Incentive Design and Governance
Long-term Commitment and Stake Allocation through VLD/veVLD
By staking elSOL in Validators DAO, participants can mine VLD tokens. Additionally, by locking VLD tokens into veVLD (Vote Escrowed VLD), participants gain various incentives and governance rights:
Rights for Small to Medium Validators to Obtain Stakes
Validators can showcase their operational quality and capabilities, attracting votes from veVLD holders to receive necessary stakes in exchange for bandwidth. This facilitates the distribution of stakes, thereby promoting network decentralization and reducing the risk of operational deficits.
Benefits for Liquidity Pools
Liquidity pools (such as DeFi protocols) can benefit by handling increased volumes of VLD tokens, potentially expanding their LP rewards. Pools that receive veVLD votes can attract more capital and increase total value locked (TVL), enhancing overall ecosystem growth.
Advantages of the Vote Escrowed Model
The longer the VLD locking period, the greater the amount of veVLD granted, increasing voting power and influence over stake allocation decisions. This system is designed to discourage short-term speculation, instead rewarding long-term commitment. Participants contributing significantly to network health and decentralization thus receive higher returns.
Benefits for Each Participant
elSOL Stakers
- Gain multiple revenue streams, including standard staking rewards, VLD token mining, and bandwidth rental income through QoS.
- Obtain veVLD tokens for voting on validator delegation and liquidity pool decisions, enabling active ecosystem shaping.
Validators
- Increase stake acquisition through QoS bandwidth rental income and veVLD votes, reducing operational risks.
- Benefit from automated, high-quality operations through SLV and Validators Solutions, lowering entry barriers and securing stable rewards.
Traders/Projects
- Rent QoS bandwidth on ERPC to secure high-speed, reliable transaction environments.
- Apply stake to dedicated RPC nodes, overcoming traditional limitations of zero-stake setups, thereby improving operational efficiency.
Positive Spiral Created by Incentives
The core strength of Validators DAO’s incentive design lies in participants naturally pursuing their self-interest, collectively enhancing network stability, decentralization, and performance:
- elSOL stakers seeking additional rewards stake with Validators DAO, participating in votes for validators and liquidity pools.
- Validators easily attract stakes, operate high-quality nodes, thereby stabilizing the network and increasing trust among participants.
- Traders/projects rent QoS bandwidth, increasing rental income for elSOL stakers and expanding incentives.
- Increased incentives attract more stakes, leading to greater validator participation, further decentralizing and strengthening Solana’s overall network security.
This integrated incentive structure ensures continuous improvement in decentralization, security, and efficient network utilization, forming the foundational value proposition of Validators DAO.