Staking
Last updated
Last updated
Staking in the MID ecosystem allows participants to earn rewards over time by committing their MID tokens as sMID. However, the legitimacy and sustainability of these rewards hinge on the underlying value sources that back newly issued MID, ensuring that the protocol never inflates tokens without proper collateral. Through bond premiums, interest-bearing assets, trading fees, and early redemption penalties, the system supports staking rewards without compromising MID’s $1 baseline intrinsic value. AI agents dynamically adjust parameters—such as APY, bond prices, and redemption terms—to strike a balance between attractiveness for participants and economic stability.
When a user stakes their MID, they receive sMID in a 1:1 ratio. While holding sMID, the user accumulates rewards over time. Eventually, sMID can be redeemed back into MID after a predefined redemption period. Redeeming earlier incurs a penalty. Both the redemption period and the penalty are AI-controlled variables, ensuring that these conditions remain flexible and responsive to market conditions and user behavior.
sMID Entitles Users to Rewards: Stakers receive additional MID tokens over time, representing returns on their commitment.
Controlled Redemption: A redemption period plus a penalty for early exit discourages short-term flipping and supports price stability.
AI-Driven Adjustments: The APY (rewards rate), redemption period, and penalty can all be fine-tuned by AI agents, keeping conditions attractive but never dangerously inflationary.
Bonding Premiums: Bonding occurs when users exchange assets (like DAI or USDC) for MID at a bond price ( B ). If ( B > 1 ), the difference ((B - 1)) represents a premium. This premium is extra collateral entering the treasury, allowing the protocol to back additional MID tokens above the simple $1 baseline.
Example: If the bond price is $1.05, each bonded MID brings in $1.05 of assets, a $0.05 premium. Accumulating such premiums provides tangible value that can fund staking rewards without risking the token’s intrinsic worth.
Interest-Bearing Assets: The treasury may hold interest-bearing stablecoins (e.g., sUSDe, USDY) or other yield-generating tokens. The interest these assets earn increases the treasury’s overall value. Portions of this yield can be redirected to staking rewards, ensuring every rewarded MID is still rooted in real asset growth, not empty inflation.
Liquidity Provision and Trading Fees: If the treasury supplies liquidity to certain pools, it earns trading fees. These fees add another stream of revenue to the treasury, further bolstering the asset base supporting MID. Part of these accumulated fees can go towards staking rewards, effectively distributing some of the ecosystem’s liquidity-generated value back to stakers.
Early Redemption Penalties: If a user redeems sMID before the full redemption period, they pay a penalty. These penalties flow into the treasury, adding another layer of asset support. This ensures that quick profit-taking (short-term unstaking) still contributes positively to the treasury’s health, indirectly benefiting long-term stakers.
The protocol’s fundamental principle: no rewards are issued without backing. Formally, the value issued as staking rewards must never exceed the sum of premiums, yield, fees, and penalties available to maintain at least $1 baseline value per MID.
Conceptual Formula:
By enforcing this constraint, the protocol guarantees that every newly minted MID given as a reward remains fully collateralized, ensuring that MID cannot fall below its intrinsic $1 backing.
AI agents continuously monitor:
Market Conditions: Price, volatility, and user demand.
Premium Levels: Bonding premiums that add surplus to the treasury.
User Growth and Retention: Engaging or keeping participants requires adjusting APY or redemption terms to be welcoming but not inflationary.
Risk Indicators: Any sign of exploitation or oracle issues might prompt AI agents to become more conservative, reducing APY or increasing penalties to safeguard the ecosystem.
Adjust APY: Increase APY if user engagement is lagging or if the treasury’s surplus supports higher yields, but never to the point of undermining the $1 baseline.
Set Redemption Period and Penalty: Extend the redemption period or slightly increase penalties if needed to discourage excessive short-term behavior, or relax them when conditions allow more user-friendly terms.
Balance Attractiveness and Prudence: They ensure staking remains beneficial enough to encourage participation, but not so generous that it dilutes MID’s intrinsic value or discourages new entrants by appearing overly complex or restrictive.
