[RRC-XX] Rari Staking Incentives (updated 2025)

[Jaf]

Authors: @Jaf
Reviewers: @Jose_StableLab

Abstract:

Following the approval of RRC-30, Rari DAO began transitioning the $RARI token and governance to the Arbitrum ecosystem. The community has already approved the implementation of RARI staking to enhance the governance and security of the RARI protocol.

This proposal specifically seeks approval for:

1. Initial funding budget of 75,000 $RARI from the DAO treasury for staking incentives.
2. A twelve-month staking incentives program to be launched on Rari Chain.
3. Decaying rewards every four months, incentivizing early bridging to Rari Chain.

Implementing these staking incentives together with the already-approved staking mechanism will maximize its impact on the DAO’s governance participation and token value.

Motivation:

The Rari DAO is undergoing a significant transition from the Ethereum mainnet to Rari Chain. This migration is a critical milestone for the DAO’s evolution, aimed at improving governance efficiency, reducing transaction costs, and enhancing the scalability of the protocol. However, the success of this migration depends heavily on user participation and the seamless integration of existing governance mechanisms into the new environment.

The current governance model relies on Rari tokens locked in veRari contracts on Ethereum mainnet. For the migration to Rari Chain to be effective, these staked tokens must be unstaked, bridged, and delegated on Rari Chain. Without sufficient incentives, users may hesitate to migrate their tokens - especially early on. While mainnet utility isn’t lost, since tokens can be wrapped and used for governance after the upgrade, incentives will still be key to drive early staking and adoption of the new RARI L2 token standard. Additionally, staking on Rari Chain draws in unlocked RARI to be used in governance — not just the currently locked veRARI.

Two of Rari DAO’s most important goals are to improve governance participation and increase the utility of the $RARI token, both of which are significantly advanced by the introduction of RARI governance staking, developed by Tally. In this contract, $RARI stakers that delegate their voting power to an eligible delegate will receive staking rewards. Adding staking rewards will further motivate token holders to migrate and contribute to governance, ensuring stronger alignment with the DAO’s overall objectives and enhancing the utility of the $RARI token by providing tangible benefits to participants.

Rationale:

This proposal establishes a fixed-term (twelve-month) incentives program to jumpstart governance participation. To incentivize early bridging and staking, the incentives will be scheduled in three phases (see specification) with diminishing rewards over time plus a one-time bridging Quests for early users. The initial goal is to attract an equal or greater amount of $RARI as currently sits into the ve-contract in Ethereum, ~300,000 $RARI, to the governance staking contract in Rari Chain.

The staking mechanism supports both direct voter participation and the option for token holders to delegate their voting power to active community members, creating multiple pathways for governance engagement while still earning rewards.

The long-term vision is for staking incentives to be sustainably funded from the DAO’s revenue streams. After this initial period concludes, a new proposal will be required to continue the staking rewards program, ideally transitioning to the self-sustaining model derived from DAO revenue.

Key Terms:

• RARI token: RARI DAO governance token
• RARI DAO: body governing the Rarible Protocol and RARI chain
• Arbitrum ecosystem: Arbitrum One and RARI chain L3

Specification

Staking Rewards Mechanics:

In the governance staking contract, rewards are distributed proportionally to the amount of $RARI staked. We calculated the amount of $RARI to allocate for rewards based on an APR estimation for 300,000 $RARI migrating to Rari Chain:

• Current veRARI locked tokens: Approximately 300,000 $RARI as a baseline for participation.
• Target APR: An attractive yield of 30% (Phase 1), 20% (Phase 2) and 15% (Phase 3) annualized return to attract stakers, balancing the risk of holding $RARI on Rari Chain against typical crypto yields (e.g., 3-3.3% for ETH staking, 4.5% for Sky’s USDS).

Reward Calculations:

As each Phase lasts 4 months, to estimate the amount of Rari to yield each target APR we must calculate:

$RARI incentives = 300,000 (Staked $RARI estimation) * Target APR * 4 months (Phase duration) / 12 months (annualized returns)

Therefore,

• Phase 1 (months 1-4): 30,000 $RARI.
• Phase 2 (months 5-8): 20,000 $RARI.
• Phase 3 (months 9-12): 15,000 $RARI.

Additonally, 10,000 $RARI will be allocated to Quests for bridging into Rari Chain to kickstart Phase 1.

Steps to Implement

Upon successful approval of this proposal on Tally, 75,000 $RARI will be sent to the Foundation’s SAFE on mainnet (0x2a83d2891Ef3df6967E3C2e9b69cCc7aD029736B).

Then, Rari Foundation will bridge the funds to Rari Chain and deposit them into the DAO Treasury at 0x83CBaF64b94D1eDfeDd468b23234DeCf2AecDD8b.

The Governance Staking contract will then be given permission to allocate funds as staking rewards based on the outlined reward structure, through a DAO-approved proposal on RARI Chain (more details on governance staking here).

Overall Cost:

Overall costs: 75,000 $RARI

• 10,000 $RARI for Superboard bridging Quests.
• 65,000 $RARI for staking rewards.

[Firefly808]

I’m in favor of this proposal. The phased staking incentives are a smart way to drive early migration, deepen governance participation, and increase the utility of $RARI. Aligning rewards with delegation adds another layer of impact. Looking forward to seeing this rollout on Rari Chain. Let’s keep building.

[bitblondy]

Thanks for sharing the details @Jaf. It is quite a commitment to pay staking rewards out of the treasury, but it seems like a reasonable way to get governance on RARI chain going.

I’m wondering a bit, how delegators will change from veRARI to staking on RARI chain, can they unlock, bridge, and lock again? Or do they have to wait, until the veRARI are unlocked. In this case, current veRARI holders could not profit from early staking incentives.

[coffee-crusher]

Thank you for this updated proposal. I do support this proposal, that it will provide a healthy governance environment that can redistribute voting power from passive holders to active delegates, and is important for the DAO’s long-term vitality and growth.

I do have a question regarding the initial proposal goal of 300K $RARI. How will the success metrics be measured for meeting this goal, as I feel that this proposal is missing KPIs, and what you be measuring for success? If its’ reaching the 300K $RARI staked in a specific time-frame, then what is that timeframe goal with milestone goals, and how do you see adjusting in a future proposal to reach that goal if it’s not met?

Secondly, can you address if you foresee if there is a potential risk of “farming” staking rewards between self-stakers vs. delegating to other wallets? And how will this proposal address this concern, including possibly reducing staking rewards based upon wallet staking type?

And finally, to provide transparency for the DAO to reach this 300K RARI goal, this proposal could include a quarterly or monthly update (for our monthly community calls) on where we are in relation to the goal, and track total delegation activity.

[Jaf]

@coffee-crusher

I do have a question regarding the initial proposal goal of 300K $RARI. How will the success metrics be measured for meeting this goal, as I feel that this proposal is missing KPIs, and what you be measuring for success? If its’ reaching the 300K $RARI staked in a specific time-frame, then what is that timeframe goal with milestone goals, and how do you see adjusting in a future proposal to reach that goal if it’s not met?

Good question. The 300k $RARI acts as a north star to help us make sure we’re on the right track. It’s measurable against the contract. And of course, the more we go above the 300k, the better.
I’ll add the timeframe questions to next week’s Gov WG Call - together with the risk of farming question.
(Gov WG Call → Tuesday April 22nd at 16 UTC in the discord server voice channel)

@coffee-crusher

And finally, to provide transparency for the DAO to reach this 300K RARI goal, this proposal could include a quarterly or monthly update (for our monthly community calls) on where we are in relation to the goal, and track total delegation activity.

Agreed. This is a good idea.

[Jaf]

will get back with you soon regarding this.

[coffee-crusher]

Thanks @Jaf for the responses and looking forward hearing more during the GWC call on the 22nd.

[GozmanGonzalez4]

Thanks for sharing this details.

It was really insightful and I am in favour of the proposal.

[Jaf]

The veRARI lock needs to expire before users can bridge their funds. The incentive is to either bridge right after the lock ends or buy new RARI to start earning yield.

[cr1st0f]

I do not currently support this proposal for the following reasons:

1. This is an entirely unproven system, I do not think the DAO is in a financial position to be trialling experimental governance mechanisms whilst we currently lack basic functions. We should at a minimum wait for Arbitrum to trial the system and consider the results before we proceed. There is no benefit in being first here.
2. Rarichain lacks much of the expected infrastructure to encourage onchain activity which would generate sequencer revenue from increased capital on the chain. For example, according to Defillama there is a dex with $14k TVL, and a lending protocol with $6k TVL.
3. This is significant additional friction for Rari holders to endure when voting. They will need to bridge from mainnet to Arbitrum, and then to Rarichain. What is the benefit of having them vote on Rarichain as opposed to mainnet? Is there a business case for this? Does it generate revenue or impact important metrics?
4. The yield itself is relatively low to tolerate exposure to a token which has performed poorly on most timeframes. Significant buy pressure is unlikely to be generated by this proposition as people are able to farm delta neutral yields on mainnet and L2s which rival this yield without exposure to RARI.

What I believe will result from this:

Some people will migrate and vote but it will not result in any significant increase in supply voting on proposals. There will be no increased sequencer revenue from this migration of tokens as there is a clear lack of product market fit demonstrated by the 5 figure TVL onchain and lack of basic infrastructure that would encourage organic growth. Voting alone will not result in increased sequencer revenue. Funds will be spent with no impact.

I believe delegates at Rari need to begin thinking about what will be best for both the DAO and the tokenholders. We are representatives of tokenholders and are not here to simply rubberstamp any proposal presented.

When assessing proposals, I believe that at a minimum we must assess the following: risk, ROI, impact on token price. Lets look at this proposal across these dimensions:

• This proposal is risky: 2% of the treasury is a not insignificant amount for an entirely unproven system, we can simply wait to see how the Arbitrum staking system performs and asses with the benefit of that information.

• This proposal offers poor ROI: it does not generate revenue for the DAO or impact any meaningful business metrics, this is spend without return at a time when the treasury is in a sorry state and DAO and Foundation spend is unsustainable. There are better ways to spend the small treasury remaining.

• This proposal is likely to harm token price: the only purchasers of tokens are likely to be farmers, who will dump, and at least some existing holders who migrate will also dump their staking rewards. This in turn further depletes the resources of the treasury as selling into very thin liquidity impacts price significantly. As the treasury is mainly denominated in $RARI, we will be harming ourselves by doing this. If 75,000 $RARI were sold into onchain pools on mainnet today it would result in a 68% decrease in $RARI price. Do we have some reason to believe there will be demand generated to absorb this? If so, where will this come from?

In summary I believe this proposal in its current form, at this current time would be harmful to RARI holders and the DAO. What I believe would be a better route forward for this proposal:

1. Wait for Arbitrum to trial the system and assess the results and then decide if this is worthwhile for Rari.
2. Wait until onchain liquidity improves to absorb expected sell pressure from this program.
3. Wait until token price recovers and we see sustained demand for $RARI to absorb any sell pressure.

I believe that only at that point would it make sense to reconsider this proposal, and only if the results from Arbitrum are significant enough for it to be worth the cost for Rari to follow suit.

[bitblondy]

Thanks for checking @Jaf. That’s a bit of a disadvantage for veRARI holders, that locked recently or for a longer time frame, since they won’t receive the early rewards. I guess, at the current state of votable supply, that’s not affecting many people, though?

Also thanks @cr1st0f for sharing your concerns. While (retrospectively) the governance upgrade was an expensive decision and has been delayed as well, I still would argue it’s important we migrate governance to our native chain and gain more delegators. The veRARI model is rather unattractive and, looking at the low votable supply, the DAO is prone to governance attacks.

As far as my understanding goes, the DAO already approved the governance migration and staking in last October, and this proposal only determines where the incentives should come from (please correct my if I’m mistaken @Jaf). Not approving the staking incentives would lead us to not using work, that has already been done / the DAO has paid for.

On the other hand @cr1st0f I agree on the lack of infrastructure, general “attractiveness” of the token and your suggestions on assessing proposals. Maybe that’s a topic for a community call?

[cr1st0f]

I believe the DAO approved the governance migration and staking infrastructure. This doesn’t mean we need to allocate budget towards staking incentives. Saying we need to put more budget towards something just because we’ve already spent on it is classic sunk cost fallacy and we should instead cut non critical spend imo.

I believe a governance attack is extremely low risk as there’s nothing to steal, just native tokens with no liquidity to swap them out. This was just a sales pitch from Tally - it isn’t a real risk for us as a small DAO. We also have no idea if this will reduce the risk of governance attack or increase delegation, it’s just a theory with no proof. Why don’t we wait to see how arbitrum’s implementation goes?

[insider0x]

I agree the budget is a bit too much. Is it possible to reduce the allocation for the first period only and assess how much staked RARI is attracted with it?

[Jaf]

During the Gov call, we discussed that reporting should be done on a monthly basis to ensure everything is on track and to help decide the next steps.

I’m of the opinion that the launch of the program should be a bigger push to attract more stakers. So, I’d keep the numbers as suggested.
Depending on how the numbers look month after month → by the end of Phase 1 we should have enough supporting data to decide whether to continue the campaign as planned or pivot to a different approach.

Curious to hear what others think about this.

[coffee-crusher]

Totally support your thoughts, @Jaf on keeping the allocations as stated in the proposal. With the monthly proposal, we’ll be able to track if the reward targets are on track to meeting our 300K $RARI staking goal, and if necessary, adjust either the reward percentages or monthly targets to meet that goal.

What I would suggest is the inclusion in the proposal that allows for adjustments of allocation of rewards (either TV or percentages of rewards) based upon monthly reporting reviews by the DAO to reach the 300K $RARI target.

[LAD]

Thank you for putting this up, @Jaf.

This proposal will do much good to improve the community’s governance, not just the normal stake-for-yield approach. Also, this staking proposal lays the groundwork for future utility layers, because once the staking infrastructure and incentive logic are in place, we can begin experimenting with broader governance-linked perks and increase our community value.

That said, the DAO should implement a short-term incentive program, spanning three months, with clear success KPIs.

We could establish a tiered reward system to discourage passive holding, where some individuals hold tokens without contributing real value to the DAO. This system could include:

1. Staking and voting to receive more rewards.
2. Long-term staking alone results in bonus multipliers, calculated at a certain percentage quarterly.
3. Staking without any engagement yields only the minimum rewards.

We should also commit to creating dashboards (the frequency can be determined based on how often proposals are submitted on Tally) that display the percentage of RARI tokens staked and the number of active voters since the last update. These dashboards could also show the treasury balance used and influenced.

Finally, +1 on a gamification approach to this program as suggested by @dzonson.eth; that comes directly from Arbitrum’s handbook.