Diva Staking

[DIP-07]: Launch Early Staker Program Powered by Sommelier Vaults with Terms & Conditions (T&Cs) - Incl. Token Distribution Details for Program Participants

DIP-07 has been curated by Sunand Raghupathi representing Seven Seas, a data science firm and strategy provider in the Sommelier ecosystem.

As per governance DAO guidelines, the proposal is brought by Kotler who represents 1M+ delegated DIVA tokens and therefore meets the criteria to submit a binding DAO proposal.

Scope of DIP-07

This proposal outlines the intention of launching a Early Staker program powered by Sommelier and its associated Terms and Conditions (T&Cs), which includes token distribution details for Program participants. The initial proposal of the Early Staker program was outlined in this first RFC and the initial proposal of the T&Cs was outlined in this second RFC. Both RFCs were placed for a temp check poll and passed.

The text below re-outlines the key provisions of those RFCs with particular emphasis on the T&Cs. The Seven Seas compensation component of the T&Cs have been adjusted based on community feedback, and we are proposing a compensation structure in line with our latest comment in the second RFC.

Early Staker Program: Summary

• Why: The Enzyme pre-launch vaults have been successful at attracting ~$45M of future divETH stakers. However, this initiative has been primarily focused on ETH and stETH holders. Members of the Rocket Pool community interested in Diva expressed feelings of being left out as rETH holders. An rETH vault had been discussed but the Diva community has been against an rETH vault that would directly reduce Rocketpool TVL. A more synergetic approach is needed.

Beyond targeting a new user base, the vault will help bootstrap intelligent long-term and post-launch divETH liquidity which can be dynamically provided across the divETH ecosystem to support Diva Staking DAO goals (e.g., Chainlink oracle support).

• Who: Seven Seas for its DeFi expertise and Sommelier for its secure and cutting-edge architecture are ideal partners to launch a new vault enabling the Rocket Pool community to participate in a Diva pre-launch initiative.
• How: With a Diva Early Stakers rETH BPT vault, which accepts rETH-ETH BPT (Balancer Pool Token) (B-rETH-STABLE) as the deposit asset and accounting asset.

Early Staker Program: Sommelier as Infrastructure

Innovative and non-custodial, Sommelier, launched in 2021, is a decentralized asset management protocol that secures over $60M in TVL. It has undergone multiple audits with 0xMacro and has a bug bounty program on ImmuneFi. Sommelier vaults are used by crypto natives (e.g., top DeBank users), DAOs, Family Offices and Hedge Funds

Early Staker Program: Seven Seas as DeFi Strategists

It is also important to consider several Seven Seas’ qualifications as strategists to supervise this initiative. Seven Seas has been actively running and designing DeFi strategies for LST assets throughout 2023 including the $42M Real Yield ETH vault and vaults created in partnership with other LST protocols like the $32M Turbo stETH vault for Lido and the $3M Turbo swETH vault for Swell.

In terms of liquidity management, the vaults listed above have LP’d for an aggregate trading volume in excess of $2.5B since April. More specifically, we believe that Real Yield ETH is the single most prolific on-chain LP in LST DeFi having facilitated $1.96B of swap volume. In short, we bring a rare expertise to the Diva ecosystem.

Early Staker Program: DIVA DAO & Ecosystem Benefits

• Assisting with Chainlink Oracle Support: One of the requirements to receive a Chainlink oracle is having sufficient liquidity on at least 3 different DEXs. The Sommelier vault can help provide intelligent liquidity on a DEX like Uniswap v3, Balancer and others to help meet this requirement.
• Efficient Liquidity: Efficient liquidity on DEXs also better positions divETH as collateral for various lending markets and other DeFi integrations.
• Minimal Price Impact on Entry/Exit: Deep, intelligent liquidity that can support large swaps into and out of divETH with minimal price impact makes the asset more appealing to large holders.
• Peg Stability: Liquidity that can support the divETH peg through peg arbitrage can give divETH users additional confidence in the stability of the asset.
• Waived Fees During Pre-Oracle Support Period: Sommelier vaults typically charge an annual Platform Fee based on the assets held in the vault, and a Performance Fee. These fees will be waived during the Pre-Oracle support period. After the launch of divETH and once the required oracle support is in place for the vault to take active DeFi positions, users will be charged these fees.
• Opportunity for SOMM Token Allocations: Seven Seas will post a request for a couple months of SOMM token distributions for the vault that provides a yield boost to users in the vault, contingent on the discussed DIVA allocation for users of the Sommelier vault. These token allocations would begin once the required divETH oracle support is received and the vault takes its active DeFi positions. Seven Seas could advocate for additional SOMM token distributions beyond this initial period depending on the vault’s traction.
• Ability for the Rocket Pool Community to Participate Directly (rETH-ETH BPT) & Earn DIVA: Holders of the rETH-ETH BPT will be able to continue to benefit from the ongoing yield generated by depositing their B-rETH-STABLE tokens into the vault. In doing so, not only do we provide an easy onramp for the more than $85M of capital in this pool to join the Diva ecosystem, but these users will also be able to earn yield prior to the divETH launch. The yield of this BPTposition (when staked) has historically been significantly higher than the native rETH yield. This dual benefit allows depositors to maximize their rETH returns while they wait for divETH launch and also receive a DIVA token allocation.

Early Staker Program: Vault Description & Technical Implementation

Diva Early Stakers rETH BPT vault: Accept rETH-ETH BPT (B-rETH-STABLE) as the deposit asset and accounting asset. These BPT tokens will be held “as is” or staked on Aura until divETH is live and has the required oracle for Sommelier integration. Once the required oracle support is in place, the assets in the BPT can be used in divETH-powered yield opportunities including a potential Balancer rETH-divETH pool. Essentially converting the committed ETH into divETH and adding liquidity for rETH-divETH on a major decentralized exchange. As divETH proliferates, the vault could run yield-generating strategies on the following protocols: Uniswap v3, Balancer/Aura, Aave, Compound, Morpho,  and Fraxlend. Integrations with additional DeFi protocols are in progress.

Any variations to this intended implementation & strategy (especially before mainnet) shall be executed only after a successful vote by the DIVA DAO.

Depositors receive an ERC-20 vault share, which represents a pro-rata share of the underlying assets held in the vault. Vault shares are transferable and can be used anytime to redeem the corresponding amount of underlying assets.

All smart contract components that will be used in this vault have been previously audited by 0xMacro.

Terms & Conditions: Summary

• What: Sommelier vault to onboard rETH users into divETH LST DeFi
• Why: Enable Rocket Pool community access to a Diva pre-launch initiative and provide intelligent liquidity within the divETH ecosystem
• When: Prior to divETH mainnet launch and beyond
• Where: Uniswap V3, Balancer and others
• Token Allocation: 1.30 - 2.50 DIVA/ETH/day, higher for early participants
• Proposed Capacity: 20,000 ETH

Specific Terms & Conditions

Eligibility

Although there is no KYC enforced, Sommelier vaults are not open to persons or citizens of the United States and other restricted countries - for more details please refer to the Sommelier User Terms.

Transferability of Vault tokens

Depositors receive an ERC-20 token, which represents a pro-rata share of the underlying assets held in the vault. Vault shares are transferable and can be used anytime to redeem the corresponding amount of underlying assets.

Key dates

There are several key dates to keep in mind:

• Vault Launch: The launch of the vault marks the beginning of the “Queuing Stage”
• 30D pre-Mainnet: DIVA allocations begin to accrue for users in the vault
• Mainnet Launch: DIVA allocations accrue for the next 335 days
• Oracle live for divETH: SOMM incentives begin for 60 days (subject to governance approval); vault shifts from “HODL” strategy to active DeFi LPs (e.g., Balancer, Uniswap, etc.)
• DIVA claims begin: Users are able to claim a portion of their their accrued DIVA tokens beginning 30 days after divETH mainnet launch

DIVA Accrual

Users will be assigned a ranking based on a first-come, first-served principle. This ranking will be used to determine future token distribution, with those depositing earlier enjoying higher distribution rates.

Once the vault launches, users can enter the vault to secure their ranking for that deposit.

The earliest token accrual of DIVA tokens will be 30 days prior to divETH mainnet launch and will continue for 335 days after mainnet launch.

Program Duration

DIVA tokens will accrue for a period of 365 total days, 30 days pre- mainnet launch and for 335 days post-launch.

We acknowledge that the initial Avantgarde pre-launch program was for 183 days, but that program focused solely on bootstrapping TVL prior to divETH mainnet launch. In contrast, this program focuses on pre-mainnet bootstrapping as well as long-term post-launch liquidity in the divETH ecosystem, hence the proposed 365 day duration.

Token Unlocks and Claiming

Token claims will occur in four phases:

Phase 1: 30 days after divETH mainnet launch, vault depositors can claim 50% of their accrued DIVA tokens as an initial allocation for their participation. That is 50% of the tokens accrued during the 30 days from [divETH mainnet launch - 30 days] until [divETH mainnet launch + 30 days], which is approximately 8% of the max potential accrual.

Phase 2: On day 120 of the program [divETH mainnet launch + 90 days], vault depositors can claim the unclaimed 50% of tokens from Phase 1 in addition to 50% of the tokens accrued in Phase 2. This represents approximately 16% of the max potential accrual.

Phase 3: On day 240 of the program [divETH mainnet launch + 210 days], users can claim the unclaimed 50% of tokens accrued in Phase 2 in addition to 50% of the tokens accrued in Phase 3. This represents approximately 25% of the max potential accrual.

Phase 4: On day 365 of the program [divETH mainnet launch + 335 days], users can claim the unclaimed 50% of tokens accrued in Phase 3 in addition to 100% of the tokens accrued in Phase 4. This represents approximately 51% of the max potential accrual.

As a reminder, early redemptions do not imply losing eligibility in a retroactive manner, but it does imply forgoing future accruals.

Deposit Cap

The cap on this initiative is 20k ETH. For reference, the current TVL of the Balancer rETH-ETH pool is $85M TVL (~32k ETH).

If the 20,000 ETH cap is hit, deposits can still be made, but they’ll be considered as being on a “waitlist.” These waitlisted deposits will only be eligible for DIVA distributions if those who got in first withdraw their deposits early.

Maximum / Minimum Deposit

The minimum deposit is set at 0.1 B-rETH-STABLE while the maximum deposit for a single depositor is 10,000 B-rETH-STABLE.

Withdrawals

Funds can be withdrawn at any time. However, if you redeem prior to when the vault begins taking its active DeFi positions, which we define as the first rebalance into the divETH asset, you won’t qualify for any DIVA distributions. For redemptions that take place between the start of active DeFi positions and the 365-day deadline, accrual is determined by the count of full commitment days.

Vault Value Proposition (Liquidity Provision)

The assets in the BPT can be used in divETH-powered yield opportunities including a potential Balancer rETH-divETH pool. As divETH proliferates, the vault could run strategies on the following protocols: Uniswap v3, Balancer/Aura, Aave, Compound, Morpho, and Fraxlend. Integrations with additional DeFi protocols are in progress.Because divETH is not being used as the deposit asset, the assets in the B-rETH-STABLE BPT will have to be swapped for divETH and the other asset(s) in the divETH LP. This means that for all incoming deposits (especially post divETH launch), the vault will be contributing buy-pressure on divETH and also increasing the amount of divETH supply.

Lastly, but most importantly, we as Seven Seas bring our world-class expertise in liquidity management to the Diva ecosystem. Vaults designed by Seven Seas have LP’d for an aggregate trading volume in excess of $4B since April. We believe that our Real Yield ETH vault is the single most prolific on-chain LP in LST DeFi having facilitated ~$2B of swap volume. In short, there are very few, if any, teams with matching levels of hands-on experience.

Calculation and Distribution of DIVA tokens

The calculation will be based on an off-chain formula that determines the distribution for each single address. The final distribution will be based on the on-chain data. The formula for the calculation of DIVA tokens is based on tranches with diminishing token amounts (listed below).

The distribution of DIVA tokens will be calculated as follows, DIVA accrual = ETH deposited * Days in vault during accrual period * DIVA/ETH/Day for each tranche.

DIVA Allocation as a % of the Total Supply

An initiative with a goal of bootstrapping millions in pre-launch TVL and incentivizing significant liquidity provision on DEXs for the LST should receive a generous token allocation.

The size of the allocation discussed for this RFC represents a total maximum of approximately 1.4% of the total supply - if the initiative is maxed out from the start AND for the whole duration (365 days) AND 100% of tokens are claimed.

Note that the above estimated allocation also includes the allocation to Seven Seas, whose allocation is approximately 0.14%. More details about the rationale in the paragraphs below.

Seven Seas’ Role

Early Support

Although not the first team to propose this concept, getting to this point has still required extensive work engaging with the Staking Foundation. Crafting these proposals, gathering input (from the Foundation and also the community), and refining them for mutual agreement has been an intensive process.

Vault Design and Deployment

Seven Seas will handle the technical design, smart contract deployment of the vault, and shepherd it through Sommelier’s governance process for onboarding to the Sommelier protocol.

Vault Monitoring and DeFi Strategies Optimization

Seven Seas will conduct daily monitoring of the vault’s operations and construct rebalances (executed through the Sommelier protocol) that dynamically shift liquidity for the benefit of the vault’s users and the broader Diva ecosystem. The frequency of rebalances will be contingent on market conditions, but vaults typically rebalance multiple times per week.

Supervision of the Sommelier Early Stakers Program

Seven Seas will supervise the Sommelier Early Stakers program on behalf of the Diva Staking community, with the support of the Staking Foundation. We will oversee the program’s operations, excluding actual token distribution, and ensure the vault’s smooth functioning including the transition to active DeFi strategies once the required divETH oracle support is received. Users of the vault will also be able to receive support on how to participate in the program and vault in the Sommelier official Telegram and Discord.

To reiterate, Seven Seas does not wish to be responsible for distributing participants’ earned DIVA tokens, nor does it wish to provide user support specific to the DIVA claims process (e.g., handling user questions about airdrop allocations). Seven Seas’ personnel are data scientists, DeFi strategists, and smart contract developers, and as such, do not have the capacity for work beyond that scope.

Lobbying for SOMM Token allocations

As previously stated, we as strategists will waive the fees for the vault for the period prior to the vault receiving the required oracle support and taking DeFi positions. Additionally, we will submit a request to the Sommelier community fund for a couple months of SOMM token distribution to help further attract TVL to the vault.

Seven Seas’ Fees & DIVA Allocation

On Fees and DIVA Allocation:

The DIVA allocation and vault fees serve different purposes: .

1/ On the DIVA allocation side, we aim to help build the DIVA ecosystem by onboarding users and creating valued products. As such, the DIVA tokens provide Seven Seas with a long-term incentive alignment in the DIVA community as well as a voice in DIVA governance.

2/ In contrast, the fees are meant to compensate Seven Seas for direct costs incurred in optimizing the vault (outlined in more detail below). An absence of fees creates an incentive to either minimize costs (e.g. by limiting rebalances) or to sell DIVA to pay for vault operations.

Why are fees needed?

The high-level question is why fees are necessary in addition to the DIVA token allocation. Vault fees compensate Seven Seas for the direct costs in optimizing the vault.

Time & Effort: Seven Seas monitors the vault and market conditions throughout the day to ensure that it remains optimized for the benefit of the depositors. This could involve rebalancing to a higher yielding DEX, buying an asset under peg or even navigating market volatility (e.g., due to a protocol being hacked or Black Swan).

Expenses: Seven Seas pays for gas fees on all of the vault’s rebalances. To give an example, the Turbo swETH vault solely focuses on LPing and a typical rebalance on that vault costs approximately $200 at 35 Gwei. With multiple rebalances in a week and the increasing network congestion on Ethereum from the pending bull market, it’s easy to see how these gas costs can quickly mount.

What are the proposed fees?

Platform fee: An annual fee (pro-rata if less than a year) based on the amount of assets held in the vault.

Performance fee: A fee assessed on the incremental performance above the accounting asset, which in this case, is the rETH-ETH BPT (Balancer Pool Token) (B-rETH-STABLE). This ensures that the Seven Seas only gets compensated on this portion if the vault outperforms this otherwise readily available passive yield opportunity for users.

We provide a summary of the fee information in the table below.

As a final point, we are aware that the live Avantgarde/Enzyme vaults have zero fees. However, we believe that comparing Seven Seas to these vaults is not suitable because they maintain passive positions, such as staking with Diva and holding divETH, and therefore require no ongoing maintenance or monitoring.

DIVA Distribution to Seven Seas

• 10% of the tokens actually accrued by depositors from 0 to 10K ETH
• 5% for the tokens actually accrued by depositors from 10K to 20K ETH

Valuation

It’s important to note that DIVA is a utility token that currently holds no value other than the ability to convert into governance power through a delegation system.

Vesting

Seven Seas’ allocation will be subject to 6 months (180 days) of additional vesting beyond vault users’ vesting of Mainnet Launch + 365 days.

Closing Remarks

This DIP represents our attempt at a mutually beneficial collaboration between Seven Seas, Sommelier and the Diva ecosystem. We have structured the proposal so that it serves as a strong foundation for a long-term relationship between Seven Seas and the Diva community. As the strategist of the vault, we’re committed to helping bring it to market, monitoring the vault’s performance and optimizing its liquidity across the divETH ecosystem.Our ability to design attractive LST DeFi vaults for users (e.g. our $40M Real Yield ETH vault) and our expertise in liquidity provision, which has resulted in billions of ETH LST trading volume, make us a valuable addition to the Diva ecosystem. We are excited to help contribute to the growth of this promising LST ecosystem.