP 4 in May. The goal of the Strategic Acquisition Proposal was to increase alignment between DRIFT and the Drift ecosystem by directing $1mm of protocol-owned assets to acquire DRIFT. To align with the Drift Foundation’s mandate of capital efficiency, the acquisition of DRIFT will be implemented in a “smart” manner, when DRIFT shows weakness relative to the market, as outlined by a program. The acquired DRIFT would serve to initially seed the distribution pool in order to reward DRIFT stakers.
The acquisition mechanism will be executed programmatically w over time based on ecosystem conditions. Drift Foundation has also allocated 100k DRIFT from the Drift Incentive Fund to kick-start awards if the proposal is approved via governance.
Reasoning:
The primary goal of this proposal is to increase alignment between DRIFT, Drift Protocol, and the broader Drift Ecosystem. As per DIP 4, DRIFT is being programmatically acquired by the protocol. By distributing the acquired DRIFT to stakers, it focuses the distribution of governance to a core group of believers and creates an avenue for any community member to gain exposure to Drift’s economics. Beyond direct value attribution, this alignment aims to grow holder conviction, amplify community engagement, and fuel a reflexive flywheel that strengthens the Drift community. Alignment is a growth lever.
Implementation:
The proposal outlines activating distributions from the Drift program to be distributed to Drift stakers. Acquired DRIFT will be transferred within the program once a day to the account serving as a distribution pool. The distribution pool will be apportioned at a rate of the lesser of 5 % of the current pool per settlement period (60 minutes) or 20 % APR. Distribution will be linear to the staked DRIFT in the Drift Insurance Vault.
Although the Drift Strategic Acquisition Proposal has already passed, the acquisition has yet to begin. To help kick-start distribution to the Drift Staking Vault, the Drift Foundation will contribute 100 k DRIFT to the initial pool from the Drift Incentive Fund upon this proposal passing.
To ensure distributions are allocated to committed community members if the proposal passes the cool-down period for withdrawing from the vault will be increased from 13 days to 30 days.
Consideration:
The goal of the initial Drift Staking Allocation is to implement a system to strengthen alignment between DRIFT and the Drift ecosystem and provide the community an avenue to participate in the economics of the protocol. Both the Strategic Acquisition Proposal and Drift Staking Allocation proposals are initial experiments in alignment mechanisms and token utility. These will be reviewed and potentially scaled up via future governance proposals, depending on their deemed effectiveness by the team and community.
In order to maintain operational efficiency, specifics in implementation and possible adjustments of the staking proposal are at the discretion of the Security Council to allocate/manage.