ShapeShift

Summary:

FOXy is a proposed staking rewards system that allows FOX token holders the ability to stake FOX into a smart contract in order to receive rewards denominated in FOXy. FOXy is an ERC20, rebasing token that is redeemable 1:1 with FOX tokens. The FOX rewards generated by the staking system are provided to the contract via the Shapeshift DAO’s treasury swapping for Tokemak’s TOKE rewards, but this project aims to provide a design that is extensible in the future for other alternative yield generating strategies. The ultimate goal is for FOX holders to have a simplified interface in which to earn yield on their FOX tokens that outperforms other avenues available to them without active management. Several mechanisms of the system have implications for the DAO’s treasury and require approval by the formal DAO governance process to proceed.

This proposal seeks governance approval for the following:

1. deployment of the the smart contract system on behalf of the DAO and the transfer of ownership of these contracts to the DAO multisig.
2. empowerment of the Treasury Management and Diversification Committee (TMDC) to adminster the following responsiblities on behalf of the DAO: a) management of the TOKE to FOX swaps required to reward staking participants b) FOX contributions to the FOXy liquidity reserve to enable immediate liquidity (for a penalty) for users. c) setting and adjusting the percentage fee for user’s accessing immediate liquidity

Project Timeline

Currently, Toshi is leading the project to deliver the FOXy staking program to mainnet with a target date of early Q2 2022. The project is being funded solely by personal funds that have been committed to a bounty created by Beorn (link ).

Specification

If approved the following steps will be taken:

1. A bounty hunter will deploy the audited FOXy smart contract suite to Ethereum mainnet. Publishing the source code to etherscan
2. Ownership of the contract will be transferred to the DAO multisig address
3. The security and engineering workstreams will validate that the code that is deployed matches the audited code.
4. The TMDC will decide on the desired fee percentage and the DAO multisig will set this fee.
5. The TMDC will decide on the amount of initial FOX liquidity to add to the reserve and will transfer the needed FOX to the contracts.
6. Initial users can then proceed to deposit FOX
7. After the initial Tokemak cycle has passed, the TMDC can facilitate the first redemption of TOKE and infusion of FOX to trigger the first rebase for active stakers.
8. The TMDC will perpetually facilitate this swap at the end of each Tokemak cycle.
9. The TMDC will continue to monitor balances, the frequency of immediate withdrawals incurring a fee and make adjustments to both the amount of FOX in the reserve and the fee percent.

Benefits

• Allows for the creation of an important mechanism for FOX holders to receive yield on their FOX and paves the way for future possibilities for the DAO to distribute additional FOX from other revenue sources to token holders
• Allows for users to access immediate liquidity if required
• Enables the potential for FOXy to be used as collateral on other DeFi ecosystems since liquidators are able to immediately exit if need be.
• Opportunity costs for the DAO is very low given we have an excess of FOX and this pool can generate a return on that FOX.
• Allows for a trusted committee to be put in charge of the TOKE rewards generated by the system and enables the DAO to be nimble with market conditions on whether to sell or retain the TOKE in the DAO’s treasury.

Drawbacks

• Any smart contract suite comes with security and operational risks that the DAO would be taking on. Formal audits will be in place prior to the launch and the community will be able to review all source code.
• Exposes N Million DAO owned FOX to the same smart contract risks mentioned above.
• Creates a non market based rate for the liquidation penalty due to the unique nature of the DAO’s FOX position. This will probably mean the penalty for immediate FOXy exit is lower than other market participants would accept in return for their FOX deposits.
• Puts additional trust and responsibility on the TMDC committee that they (of course) would need to be willing to accept.

Vote

For - If you vote for this proposal, the DAO will proceed with the deployment of the FOXy smart contract suite and the delegation of its administration to the TMDC as outlined in the specification section above.

Against - No action will be taken.