SIP-X: Protocol operations and treasury management

Proposals
1

Summary

Ensure the continued safety of user funds by winding down the protocol by pausing all pools and dissolving the community multisig. Additionally, airdrop protocol-owned $ARB tokens to $SDL, veSDL, and Saddle NFT holders and liquidate the remaining DAO treasury tokens to $ARB to be included in the airdrop. For those using contract wallets such as Gnosis Safe, the $ARB will be converted to ETH and then bridged to Ethereum Mainnet using Across Protocol and distributed accordingly. All other holders will receive $ARB on the Arbitrum network.

The eligible SDL supply is ~500M and veSDL supply is ~43M, which implies an airdrop amount of ~$0.0026 in ARB per SDL and ~$0.01 in ARB per veSDL.

Background

This SIP seeks to ensure the continued safety of user funds by winding down the protocol by pausing all liquidity pools and disbanding the community multisig. Additionally, reward $SDL and veSDL holders by distributing the protocol’s treasury to token holders. The distribution will account for the amount of $SDL tokens a wallet has and how long veSDL has been locked for. If passed, liquidity providers are advised to withdraw their funds.**

Motivation

The north star for Saddle has always been to be a community run and self sustaining protocol. The core contributors with the help of the wider community have completed the necessary groundwork to realize this vision - Saddle is the premier open-source, MIT licensed StableSwap and the 9th most forked protocol by TVL! In light of this, many core contributors intend to step away from being actively involved by 9/30/23.

The community can decide to either:

  • Continue operating the protocol
  • Wind down the protocol to ensure the continued safety of user funds

If the community decides to continue operating the protocol, it will be necessary to support the community multisig and the Delos HQ multisig on various operational tasks. However, we believe this will be hard to coordinate and manage over the long term.

On the other hand, the recent Vyper zero-day/Curve hack has shown that protocols are always at risk of exploits due to latent bugs. Additionally, the market value of the protocol’s treasury has recently exceeded the protocol’s circulating market cap. Many community members have proposed distributing the DAO’s $ARB airdrop to token holders (past discussion), and after preliminary discussions with the community and core contributors we believe this is the best path forward to ensure the continued safety of user funds and recognize token holder value.

Specification

The final multisig transaction will airdrop 1,545,242 $ARB tokens from the DAO treasury to holders, in addition to funds liquidated from other Saddle protocol-owned wallets and admin fees which will be converted to ARB. To calculate how many $ARB tokens holders receive is as follows:

  • $SDL held in user’s wallets, LP tokens, staked LP tokens, or held in vote escrow will receive a 1x multiplier
  • veSDL will receive a 4x multiplier
  • Each of the 9 Saddle Creator NFTs will be counted as holding 350,000 SDL
  • Each of the 1,080 Badges for Bandits NFTs will be counted as holding 7,500 SDL

Using these parameters a wallet’s share of $ARB is then dictated by this formula:

wallet's % of airdrop = (wallet_sdl + 4 * wallet_vesdl) / (sdl_supply + 4 * vesdl_supply)

From this formula, we can derive the appropriate value of one SDL and veSDL:

arb_dollar_value = $1.15 * 1_545_242 = $1_777_028
total_sdl = 502_000_000
total_vesdl = 43_000_000

sdl_dollar_value = 1 * arb_dollar_value / (total_sdl + 4 * total_vesdl)
= 1_777_028 / (502_000_000 + 4 * 43_000_000)
= $0.0026
vesdl_dollar_value = 4 * sdl_dollar_value = $0.0104

Wallets which belong to Saddle or cannot be attributed to specific users (such as CEX’s or bridges) will be excluded from the airdrop. The “RetroVesting” contract used to initially airdrop vesting SDL is also excluded. The Ethereum snapshot block used for all these calculations will be block #17820592 (1 week ago), and the block with the closest timestamp for other chains. The full methodology can be found here (any fixes/corrections would be much appreciated) and a list of excluded addresses is below:

Excluded wallets

Name Network Address
Saddle Treasury mainnet 0x5DFbCeea7A5F6556356C7A66d2A43332755D68A5
Saddle Multisig mainnet 0x7A1c42297c00823736FD91E3d0F2Cc7ca848e98e
Saddle Grants Multisig mainnet 0x87f194b4175d415e399e5a77fcfdfa66040199b6
Saddle Operations Multisig mainnet 0x4802CedbDF865382dbaED8D5e41a65C8AB840676
Saddle Operations Multisig fantom 0x4802CedbDF865382dbaED8D5e41a65C8AB840676
Saddle Operations Multisig arbitrum 0x6d9b26C25993358dCa0ABE9BF6A26Ddb18583200
Saddle RetroVesting mainnet 0x5DCA270671935cf3dF78bd8373C22BE250198a03
Multisig mainnet 0x4ba5B41c4378966f08E3E4F7dd80840191D54C69
Delos Multisig mainnet 0x03D319a9921474B9cdE1fff1DBaFba778f9eFEb0
MEXC mainnet 0x75e89d5979E4f6Fba9F97c104c2F0AFB3F1dcB88
Kucoin mainnet 0xf16E9B0D03470827A95CDfd0Cb8a8A3b46969B91
Optimism Gateway mainnet 0x99C9fc46f92E8a1c0deC1b1747d010903E884bE1
Arbitrum Gateway mainnet 0xa3A7B6F88361F48403514059F1F16C8E78d60EeC
Euler mainnet 0x27182842E098f60e3D576794A5bFFb0777E025d3

For: Airdrop protocol-owned $ARB tokens to $SDL and veSDL holders and ensure the safety of user funds by winding down the protocol by pausing all pools and dissolving the community multisig.

Against: Do nothing (continue operation).

Poll:

  • For
  • Against
0 voters
3 Likes
2

Hi, good proposal. This takes a good amount of introspection to come up with.

So the allowlist for the airdrop has been taken already, or will there be a new allowlist when this proposal go up onto Snapshot?

I’m asking because this excludes everyone on exchanges and isn’t really fair.

Thank you.

4 Likes
3

What about the users holding on exchanges lol
you are literally airdropping arb to yourselves as most of the tokens are owned by team and insiders!!

6 Likes
4

@gmeow @amar_8 How would you properly attribute exchange balances to their corresponding owners/wallet addresses? If you have concrete suggestions/ideas that are feasible on how to address this they would be welcomed.

5
  1. We need to make 1 sdl = 1veSDL. Multiplier veSDL 1x
  2. Everyone who has tokens on exchanges can be individuated. Let them withdraw tokens SDL and make a new snapshot.
3 Likes
6

Hi. When will there be a snapshot if this vote is approved?

7

veSDL holders are the parties who are actually governing/operating the protocol and have skin in the game. There is a reason that protocol fees are distributed to veSDL and not SDL - and that is typically how vote escrow token designs operate, e.g. you get more voting power/boosts/incentives the longer your lock duration (e.g. CRV/veCRV, FXS/veFXS, BAL/veBAL etc). That same design principle was applied to the proposed disbursements, what would your justification be for abandoning one of the pillars of this token model?

8

This was specified in the original post:

9

We need a new snapshot. But first announce that all have time to withdraw SDL from exchange.

10

Why then do locked coins have a reward? Their value is still empty.

x4 multiplier for veSDL is very large. 1.2-1.3x is enough.

1 Like
11

Hi, for users holding SDL on CEX will there be a snapshot for us? I know im not the only one but maybe this should be announced earlier so CEX holders can withdraw in time.

3 Likes
12

Besides being unfair to CEX holders, if the distribution methodology is an airdrop without a claim transaction, we will waste money on dead wallets.

13

My 2 GWEI:

I think on the whole…this is clearly a very well thought out proposal; and from a 30,000 foot view, is the most reasonable path forward considering the current state of the markets. Although I am certainly bummed out as a big fan of Saddle myself for a long time now… seeing the protocol wind down is not a fun thing to learn about.

That being said, I think some key points here that make this a viable and best path forward are: that the Vyper incident recently scared everyone in the web3 community. It’s just too much to be constantly monitoring contracts that may have vulnerabilities that are unknown, especially when a protocol such as Saddle would be aiming to gain significant TVL. So to tie this together, having that TVL … brings a lot of responsibility to Saddle and that responsibility would come with massive overhead costs and back to the point of this being the most reasonable path… it just makes pragmatic sense to me.

I’m sad to see it, but I think it is inescapably the best course of action for everyone involved. I will never forget the original D4 pool, how awesome a concept it was, and know there will be many people who have all been connected via Saddle Community… that will go on and continue to build awesome things in web3.

Cheers all,

Weston

4 Likes
14

I’m pretty sad to see many protocols winding down recently, including Saddle. Building successful projects is quite hard and I respect what Saddle brought to the space.

However, the proposed ARB airdrop plan is flawed. First of all, the token grant was not intended to reward past activity, but to facilitate the ecosystem on Arbitrum in the future. If Saddle team plans to phase out, the simple way to avoid conflict of interests is just returning the $ARB to Arbitrum Foundation.

Secondly, in case that community decided to airdrop $ARB to SDL and veSDL token holders, they shall be treated equally. This includes those having SDL in central exchange and the unclaimed SDL in the retro airdrop vesting contract. I think setting up a contract that one can redeem/burn SDL to underlying treasury assets is the way to go.

Simply checking on-chain, many addresses bought and locked SDL into veSDL after the Arbitrum grant announcement. I have to argue they haven’t created much values to the community. One address bought and locked ~900k veSDL last week. This address can easily cash out a juicy 3x profit if veSDL = $0.01 as it is proposed. Insiders? probably.

On the other hand, the unclaimed SDL tokens in the retro airdrop vesting contract are entitled to early liquidity providers. According to the proposal their rights to redeem the treasury are basically gone. If that’s the intention, why not setting up a claiming deadline at the first place when the SDL token was released?

Overall, the proposed airdrop is flawed which easily benefits insiders and hurts regular SDL holders. The ways to go imo:

  1. return ARB tokens to the Arbitrum governance, or
  2. treat SDL and veSDL tokens equally in terms of weights to redeem treasury tokens. Setting up immutable contract that 1 SDL/veSDL can redeem certain amount of ETH
3 Likes
15

this point is actually not valid, as most ve- tokens are designed to aligning holders interests with the long term goals of project. As Saddle sunsetting, giving 4x multiplier to veSDL holders regardless of the how long they have been locked, is not fair.

3 Likes
17

Exclusion of “RetroVesting” contract looks strange for me.

18

SDL was originally launched in November 2021 with 2 year vesting and recipients have had almost ~2 years to claim. As of right now, only ~24% of those tokens have actually been claimed - the rest have not contributed anything to the growth of the protocol. The intent of the proposal is to reward active holders who have contributed (e.g. locking veSDL and voting, providing liquidity, etc.). Why should the proposal seek to reward non-contributors?

1 Like
20

Actually, the Arbitrum team/foundation specifically did not provide any directives on how the airdrop should be used: “Each protocol knows its community best, and it will be up to the respective DAOs to determine how to distribute governance within their community” (from ARBITRUM: THE NEXT PHASE OF DECENTRALIZATION. The DAO will ultimately vote and approve how those tokens are used, how is that a conflict of interest?

Regarding the treatment of SDL vs. veSDL holders, please see this post: SIP-X: Protocol operations and treasury management - #7 by devops199fan. I think you are misunderstanding how the 4x multiplier works: 1 SDL locked for 4 years gives 1 veSDL, while 1 SDL locked for 1 year gives 0.25 veSDL - the 4x multiplier merely accounts for the lock duration.

If you have concrete feedback on how to design a superior redeem/burn mechanism (e.g. how is the exchange rate determined, how would it account for a non-static amount of redeemable SDL coming from the retroactive vesting contract) and can coordinate implementing/auditing the required smart contracts, we would be happy to include it in this proposal.

2 Likes
21

The DAO will ultimately vote and approve how those tokens are used, how is that a conflict of interest?

It is clearly conflict of interests as team/advisors own the most of voting power, and you can make proposal to benefit yourself.

I think you are misunderstanding how the 4x multiplier works: 1 SDL locked for 4 years gives 1 veSDL, while 1 SDL locked for 1 year gives 0.25 veSDL - the 4x multiplier merely accounts for the lock duration.

i understand how veSDL works and i made that SDL token dune dashboard. The problem here is the proposal is to reward past activity while ve-type of incentive is forward-looking to the future. Clearly after being aware of the proposal, insiders can market buy Saddle and lock into 4 years of veSDL before the snapshot time. Thats what meato.eth did tx here.

1 Like
22

This is weak argument to exclude the vesting contract eligibility. The vesting contract has no deadline to claim and people have rights to claim anytime they want. If you intend to reward the active user, you should have set the deadline to like 6 month with unclaimed portion taken by DAO treasury.

Also, locking SDL into veSDL by itself is not the contributing to DAO.

1 Like