Staking and Keyper Incentive Mechanism Coming Soon for Shutter DAO 0x36
Shutter DAO 0x36 has officially kicked off the development of a Keyper incentive mechanism and (delegated) staking for Shutter!
After a governance process, 0x36 members have elected to introduce staking for its members. Several Shutter community members are collaborating to create an initial version of delegated staking for the SHU token holders.
The initial version of Shutter DAO's 0x36 staking mechanism centers on a simple concept, focusing on staking for Keyper incentives and delegated staking for SHU token holders. "Staking V1," as it could be called, incentivizes Keypers and delegates via Shutter DAO 0x36's SHU token rewards. Two separate tracks are moving forward simultaneously. Both a technical implementation track and an economic track are currently underway.
Key points:
- Staking and delegated staking can:
- Enhance economic security for Keypers and the entire system.
- Align incentives among key ecosystem participants.
- Increase SHU token utility.
- Blockful is working on it and aims for a full release in approximately three months.
- A new economic proposal with example parameters is available for discussion on the Shutter Forum.
- Join the discussions at the Forum and on Discord!
What's Happened So Far
The 0x36 members voted to have Blockful work on the technical development, and they are aiming for an August release. For more details, check out their excellent roadmap.
For the 0x36 members, there is now a discussion/proposal regarding the economic parameters to be set by Shutter DAO 0x36 for staking, and every SHU holder is invited to provide input. Rewards are expected to begin immediately upon staking, with a lock-up period required for unstaking.
Shutter DAO 0x36 will be able to use its governance process to adjust reward amounts, distribution rates, and lock-up periods to align with its strategies. This could significantly enhance the security of the Keyper system, align incentives among key stakeholders, and boost the utility of Shutter DAO 0x36's SHU token.
A Request For Proposals has been submitted to audit the technical contribution to developing staking, ensuring the staking mechanism is secure for SHU holders to participate.
Purpose of Staking in Shutter
Keypers play an essential role in any Shutter protocol. They ensure the protocol stays operational by creating specific encryption and decryption keys. Keypers oversee nodes that generate keys for different purposes, such as voting in Shutter's Snapshot integration or carrying out transactions in any protocol that uses Shutter.
The Keypers are responsible for managing threshold encryption and Distributed Key Generation. These measures create a digital lock that requires the collaboration of a specific number of Keypers to unlock. This ensures that the protocol's transactions are secure and their order cannot be tampered with before they are included.
Incentivizing Keypers
Based on the proposal, as a Keyper for Shutter DAO 0x36, you must permanently stake a minimum of 50,000 SHU tokens (an example currently under discussion by Shutter DAO 0x36 members) to support the protocol. The staking requirement may increase in the future as the protocol evolves. Once staked, the tokens cannot be withdrawn if the Keyper is part of the active Keyper set. If a Keyper decides to shut down their node, the delegators must re-delegate their SHU tokens within a specific period.
The mechanism incentivizes Keypers to participate in the protocol by staking SHU tokens and fulfilling their role. It rewards long-term commitment by offering incentives to the Keypers in SHU. This mechanism aims to ensure the presence of a healthy set of Keypers who consistently maintain their nodes and strengthen the protocol's integrity over time.
Overall Economic Security
The security and reliability of the Shutter protocol depend significantly on the operations of the Keypers.
As per the current economic parameter proposal, Keypers must stake a minimum of 50,000 SHU permanently as a commitment to their role, possibly increasing as the network grows.
By requiring Keypers to stake tokens and incentivizing good behavior, the staking mechanism of Shutter DAO 0x36 aligns economic security for its entire protocol, leading to better overall security and enhanced network stability.
By delegating tokens to Keypers, SHU holders contribute to enhancing network security and position themselves for long-term commitment rewards.
Shutter DAO 0x36' 'SHU' Token Utility
A governance token plays a crucial role in a Shutter ecosystem as it enables governance. For example, holders of Shutter DAO 0x36’s governance token SHU can participate in decision-making processes, such as voting on proposals and shaping the future direction of its protocol.
With the introduction of the Keyper incentive mechanism and delegated staking, the utility of the SHU token is set to expand significantly. If implemented as proposed, SHU tokens will also be used for:
- Staking for Keyper Incentives: Keypers will stake SHU tokens to ensure their commitment to maintaining the network's security and functionality.
- Delegated Staking: SHU holders have the option to delegate their tokens to Keypers, which enhances network security and allows them to earn rewards for their participation.
Example Staking Parameters for Shutter DAO 0x36
According to the current proposal, Shutter DAO 0x36 would distribute 10 million SHU tokens to launch staking and enhance network security. In the example parameters in the current draft of the economic staking proposal, a target yield (APY) of 20% is stated (subject to discussion and finalization of the parameters). With this attractive incentive mechanism, the proposal aims to have around 25% of the SHU circulating supply securing the network through staking[1].
These parameters are preliminary and based on assumptions and potential scenarios. They should be thoroughly discussed and refined in practice, with adjustments possibly necessary to optimize their effectiveness.
The proposal includes stakers to have a minimum lock-up period of 6 months. ↩︎
Why Delegated Staking?
Delegated staking enables SHU holders to delegate their tokens to specific Keypers, thus indicating trust and enhancing the reputation of those Keypers. This mechanism promotes transparency and accountability, as Keypers with a higher number of delegated tokens are perceived as more dependable and trustworthy by the community.
When SHU holders participate in delegated staking, they actively contribute to the network's security and stability, while also earning rewards. Not only does this benefit the individual Keypers, but it also strengthens the overall protocol. In the future, a more complex incentive and slashing system could be implemented, similar to traditional Delegated Proof of Stake (DPoS) systems. This would introduce additional layers of security and ensure that Keypers maintain high performance and reliability standards, further enhancing the robustness of the Shutter ecosystem.
A Collaborative, Decentralized Approach
Establishing Shutter's governance framework represents a significant milestone in its shift to a more decentralized model. The inclusion of DAO participation, Keyper roles, the delegate system, and active voting has been crucial in achieving this goal.
It's important to note that token distribution and incentive alignment are crucial for decentralization. Shutter DAO 0x36 was launched with an initial allocation for about 12,000 early users, contributors, community members, and key partners. However, this is just a tiny part of the Shutter ecosystem and its users. For instance, over 43,000 addresses were used for Shutterized shielded voting on Snapshot.
Blockful, the chosen development team working on the staking mechanism, is another contributor to the Shutter ecosystem. Collaborations with integration partners and more development teams will further accelerate Shutter's growth.
The entire process of developing a Keyper incentive mechanism and (delegated) staking has occurred through the open Shutter DAO 0x36 governance process. It began with a community member proposing the mechanism, followed by discussions, feedback, and voting by the SHU holders. Now, Blockful is moving forward with its open roadmap.
Challenges
Without a doubt, there are still questions and challenges that remain unresolved.
For example, non-attributability presents a difficulty in proving Keyper's inactivity. Accidental non-participation could result from network issues, leading to harmless faults within the system. Safety attacks involve addressing methods to detect and prove early key generation for security. Additionally, there is a reliance on social enforcement of community-driven measures to tackle issues related to inactivity.
Conclusion
Currently, the next steps are for Shutter DAO 0x36 members to share their thoughts on the economic proposal and decide on the auditing of the mechanism.
In the future, SHU holders will continually adjust the economic parameters, and the incentives for all staking participants will need to be aligned.
Validator staking and EigenLayer or other staking implementations are also worth considering.
The Keyper incentive mechanism and (delegated) staking are expected to launch in August, and all SHU holders will hopefully anticipate this new development in the ecosystem.
Get Involved Now
Contributing to the ongoing process, including discussions and proposals, can help shape the direction of the mechanism. Join the Shutter Forum, share your input in the discussions, and be prepared to vote when the economic parameters and audit provider are chosen!
This new mechanism will significantly benefit the whole Shutter ecosystem and reward those participating as delegators/stakers or Keypers!
For more news and updates, be sure to join the Shutter Discord, follow us on X-Twitter, subscribe to the blog, and let us know your thoughts on how this and other new developments could improve the Shutter ecosystem!
Further resources/links
jul1an
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Shutter ♾ EigenLayer: Encrypted mempool coming to an L2 near you https://t.co/1fjd2BwsLE
— EigenLayer (@eigenlayer) February 9, 2024
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About Shutter
Shutter is a free open-source software designed to protect the crypto community from those manipulating the blockchain for their own gain. Using threshold encryption, Shutter ensures base layer neutrality, information symmetry, and accessibility in trading, voting, and gaming. Available on GitHub and maintained by brainbot, Shutter empowers communities to manage key operational aspects autonomously.
About brainbot
brainbot gmbh, Mainz, Germany specializes in the development, distribution, licensing, and operation of software, alongside providing a wide range of related services. As the core developer behind several key crypto infrastructure projects, including Shutter, brainbot GmbH plays a pivotal role in advancing blockchain technology.
About Shutter DAO 0x36
Shutter DAO 0x36 is a specific community initiative aimed at implementing Shutter. Formed by community members who align with the vision proposed by brainbot, the DAO has distributed a token to encourage community participation while maintaining its autonomy. Shutter DAO 0x36 employs snapshot voting for its decision-making processes, ensuring a decentralized and democratic approach. The DAO utilizes public forums for discussions and coordination, and follows its own roadmap and objectives. brainbot does not participate in its governance or speak on its behalf.
