Summary
While the Synapse Chain remains in development, implement a temporary SYN token staking program on Ethereum that emulates what the Synapse Chain's Proof of Stake architecture will look like. This will help incentivize all token holders & network participants to encourage participation of staking SYN to network validators upon launch of the Synapse Chain mainnet.
Enable SYN staking
Allocate 4.5 million SYN to be used over a 3 month period as staking rewards
Smilar to other DPoS L1s, to unstake SYN, a 7 day "undelegate" period must be undergone. During this 7d period, rewards will not be earned. Once the 7d period is over, a user then has full access to SYN has they typically would.
SYN rewards will auto-compound
Background
As described in the docs, the Synapse Protocol launch is split into three main phases:
The Hadean Phase: A time of growth and rapid development, while having numerous guardrails ensuring safe deployment of new features. Validators are selected based on community governance and consensus. This is the current phase of the Synapse Protocol.
The Archean Phase: Further validator decentralization is introduced, primarily via the launch of the Synapse Chain, economically secured via Delegated Proof of Stake (DPoS). Validators and delegators are incentivized via SYN rewards and protocol fees. In order to maintain honesty of individual validators, and thus the security of the network, they will be subject to slashing of their staked SYN upon engaging in either negligent or malicious behavior. Delegators will be subject to the same slashing as their chosen validator. The Synapse Chain will create a cross-chain interoperable ecosystem, secured by SYN, connecting all chains.
The Proterozoic Phase: The Synapse DPoS Chain continues to grow and harden. The network is further decentralized by integrating Zero Knowledge Proofs allowing anyone to relay and settle cross-chain transactions.
While the network should always strive for as many individual validators as possible, allowing delegation is a crucial component to kickstarting network growth while involving a large base of tokenholders into the network validator process. Striving for pure PoS launch is unfeasible, as is shown by the launch of ETH2 resulting into a variety of either centralized or decentralized delegated staking alternatives via liquid derivatives.
As such, it's important to begin to increase network involvement now, ahead of the mainnet launch.
Proposal
The Synapse Chain remains in active development. In the interim, the Synapse DAO should initiate a 3 month single-sided staking program, that best emulates what prospective economic security of what the Synapse Chain would look like.
Allocate 4.5M SYN to be distributed to SYN stakers over 3 months. Each month, the Synapse DAO should review & evaluate progress of the Synapse Chain development to, if necessary, pause the program and migrate into staking on the Synapse chain.
A 7 day "undelegate" period is initiated upon unstaking. Undelegated SYN will not participate in staking, and remains locked for 7 days. After 7d passes, users can then fully claim their original SYN + SYN staking rewards. This is necessary to protect the network against a mass unstaking event, which would result in lowered economic security.
To save on ETH gas fees, rewards will auto-compound. On the mainnet Synapse Chain, it's more optimal to not auto-compound rewards, so as to have a 'proof of life' signal on delegators activity.
Protocol fees will continue to accrue to the DAO treasury during this temporary staking program.
Reasoning
The SYN staking program should be used to evaluate what future network participation would like given certain economic incentives. While currently the program would only involve SYN, in the future this inflation can be reduced via other mechanisms by future DAO proposals. Assuming a target 60% of SYN circulating supply participates in this staking program, this would result in roughly 18% APR / 20% APY. This is in line with similar DPoS networks, in terms of the staking yield and network participation of holders.