Draft: DRIFT staking allocation

General
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Name: 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 perform the strategic acquisition of DRIFT in a capital efficient programmatic way over the next few months. This 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, increased voting power, and fees allocated to the insurance fund. The Drift Staking Allocation would direct purchased DRIFT to be distributed to DRIFT stakers in the Drift Staking Vault further increasing token utility for DRIFT stakers.

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 purchase DRIFT. To align with the Drift Foundation’s mandate of capital efficiency, the purchase of DRIFT will be implemented in a “smart” manner, when DRIFT shows weakness relative to the market, as outlined by a program. This purchased DRIFT would serve to initially seed the distribution pool in order to reward Drift stakers.

Given the acquisition will be executed over time and are market dependent the Drift Foundation will also allocate 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 the DRIFT token, Drift Protocol, and the broader Drift Ecosystem. Drift is already channeling fees collected from the protocol into the token via strategic acquisition of DRIFT outlined in DIP 4. By distributing the acquired DRIFT to stakers, it focuses the distribution 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.

Overview:

The proposal outlines activating distributions from the Drift program to be distributed to Drift stakers. Acquired tokens will be transferred within the program once a day to the token account used as the reward pool. The reward pool will be distributed at a rate of the lesser of 5 % of the current reward 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 will not have started yet started. To help kick-start rewards 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 awards are distributed to committed Drift community members the if the proposal passes the cool-down period for withdrawals will be up’d 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 Security Council to allocate/manage.

4 Likes
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Overall like the focus on the alignment between the protocol and the token.

That being said unsure why redistribute the bought back tokens to stakers. Like why reward stakers vs contribute to growth of the protocol and let the markets figure it out?

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Not sure about the details of the incentive metrics.

But it could potentially be valuable to use DRIFT holdings to give out some perks,

A community of power traders is a valuable asset in cases where other Defi protocols are looking to partner with Drift to reach power users and distribute their tokens.

Something like that might be too optimistic, but would increase the value of holding DRIFT and relieve pressure from Foundation/treasury to keep incentivising holders and stakers

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4

just dropped this thread giving my thoughts on the proposal.

https://x.com/PineAnalytics/status/1935457464691863600

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This proposal presents a thoughtful mechanism to deepen alignment between DRIFT stakeholders and the protocol’s long-term success. Below are key observations and considerations for the community:

Strengths of the Proposal

:white_check_mark: Double-Alignment Mechanism

  • Combining buybacks (DIP-4) with staking rewards creates a reflexive value cycle: treasury assets grow protocol equity → buybacks increase token demand → staking rewards incentivize long-term holding.
  • The 30-day cooldown extension (from 13 days) smartly filters for committed participants.

:white_check_mark: Capital Efficiency

  • The “smart” acquisition strategy (buying during relative DRIFT weakness) demonstrates disciplined treasury management.
  • 100K DRIFT from the Incentive Fund (DIP-5) jumpstarts rewards without over-relying on market buys.

:white_check_mark: Clear Metrics

  • Hard caps (20% APR max, 5% hourly distribution) prevent unsustainable inflation.
  • Linear distribution avoids whale favoritism.

Open Questions for Discussion

:one: Sustainability & Scale

  • How will the 20% APR be adjusted if DRIFT price appreciates significantly? (e.g., Will rewards shift to a fixed USD value?)
  • What criteria will determine whether to “scale up” this program post-experiment?

:two: Insurance Fund Synergies

  • Stakers currently backstop bad debt. Should rewards be weighted by staking duration or insurance fund contributions to further de-risk the protocol?

:three: Market Impact

  • Could daily buybacks (even if algorithmically paced) create predictable price pressure exploitable by front-runners?

:four: Governance Trade-offs

  • The Security Council’s discretionary power over adjustments is pragmatic but could benefit from sunset clauses or community veto thresholds.

Suggestions for Optimization

:small_blue_diamond: Transparency Dashboard

  • Real-time tracking of:
    • DRIFT acquired vs. distributed
    • APR actuals vs. targets
    • Insurance fund health metrics

:small_blue_diamond: Contingency Planning

  • Define protocol-owned liquidation triggers (e.g., if DRIFT drops >X% vs. ETH, pause buybacks).

:small_blue_diamond: Future Flexibility

  • Build hooks to allow future governance votes to redirect a portion of rewards to other alignment mechanisms (e.g., LP incentives).

Conclusion

This proposal intelligently layers multiple alignment mechanisms (staking, buybacks, fee redirection) while mitigating common pitfalls like hyperinflationary rewards. With minor clarifications on long-term adjustability, it could set a new standard for DAO capital allocation.

Next Steps:

  • Community debate on reward elasticity (fixed APR vs. dynamic)
  • Technical review of the hourly distribution mechanism’s gas efficiency
  • Formalize Security Council oversight boundaries
6

Chanil stop copy pasting AI.

3 Likes
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21M drift are staked. A target of 20% APR is 4+ million drift per year. The proposal that passed allocated 1 million dollars right? which lets say today buys 2 million drift. So it supports this proposal for 6 months at the full target APR which is quite high but…

I don’t care. I’m not really interested in holding a high risk asset like drift especially when, if I understand correctly, the buy back is a one time thing of 1 million. There’s no on going buy back system in place.

I want profit sharing. I want it so that x percentage of Drift fees goes directly back to me or to a drift buy back. Then and only then am I incentivized enough to hold this super risky asset.

But if you cap me at 20% I’m still not interested. The downside risk is too high to hold out for 20% APR in crypto.

Essentially what benefits everyone is profit sharing. I want to hold and acquire drift because it generates me passive income. I hold drift, I make money, I’m happy. Drift foundation wants to keep and continue acquiring drift tokens for the same reason. So now DRIFT is in high demand. Scarcity follows, price goes up, everyone is happy and it brings a lot of attention to the project.

You just need to find a way to do this legally.

2 Likes
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This is really good feedback and agree. Not sure this makes sense, and 20% means the DAO would have to scale up buybacks in the future.

Have you considered applying to be a delegate btw?

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I like it, but the math has to be there. I propose in any of these systems of reward for a quadratic equation added to the rewards. Not linear. Did we not learn from the last drop?

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Remember to make sure AI doesn’t just try to agree with your points rather than find discrepancy.

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Hello, my opinion while having a fixed apr seems cool in paper its probably not feasible in reality.

I think people feel more connected / rewarded from getting a share from participation like in getting a share from Drifts fees. That way when we see x’s posts about $500M, $1B trading volume community feel more connected and eager to engage. Incentives for platform and Drifters must be connected. Essentialy what Light described above.

Look at Jupiter’s JLP value with the perp price share. Its something like that

1 Like