Authors: Cye Mouri, CryptoG, Primitive Money
Three weeks ago, we finished setting up Solana’s first validator run by an NFT DAO. This was an exciting moment for our community, but we aren’t stopping there. Though we are proud to have started the trend of NFT DAOs running Solana validators, we did experience some key pain points and hurdles. We realized that in order to keep pushing this space forward, we should adopt a strong support role and help to facilitate this process for other DAOs. Supporting the Solana ecosystem is one of our core values, and we believe that supporting the blockchain’s progressive decentralization and censorship resistance is one of the best ways for any organization in this ecosystem to contribute to the wider community. With that in mind, we are proud to announce the launch of our staking pool, DAOPool, and associated LP token, daoSOL.
So, why would we create a staking pool?
As Solana founder Anatoly Yakovenko put it on a recent podcast: “So this is the challenge. How do we grow the validator set to increase the nakamoto coefficient? Stake pools can increase decentralization, while letting stakers participate in DeFi. That’s the challenge to get as much SOL staked, without reducing available liquidity.”
As we’ve found out, setting up a validator isn’t as difficult as you’d expect, but other NFT DAOs like ours, that are not composed primarily of developers and ecosystem experts, could probably use some help. We’ve identified two pain points for groups trying to make this commitment. First, the technical aspect of setting up and running a validator can be a daunting challenge for groups that don’t have in-house technical knowledge. Second, quite a lot of SOL needs to be staked in order to make the venture financially viable — if you don’t have enough SOL staked to your validator, you lose money over time. Through daoSOL and our onboarding program, we are going to help our fellow Solana DAOs address both challenges.
Validator Creation and Transition
The first step in creating a validator can be the most daunting — Solana’s ultrafast transactions are typically supported by powerful computers running on dedicated equipment. Our partner, GenesysGo, has created an excellent solution to help DAOs by assisting in the initial setup, implementation, and maintenance of a Solana validator. But that’s just the first step — we strongly believe that every DAO’s end goal should be to fully control their own validator including control over the equipment, the software, and the private keys. We plan to support our fellow DAOs through the process of not just creating the validator with help from a partner, but also the provisioning and operation of a validator on a standalone basis. Our intent is to guide communities through hardware standards, server provisioning programs, and any other needs to establish and run a Solana validator. Our vision is that in time, every DAO on Solana can, should, and will be independently supporting the blockchain’s decentralization and censorship resistance. We intend to aggregate as much knowledge as we can and provide a clear and structured path forward for others, with an accessible point of contact at the MonkeDAO.
Validator Staking to Profitability
The first challenge here — creating and maintaining a validator, is only half of the challenge for any DAO. The second part can be more tricky — attracting enough staked SOL to make the project financially viable. We are lucky in the MonkeDAO in that our project has several thousand members, and many of them have decided to show their support by staking with our validator. However, other DAOs (often by design) have smaller memberships and may not have the community support to achieve the staking threshold necessary to get to breakeven.
This dynamic also puts many community members in the uncomfortable position of having to choose which project to support — many of us are happy to be members of multiple NFT DAO communities and would like to support them all. The answer to this problem is liquid staking through the MonkeDAO staking pool, DAOPool, where staked SOL will be allocated to DAOs across the Solana ecosystem that want to work with MonkeDAO and receive stake from the pool on their validators. Unlike other liquid staking providers in our ecosystem, the set of validators eligible to receive SOL from the DAOPool will consist of NFT DAOs and other community-run validators as requested from the MonkeDAO. Ideally, the DAOPool will support an ever-growing community of Solana validators operated by DAOs across the ecosystem, especially newer validators that are still seeking to reach the breakeven point. It is also our hope that the DAOPool will also help to remove a sense of competition on this topic — this should represent a community effort to push the ecosystem towards decentralization.
What is Liquid Staking?
Liquid staking on Solana is built around the MonkeDAO daoSOL token, a liquid token variant — similar to mSOL and stSOL — that allows users to passively earn staking rewards without needing to run their own validator infrastructure. daoSOL can also be integrated into Solana DeFi platforms to allow for added DeFi use cases (e.g. additional yield, collateral in lending protocols, etc) while allowing stakers to retain their staking rewards. Once the SOL is staked in DAOPool, MonkeDAO will work to allocate it to smaller validators, run by DAO’s or new ecosystem participants. Remaining true to the ethos of “think decentralized first for every decision being made.”
In summary, daoSOL lets users and DAO’s:
- Earn staking rewards immediately upon depositing, without maintaining complex infrastructure or waiting periods
- Unstake at any time by swapping on the secondary market (initially at Saber.so)
- Stake with a diverse set of DAO managed validators
- Put a DAO’s SOL-denominated treasury to work, by staking the SOL in a pool and earning APY, instead of it just sitting idle in the treasury wallet.
- Increases the decentralization of the Solana network by putting more SOL to work for voting consensus.
What’s Next?
daoSOL is going live on December 19, 2021. You’ll be able to immediately stake SOL, receive daoSOL in return, and provide liquidity in the daoSOL/SOL pool at Saber.so.
See Saber’s announcement on daoSOL.
We anticipate adding additional DeFi applications with Solana ecosystem partners over the next few weeks.
Any DAOs or DeFi protocols interested in working with us, please reach out to us at stakingpool@monkedao.io.
About MonkeDAO
MonkeDAO is a community owned and operated organization made up exclusively of Solana Monkey Business owners working together to support and enrich the Solana ecosystem. Find us at monkedao.io, or on twitter @MonkeDAO.
