Launch DRIFT Staking Vault & Fee Discounts for DRIFT Stakers

DIP - Discussion Forum
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The launch of the DRIFT Staking Vault represents the first phase of DRIFT token utility. As suggested by esteemed community members, future token utility may include buy-and-burn mechanisms, using DRIFT as a payment token for trading fees, enabling trading fee rebates in Drift. These further ideas can be proposed by the community for discussion and implementation.

A. Launch DRIFT Staking Vault:

The first part of this proposal aims to turn on DRIFT staking rewards via launching a DRIFT Staking Vault.

The utility for staking DRIFT in the Staking Vault includes:

  1. Receive double (2x) governance voting power versus DRIFT held outside of the Vault; and
  2. Earn revenue yield on borrow fees and liquidation fees for activity on the spot DRIFT/USDC pair on Drift Protocol.

There is currently ~$13mm staked into the Drift Insurance Fund via USDC and SOL. This proposal will add DRIFT to the list of assets that will receive revenue from Drift’s trading fees. Similar to other Insurance Fund Vaults launched by Drift, there will be a 13-day cooldown period associated to withdraw DRIFT from the Vault. During this withdrawal period, trading rewards will not be earned.

B. Implement Fee Discounts for DRIFT Stakers:

The second part of this proposal is to enable fee discounts on Drift via DRIFT staked in the Vault. This is inspired by the usage of BNB as fee discounts for the leading centralized exchange, Binance.

The current trading fee schedule for Drift Protocol activates VIP fee tiers for users based on either their USDC Insurance Fund stake or their 30D volume.

The proposal involves switching the USDC stake requirements to DRIFT stake amount to incentivize the staking of DRIFT by large traders and market makers as illustrated in the following tables:

Proposed Fee Schedule with DRIFT Stake for SOL, BTC and ETH

Tier DRIFT Stake Volume (30D) Maker Fee Taker Fee
1 500 <1m -0.25bps 2.5bps
2 1,000 >1m -0.25bps 2.25bps
3 10,000 >50m -0.25bps 2bps
4 50,000 >100m -0.25bps 1.75bps
5 100,000 >500m -0.25bps 1.5bps
VIP 1,000,000 >1B -0.25bps 0.75bps

Proposed Fee Schedule with DRIFT Stake for all other Perpetual Markets

Tier DRIFT Stake Volume (30D) Maker Fee Taker Fee
1 500 <1m -1bps 10bps
2 1,000 >1m -1bps 9bps
3 10,000 >50m -1bps 8bps
4 50,000 >100m -1bps 7bps
5 100,000 >500m -1bps 6bps
VIP 1,000,000 >1B -1bps 3bps

Note: Either DRIFT Stake or 30-day volume can be the qualifying criteria for the fee tiers.

Proposal Goals and Success Outcomes:

  • Build a token sink for DRIFT token, enabling DRIFT-related revenues of the protocol to flow to tokenholders;
  • Align interests of DRIFT holders and the success of the Drift Protocol by ensuring platform based utility;
  • Ensure alignment between large VIP traders, market makers and takers and DRIFT tokenholders;
  • Ensure that DRIFT token can be used to secure the protocol via its Insurance Fund Program.

Risks of DRIFT Vault Staking:

  • In the case of a bankruptcy in DRIFT markets, staked DRIFT would potentially be liquidated. Similar to other Insurance Fund pools on Drift, the risk of bankruptcies is compensated by revenues earned through staking DRIFT.
15 Likes
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This is great, make it DIP-2. :saluting_face:

But it would be better for tier 1 to have a minimum 500 $DRIFT staked imo!

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Love this idea. I agree that a minimum for Tier 1 should bet set. Otherwise, this is a great proposal!

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Enabling fee rebate is a better option along paying gas with DRIFT. If this is implemented the buy&burn will only shorten supply and somehow leading to high gas if Drift scale up to a million user weekly.

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I like everything except the cool down section. If you are going to have a cool down, rewards should decrease over the cool down period. If you are going to withhold rewards from holders, then withdrawal should be immediate.

The aim is to encourage staking, not to discourage it especially since there is a “bankruptcy” risk.

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I’m an all for this proposal. How can we stake drift to vote?

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This is a lit proposal, I fully support it and the opinion of previous contributors for setting the tier-1 min staked value to 500 $DRIFT - it’d be healthier for the platform and DEX imo.

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HOly, why should long term oriented governance staking have to pay when borrowers go insolvent, which only happens if price goes up or some of their other collateral really well???!

Should probably block borrows entirely or omit insurance from slashing because of it

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Agreed! The more voters the more decentralized but I get why they would want such a high bar.

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What about locked $DRIFT?

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Thank you all for your feedback.

The following amendments have been made:

Changing Tier 1 from <1000 to 500 DRIFT staked.

This proposal will go live for voting shortly on: Realms

Look forward to seeing everyone engage there!

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yeah meeen! This is good

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The current proposed fee schedule for Drift does not seem realistic. The VIP tier now requires a minimum volume of 1B, a tenfold increase from the previous requirement (the insurance fund staked is almost a 50-fold increase!). Given that the total volume on Drift over the last 30 days was only 2.4B, achieving the VIP tier is currently almost impossible.

It would be better to implement a more gradual increase in the minimum volume requirement over time. Alternatively, you could set the minimum at 1B or a percentage of the total traded volume on Drift, whichever is lower.

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That’s true. The bad thing about this proposal: such questions come too late, everybody accepts it and it’s done.

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Fully agree, the proposal should be ammended. The security council should have the opportunity choose the params from a set of choices.

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LFG!!! supported 100%

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I don’t like this idea. Your insurance should stay insurance vaults. DRIFT is too volatile an asset to use for this.

Also how would you run governance when the vast majority of users will stake in the vault as opposed to the Realms? Surely that’s not good right?

I’m all for staking DRIFT in Realms (maybe an on site module) to achieve a points boost. I think all rewards should be tied to trading. If you don’t trade, you shouldn’t get any rewards. But I’d be open to extending that to all the trading aligned stuff like Insurance, Market Maker vaults, definitely DLP Vaults and even SuperStakeSOL.

Staking and voting are two excellent ways to filter for the bots and farmer accounts vs the legit trading users. And you want to ignore the former but listen carefully to the latter.

It’s No for me. I think there’s better designs you can use

2 Likes
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I oppose this proposal for extra governance power to the DRIFT/USDC insurance vault for these reasons:

  1. The insurance vault would be used to pay losses, and in the event of liquidations caused by DRIFT price fall, it will lead to a severe downwards feedback loop as the collateral is the same asset that will be used to pay those losses. This creates a significant extra risk to the protocol as governance becomes vulnerable in addition to that market. It creates an opportunity for malicious actors to take advantage of forced selling by governance participants, and because the price of DRIFT itself is linked to market perception of protocol health, it may cause spiraling effects on the entire ecosystem due to fear.
  2. Those who are staked into the DRIFT/USDC vault do not necessarily have their incentives aligned with the protocol as a whole and this would systematically distort the community interests over the long run, as people become initially encouraged to get the 2x governance power + yield, and then afterwards act based on their new incentives as being depositors of that vault rather than just being regular users with governance power.

I also do not like the fee discounts scheme. Direct revenue share would be better, and even if that were not possible, accepting DRIFT directly as fees to be redistributed to stakers instead of simply getting tiered discounts for fixed quantities of DRIFT would be more scaleable and sustainable.

2 Likes
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I agree with everything that was said here. The one thing that was not added that was said would be added is to use the Drift token like the BNB token to pay fees at a discounted set rate and have a small portion of the Drift Token burned. It would create a deflationary and raising the value and use case of the Drift token. Somewhat frustrating.

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Great to see the amendments here. Fee discounts is the right way to align stakers with the protocol. Only traders will benefit and the larger the trader the more the benefit so that’s positive.

1 Like