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What is Game Theory?

How we can all win

At the bottom of this article you can find a description of 3,3 staking, adapted from the Olympus DAO documentation.
Hopefully, with these documents, we have convinced you this is more than another boring fork project, and now you will stick around as we grow and develop as a DAO. We are excited to explore the future with you.
The idea is that the protocol controls its liquidity rather than individuals. So far the market has decided that this is a good approach when used responsibly by a good team and community. Stag DAO will use its treasury in much the same way you might use those funds yourself. To mine for returns while providing liquidity.

Bonds

The treasury is built both through the pre-sale liquidity bootstrap event and bonds. Bonds are sold by the protocol to and end user for a discount on the current price of Stag. We give a discount to the user in exchange for them allowing us to assume control of their liquidity. Liquidity we will use to earn returns to further strengthen the treasury.
The bonds that are purchased are released to the investor linearly over a period of 5 days. The ideal scenario is the user claims and stakes their pending vested Stag right before each rebase.

Rebase

A rebase will happen every 8 hours. In short a rebase will increase the total Stag that you are able to redeem your sStag for by the percentage shown on the UI. Unlike older style DeFi 1.0 systems this doesn't happen every block but just once every 8 hours. Which is why when bonding you only need to claim once as close to each rebase as possible to maximize your rewards.

Staking

Staking is what you need to do to be eligible to earn rebase rewards. Similar to staking LP or PoS tokens. You deposit your Stag into the protocol and at the next rebase cycle you receive the current return listed. In exchange you will receive sStag in your wallet. Which you will need when unstaking, so don't lose it.

(4,4)

Some protocols handle this in different ways, some people use 4,4 to mean manually claiming and staking right before each rebase for the entire 5 day bonding cycle.
Here at Stag 4,4 is the idea that the moment you buy your bond the entire bond is immediately staked and you receive the equivalent sStag in your wallet. You won't be able to withdraw what you have bonded using a 4,4 bond until the end of the normal bonding cycle.
The benefit of a 4,4 bond at Stag as that you don't have to wait until the bonding discount is greater than the staking ROI. You will receive the entire staking ROI plus your bond discount. This benefits the investor with a higher return and benefits the protocol by increasing the amount of bonds sold.
Increasing the amount of bonds sold is also good for the investor. Because it increases the Risk Free Value and the Runway. It also increases the value of the treasury meaning the treasury can now earn more returns farming on Elk.

Questions still?

If after reading this you still have questions jump in our discord. Some people need to read to learn, some people need to talk to learn. Our goal here is to allow everyone to be able to realize the gains that come from building on top of utility. However you get there we don't care. We just want to bring everyone we can along for this ride.

What is the deal with (3,3) and (1,1)?

(3,3) is the idea that, if everyone cooperated in Stag DAO, it would generate the greatest gain for everyone (from a game theory standpoint). Currently, there are three actions a user can take:
  • Staking (+2)
  • Bonding (+1)
  • Selling (-2)
Staking and bonding are considered beneficial to the protocol, while selling is considered detrimental. Staking and selling will also cause a price move, while bonding does not (we consider buying STAG from the market as a prerequisite of staking, thus causing a price move). If both actions are beneficial, the actor who moves price also gets half of the benefit (+1). If both actions are contradictory, the bad actor who moves price gets half of the benefit (+1), while the good actor who moves price gets half of the downside (-1). If both actions are detrimental, which implies both actors are selling, they both get half of the downside (-1).
Thus, given two actors, all scenarios of what they could do and the effect on the protocol are shown here:
  • If we both stake (3, 3), it is the best thing for both of us and the protocol (3 + 3 = 6).
  • If one of us stakes and the other one bonds, it is also great because staking takes STAG off the market and put it into the protocol, while bonding provides liquidity and DAI for the treasury (3 + 1 = 4).
  • When one of us sells, it diminishes effort of the other one who stakes or bonds (1 - 1 = 0).
  • When we both sell, it creates the worst outcome for both of us and the protocol (-3 - 3 = -6).