Bootstrapping and maintaining liquidity in Sherlock’s staking pool is one of the keys to Sherlock’s long-term success. Sherlock cannot contribute to repaying exploits at covered protocols without this pool.
On March 7th at 4pm UTC, Sherlock is launching a 5-day, $100M Special Liquidity Event to bootstrap Sherlock’s staking pool. The secondary purpose of this event is to bootstrap Sherlock’s on-chain treasury.
For an overview of how Sherlock works, please check out ”What is Sherlock?” For a better understanding of the SHER token’s role in the ecosystem, please see “Introducing Sherlock DAO.” And for a breakdown of planned token allocations, please see “Guide to SHER Tokenomics.”
To calculate potential APY scenarios from participation in this event, please use the Illustrative Investor APY Calculator.
The Sherlock team considered many approaches to bootstrapping both the staking pool and the treasury. Sherlock’s $30M guarded launch was bootstrapped through a whitelisted round. As was the initial pre-seed fundraise. The team decided it was time to even the playing field and allow for a broader range of participants and community members to get involved. This is what DeFi is all about, after all.
The 5-day window will allow for 100M USDC to be deposited into the contracts. After this period, normal staking (with lower token rewards) will be active. Information on the normal staking process can be found here in the Sherlock docs.
The Special Liquidity Event is done entirely on a first-come, first-serve basis. This means that the first 100M USDC into the contract will receive SHER rewards and any subsequent transactions will fail (and need to use the normal staking contract).
Here’s a breakdown of how the event works:
The process works like this:
- Participate: You can participate by interacting with Sherlock’s UI to send USDC to the contract. The step-by-step guide to participating is included at the end of this article.
- Split: 90% of the contributed USDC gets staked in Sherlock’s staking pool. The other 10% is contributed to the Sherlock treasury. The USDC staked in the staking pool (90% of the total) can be unstaked after a 6-month period. The USDC contributed to the treasury (10% of the total) is not returned.
- Claim: After the 6-month staking period, you can claim the SHER token reward. 1 SHER token is earned for every 10 USDC originally sent to the contract.
- Unstake/Restake: After the 6-month staking period, you can choose whether to remove the staked USDC amount (90% of the total) or restake it for another time period. The staked USDC amount that you unstake or restake will have grown due to the premiums paid by covered protocols as well as the APY earned by whitelisted yield strategies. For now, the only yield strategy is depositing USDC into Aave. The staked USDC amount will be net of any payouts to covered protocols during the staking period, meaning that the USDC amount returned could potentially be lower than the contemplated 90% of the contributed USDC in the event coverage payouts exceed accrued premiums and interest.
- Start date: March 7th, 2022 at 4pm UTC
- Duration: 120 hours
- End date: March 12, 2022 at 4pm UTC
- SHER token supply: 100,000,000
- SHER tokens available to event participants: 10,000,000 (10% of total supply)
- Max USDC participation: 100,000,000 USDC
- Staking pool / treasury split: 90% / 10%
- Max staking pool funds: 90,000,000 USDC
- Max treasury funds: 10,000,000 USDC
- Staking pool USDC lockup: 6 months (from the date of participation/staking)
- SHER token lockup: 6 months (claimable same day as Staking Pool USDC)
- USDC Participation required to earn 1 SHER token: 10 USDC
The Sherlock team is very excited to bring this launch to fruition. It’s a culmination of many deeply-considered tradeoffs and unique needs of the Sherlock protocol. Some of the important benefits of this liquidity event include:
- Open and permissionless: Instead of only allowing well-funded VCs and angels to participate in the economics and governance of the Sherlock ecosystem, this launch allows anyone to join the community as an economically incentivized member. While there may be some restrictions based on IP address, the ethos of this launch is that the playing field is more level for the average community member or ecosystem participant.
- Evenly priced: Unlike other launch mechanisms, this liquidity event is designed so that everyone will pay the same price for their tokens. We believe this will create more buy-in and camaraderie among community members since everyone in this round will have the same entry price. The tradeoff of this approach is that there’s a chance not everyone will be able to participate. However, we think a cap of 100,000,000 USDC will allow for a reasonable window of entry.
- Predictable: The structure of this liquidity event allows potential participants to know exactly what price they will be buying at long before the event begins. This should allow potential participants to take a more considered approach to the opportunity instead of trying to time the pricing, a luxury usually only afforded to VCs.
Participation will require the following:
Note: If you have questions or issues about any of the following, please feel free to reach out to firstname.lastname@example.org.
- MetaMask or WalletConnect-compatible wallet
- Ledger wallets: MetaMask allows for the use of Ledger wallets through their UI. This article contains the instructions for connecting Ledger to MetaMask.
- Gnosis Safe: Gnosis Safe can be used with WalletConnect as described in this article.
- Rainbow Wallet: Rainbow Wallet can be used with WalletConnect as described in this article.
- At least $250 in ETH
- In order to participate, you will have to approve USDC for trading in a first transaction, and then pay for the gas to send the USDC to Sherlock’s contract.
- A base amount of USDC
- There is no “minimum” amount of USDC required to participate, but the likelihood of a profitable outcome below 500 USDC of participation may become unacceptably low due to the gas costs required to participate, claim and unstake.
Let’s dive into the steps for participating:
- Use the official link to get started.
- Connect your wallet in the top right of the screen. Once the wallet is connected, the first 4 and last 4 digits of your wallet address will be visible in the top right of the screen.
- On the “Participate” tab, if you see “Event Begins” it means the event hasn’t started yet. “Participation Remaining” represents the remaining USDC that can still be sent to the contract. If “Event Ends” shows 0 minutes or “Participation Remaining” shows 0 USDC, it means the event is over.
- Enter the amount you wish to participate with in the field next to “USDC.”
- Once you’ve entered an amount, you’ll see a breakdown of where the USDC will go, as well as how many SHER tokens you’ll receive for this amount of participation.
- To participate, click “Participate” in the bottom of the box.
- Approve USDC so the SHER contract can spend your USDC.
- Confirm the transaction.
- After this, you can navigate to the “Positions” tab to see your position. It will tell you whether you’ve claimed your SHER tokens yet or not, as well as when you will be able to claim your SHER tokens. Because the lockup for SHER tokens is 6 months, you may want to check back in later to claim!
- After 6 months, you will also have the choice to either unstake, restake, or take “no action” on the USDC that has been staked (90% of the original). If no action is taken after 1 week, an arb bot will restake your position for 3 more months. These actions will be done on the staking page of the main Sherlock app.
- Congrats! You’re now a SHER tokenholder (in the making) and can claim your SHER tokens and manage your USDC in ~6 months!
Note: You will receive an NFT that represents ONLY the staked funds (90% of your total contribution). This NFT will represent the ability to unstake the staked funds. However, this NFT will NOT represent the ability to claim the SHER token rewards. The ability to claim the SHER token rewards is linked to the address that participated in the event (the address that sent your contributed funds). Make sure to participate with an address that you will still have access to 6 months later!
Why do I need ~$250 in ETH?
Unfortunately with all the activity on the Ethereum network, transactions can be quite expensive, so having a reserve of ETH is a good idea for participation.
I don’t have USDC, what should I do?
You can go to any major AMM like Uniswap, Sushiswap, or Balancer and swap between most assets and USDC, but make sure to leave enough ETH to pay for transactions.
What happens if the $100M cap isn’t met after 5 days?
If the cap is not met, then the event will end and the requisite amount of SHER tokens will still be provided to participants. For example, if participation is only 80M USDC, then 8M SHER tokens (8% of total SHER supply) will be distributed (through the same methods described above) instead of 10M SHER tokens (10% of total SHER supply).