CLOUD-1: Should Sanctum implement CLOUD staking and active staking rewards?

[defisecret]

I think idea of 60 days is fine, the rest need for us manage the locking. I maybe locking up lesser and selling the rest as a money management measurement.

[nftmods]

Q. If trading is occurring and the proposal fails, do my trades get nullified even if i close them before voting duration ends?

If i want to sell my Fail buys before the proposal actually fails, for example.

Are those trades kept in escrow or are they actuated?

[Proph3t]

it’s specifically volume in the proposal, so buying INF would not count

[Proph3t]

Yes, one way to think of it is betting with staked CLOUD (if you’re selling), but it can also be USDC (if you’re buying)

Simple example:

• Imagine there’s a new proposal to put the Sanctum logo on the Las Vegas Sphere
• You go to vote.sanctum.so and see that the current value of sCLOUD is $0.18 and that the market thinks sCLOUD will be worth $0.20 if the proposal passes
• You buy 5 sCLOUD in the market for $0.2 x 5 = $1

Now, if the proposal passes, you now own 5 sCLOUD. But if the proposal fails, you get your 1 USDC back. So it’s like you’re expressing “I’d be more bullish on sCLOUD (I want to own more) if this passes”

[Proph3t]

100%! This is a new system, which makes it unfamiliar to most people, and I expect many have these questions

I think it’ll become a lot more clear once you try it for CLOUD-0, and I’ll also answer your questions to the best of my ability below:

@Konstantinos

• if i understood right, the CLOUD-0 proposal will not have any staking in place yet, that means we are going to participate with our “spot” $CLOUD $USDC by buying or selling the token? If more people buy via this action than sell then the proposal will get approved? if more people sell via this action it will get rejected?
  How is that different to buying and selling the token at Jupiter for example?
  Does only the interaction via the specific program count for the vote? Or all global sells/buys?

The main difference between these buys and sells and the buys and sells you do on Jupiter is that these are conditional.

You’re expressing the opinion “I’d buy CLOUD, if this passes” rather than just “I want to buy CLOUD now.” So unlike a buy on Jupiter, you get your USDC back if the proposal doesn’t pass.

@Konstantinos

• CLOUD-1: to vote on this proposal, the same methodology will be applied (i guess?). If it gets rejected we go on as before, if it gets approved; taking part at this mechanism will only be possible via staking $CLOUD and receiving $sCloud?

Yes, CLOUD-1 will also use CLOUD and USDC, not sCLOUD

If CLOUD-1 passes, yes we’ll start using $sCLOUD

If CLOUD-1 fails, we’ll take community feedback and iterate (likely creating another proposal)

@Konstantinos

• Active staking rewards (ASR):
  “Voters would get a pro rata share of CLOUD equal to your overall staking score (staked CLOUD amount * time) multiplied by the number of votes you participated in. To be counted as participation, one must have a minimum trading volume of at least 10 USDC.”
  Does this mean that a whale voting with lets say 100.000 $USDC gets the same rewards as a user that votes with 100 $USDC if both have participated in the same amount of votes and have the same voting score? How does the voting score increase? Please provide some more detailed information about that, if possible also with examples.

That’s correct, although the whale would likely have more sCLOUD and thus a higher voting score

Example:
Alice has 10 sCLOUD, she participates in 10 proposals with $100 each
Bob has 100 sCLOUD, he participates in 10 proposals with $100 each

So Bob gets 10x Alice’s rewards because he has 10x more sCLOUD. Even if Bob traded in proposals with $1m each, he would still get the same amount of rewards because volume doesn’t matter as much as participation

@Konstantinos

• 50M $CLOUD allocated for the first 6 months: what is the plan for after this 6 months? We all know that time flies fast, what is the long term plan for ASR?

I will let the team answer this one

@Konstantinos

• 60 days unlocking period: IMO this is a veeeery long time, in 2 months so much can change and i am not talking about the project itself but also about the macro of web3. I understand and i also agree that staking and participating in governance isnt about making money BUT we have to be honest and transparent; We are most likely in a bull market and this will end (maybe in 3 months maybe in 6 or maybe in a year).

Okay, thank you for the feedback!

[Proph3t]

I agree, we should update this video - thank you for the feedback!

As for mixing of profit and rational decision-making, I think they can work together

Take for example a company deciding where to put its retail locations. It’s probably going to pick places where the most people go to (and where they’ll make the most money) instead of putting locations where very few people live. So in this case the problem of “how do we get companies to service the most number of people” is solved by the companies’ own profit interest

[Proph3t]

I like the early unstaking penalty idea! I know of some other protocols that have done this (one that comes to mind was FIAT DAO), I wonder how they found it

Gradual unlocking is actually how the smart contract already works, so yes you’d vest your sCLOUD into CLOUD

[Proph3t]

I think this will be more clear once we do the test proposal, but yes futarchy is “put your money where your mouth is” system so instead of voting yes or no you instead buy or sell

So it would be a minimum of $10 traded in each proposal

[Proph3t]

So I shared many of these same sentiments

One thing to consider is that many community members want staking. They want a place to lock up their tokens to show they’re long-term aligned and to earn some rewards. And community members are to some extent ‘customers’ of Sanctum, especially when you consider that many stakers of INF / other LSTs are also holders of CLOUD

There are also some technical reasons why futarchy decision-making improves with staking (what j refers to by the 'Keynesian Beauty Contest problem), although I’m reluctant to flood that level of detail here unless there’s demand

[Proph3t]

Discussed this with you in the Discord, but for anyone else:

Yes, those trades are nullified

If the proposal fails, all your trades are nullified and you get either your USDC back (if you bought) or your sCLOUD back (if you sold)

[nucky]

A lot of great questions and concerns here… just need someone from the team to come and clarify.

[fplee]

@Bizarrebra

Unfortunately, as a $CLOUD holder, I have to express my concern and disappointment, and will excercise my complain by not using this voting system that the team has chosen. I can’t believe you guys have decided to use Futarchy. In simple terms, it incentivizes trading over making a good decision for the project.

I said it then, and I’ll say it again: mixing trading for profit with making good rational decisions is in direct conflict. It’s just human nature.

Thanks for the comment! The idea of futarchy is that it’s a mechanism that aligns human nature (wanting to make money) with making good and rational decisions for the health of the protocol. Prophet explains this better here.

@nicshodln

Before making any decisions, I need to know how season 2 is going to work and whether CLOUD will play any part in it.

My immediate thoughts are that the lock up is too long & 50M is too much.

The goal of any rewards program will be to accelerate the growth of Sanctum as a protocol. That will depend on what Sanctum needs most at the time (is it TVL? revenue? adoption?). With governance, the community will decide on what would be a good use of the tokens given the roadmap that we want to execute on in 2025.

I hear you on the lockup and the ASR being too much, will take this into account!

@andrewsaul

CLOUD is only useful in-so-much as it helps increase the amount of total SOL staked in Sanctum tokens.
By extension then any CLOUD staking needs to be contributing to a growth in SOL staking on Sanctum tokens.

I think locking CLOUD by itself has low value. Locking a CLOUD-INF LP token has a lot more value as it’s useful even if someone does nothing else (increases liquidity and SOL stake).

But then we still need to figure out how you go from locking a token up to increasing the amount of SOL staked in Sanctum products.
I would like to see a lot more discussion about how that happens before I’d be comfortable voting on a staking program or even discussing how that staking program should function.

There are multiple ways to think about a token. Many protocols are now doing revenue share/buybacks, and CLOUD could be similar. In that way, CLOUD can be useful (as a yield-generating asset) even if it doesn’t directly contribute to SOL staking on Sanctum.

@andrewsaul

Let’s be very careful writing up Jupiter’s ASR as a success just yet.
They gave away a heap of tokens.
That’s not a success: That’s a rewards program.
What did Jupiter get for all that money spent? It’s hard to say and Jupiter definitely aren’t giving any figures yet.
The initial staking rewards that were were geared towards drawing attention to their launchpad. That was smart as, after all, it is people trading on chain that directly affect the success/failure of token launches. Largely I thought this was successful to start with, but it seemed that success was a case of diminishing returns. Haven’t seen anything from that launchpad for many months now. That’s very interesting Jupiter themselves have decided not to carry on with that after touting it as a success.

Fair enough! I agree that it’s probably too early to say with ASR. I can see the case for being extremely generous with ASR at the start as a “teaser rate” – something eye-popping, to get people out of their chairs and used to the idea of voting and participating regularly. Once that is done we can pare down the rewards.

[Bizarrebra]

Thanks for taking the time to explain this in detail. I want the project to succeed, of course, so if I’m wrong in my judgement then I’m wrong. I’m willing to give this a go, and do my best to push Sanctum forward. Thanks again - much appreciated.

[Bizarrebra]

@eggpanned

One very promising solution is to use staking; that is, to use staked CLOUD (sCLOUD) as the base asset to participate in the futarchic markets. This staked CLOUD will have a 60 day linearly vesting lockup, which will incentivise long-term holders to participate. We believe this will significantly mitigate the Keynesian beauty contest problem.

Going back to the original proposal, one aspect I didn’t understand was the section above. Is this sCLOUD use in voting still under discussion, or will this be implemented? And if implemented, does that mean that we could use sCLOUD instead of USDC to trade a proposal? I think it’s a very interesting solution indeed. Thanks.

[apka]

Q. (posted on X but posting here again so everyone can see and discuss) I like the futarchy model — voting via net trading on CLOUD tokens is indeed innovative. But I’m curious: how will this interact with external futures markets? For example, if a bullish proposal is live but speculators, following technical signals, start shorting CLOUD, could that skew the governance outcome? How does the team plan to address this potential misalignment between short-term trading and long-term protocol interests?

[mfusa]

My vote is yes. Because it is a huge incentive for the community

[bobjones]

Need a sliding scale timeline… the more diverse the expiry chosen the less it can be gamed… as people would like to front run a 60 day timeline, it will naturally distribute it across the 60 days 60 59 58 etc… this is best so price is less directly impacted by an anticipated/regular interval. also as someone who has waited way too long for VC tokens and is in crypto over 10 years, 30 days is at least a committment. There should also be weighting… folks who want to hold for a year should get a much higher voting weight than those with shorter… similarly the sliding scale should impact weight. out in 10 days? .33x your coin weight. out in 30 ? 1x, 60? 3x 90 6x 1yr? 15x…

[nik4]

About penalties. We can start at first day with an unstaking penalty (for example) 20%, every day of the vesting time this penalty can be linear reduced a percentage and at the last staking day must be 0%.
Let me explain, for example we are going to stake 100 $CLOUD for 60 days.
The unstaking penalty after 10 days staking must be
20% - (10/60x20%) = 16,67%
16.67% is the new penalty after 10 days etc
100 $CLOUD - 16,67% = 83,33 $CLOUD (unstaking in 10 days)
In this way we can avoid the the unstaking’s at same day sell pressure, aditionally all can have their $CLOUD instantly at any time they want.
Stakers feel free while know the rules (no complains for the penalties), team will get back $CLOUD from penalties and could burn a percentage.
As I said above I think 60 days staking is too much and many people won’t stake because of this.

[Communitytroll]

I want to start off with specially thanking the Prophet for taking the time to sort out a lot of confusion.

Starting off with some dumb questions, but is there an opportunity for not staking cloud for scloud (and making it a taxable event) with the Futarcy solution?
Regarding revenue sharing for stakers is that something which might be at the table?
Could a regular non trading/price speculating voting system attract more voters who cares less about the a quick buck, but more about the long term growth, especially important as we probably be in a bear market when a lot of the voting will happen making it even more crucial that we´re certain that we get as many votes as possible from the community with the a long term view as the main driver when voting.

Very positive with a model who incentivize longer lock ups and the default for the rewards should be auto staking with the alternative to unstake within a relative short time, but with some kind of punishment (removal of boost, lower apr, voting strength etc…) Imo this will drive the wanted engagement, the ones voting voting with a long term view.

(sorry for any bad english, wrong expressions and potentially the ability to showcase my points)
Anyways we´re building the framework and future of lsts on the greatest blockchain and should act accordingly. LFG!!

[Aro]

Would have loved to see Sanctum develop a staking model where the tokens are still liquid(not 1:1). Unfortunately w the futarchy model I don’t see this happening. I agree with the long unlock period though, because in the early stages of Sanctum’s governance they require people that are “diehard supporters” and believers in the product, rather than people who are just trying to make some money from participating in governance. I also think 50m is a big incentive to participate and get rewarded for your conviction.

Sanctum core community is smaller than JUP for example, to get a lot more people involved in governance it needs to be lucrative (the rewards), while discouraging “hit and run” voters.