33694b23e0e7c508268c2803bb6c88da9140a19d
We will introduce an early withdrawal option for staked SPS tokens, allowing users to retrieve their tokens before the staking period's completion. To enable this feature, users will incur a cost in the form of SPS tokens, and all tokens used for this purpose will be permanently burned. Additionally, we will provide users with the choice to opt in for a lock period, offering an added layer of security for those who wish to safeguard their holdings in the event of a security breach.
EDIT: If the user has any proposals they have voted for, an instant withdraw will "power down" their votes, similar to how you can "power up" your vote if you increased your SPS stake during a voting period.
This proposal offers the following benefits:
Flexibility and Convenience: Users can unstake their SPS tokens at their convenience, aligning with DAO standards
SPS Burning: Early unstaking with a 4% 5% penalty provides a valuable opportunity for SPS token burning, especially bullish market phases.
Instant Rewards: Users can instantly withdraw rewards without the need for third-party services.
Potential downsides are addressed in further detail below:
Following the implementation of this new function, all users will have the ability to instantly withdraw their SPS tokens. For added security against potential hacks, users can opt to 'lock' their SPS tokens for a specified number of days after an instant withdrawal, similar to the concept of card locking. This choice will effectively reduce the number of days required to unstake from the current 28 days to the selected 'x' days, if a user chooses to pay the early unstake fee. In the event that users choose to disable this lock, they will still be required to wait for 'x' days. During this waiting period, the lock will remain enabled as a protective measure.
Determining the appropriate penalty rate is the most challenging aspect of this proposal. Striking the right balance is crucial; the rate must be substantial enough to dissuade users from early withdrawals, yet not overly harsh to the point of discouraging its use altogether.
In my personal view, I lean toward a more lenient penalty rate. This approach aims to incentivize a broader user adoption of the early withdrawal function and offer new stakers a degree of flexibility when they initially stake their tokens.
Considering these factors, I propose a penalty rate of 1.25% per week. This equates to a 4% 5% penalty for a 4-week early withdrawal, and all SPS tokens subject to the penalty will be permanently burned.
This proposal fundamentally aims to enrich the SPS ecosystem by granting users the freedom to unstake their tokens at their convenience. This aligns with industry best practices observed in many other DAOs. Users may have unforeseen expenses, emergencies or simply sell out of anger when your card doesn't stun 4 times in a row but the enemy retaliates every time… because your card never stunned...
Moreover, this innovative feature represents a substantial opportunity for SPS token burning, especially during bullish market phases when users seek to 'catch pumps.' Early unstaking, which carries a 4% 5% penalty, enables users to capitalize on price movements while reducing the total supply of SPS. This is particularly advantageous during random Hive token pumps that often impact SPS prices, offering users the chance to reinvest at lower prices following retracements, which typically happen (NFA).
Lastly, the proposal introduces a seamless avenue for users to instantly withdraw their ranked, lands, TD, and node rewards without the need for long waiting periods or reliance on third-party services. Although third-party alternatives may still exist, they would simply need to offer rates more attractive than the 4% 5% penalty imposed by Splinterlands, positioning Splinterlands as a competitive and user-centric platform within the ecosystem, without killing off all third party competition.
With any proposal, it's crucial to acknowledge the potential downsides, and one valid concern is that a low early unstaking penalty may lead to the perception that staked SPS is no longer effectively out of circulation. I understand and share this concern to some extent. However, my perspective is that if a user is determined to sell, they are likely to do so regardless. I prefer a scenario where they choose to sell 96% 95% of their holdings instantly, with 4% 5% being permanently burned, as opposed to selling 100% of their holdings over a 4-week period. It's worth noting that certain entities, such as botnets, may use this system to constantly instantly unstake and sell. Nevertheless, it's my belief that they will extract value from the ecosystem in any case, so allowing them to do so at a penalized rate, if they opt for it, may help mitigate their impact in the long term.
Another potential issue involves the misuse of DAO proposals. Users could potentially buy SPS in the last minute, stake it to influence a vote, unstake, and sell it back on the market. To address this, we must assess its feasibility and whether it's a significant concern. The closest proposal we have had so far is #39, where a vote of 5.627 million SPS would have swung the vote from yes to no, to be safe let's use 6mil as an example. To purchase this much SPS, it would best be done through all LPs and Hive Engine order books. Assuming approx 1.5mil from SPS/ETH, SPS/WBNB and SPS/SWAP.HIVE can be bought and the remaining from Hive Engine, this would incur roughly 4-5% price impact (including fees), a sale would incur roughly the same price impact but let's not even consider that and assume that users do not sell enough SPS for the price to retrace exactly back to before. This accounts to roughly 240-300k lost SPS just from the buying/selling process. Bridging to and from the game from BSC and ETH will cost 1% for two way transactions for the 3mil bought via ETH and BSC, that is 30k SPS. The instant unstaking fee for 6mil would be 240k. Therefore, the total fee associated with this is roughly 510k-570k SPS, or roughly $7k to $7.8k USD, which is not a reasonable fee to spend for most people to swing a vote, and this is how much it would cost for the closest proposal in Splinterlands history. Therefore, I do not believe to be a real concern. In fact, the main cause of DAO exploits is due to flashloans, which do not exist for SPS.
EDIT: A valid concern raised by 
Lastly, user perception of the penalty rate may vary, and finding the ideal rate isn't an exact science. However, I am open to proposing changes to the penalty rate in the future if we observe that the system isn't being used as intended or if staked SPS no longer effectively contributes to the overall ecosystem's stability and value.
)Matt's main concern is not enough people will use it so developing this may not be worth the effort, but should the proposal pass this will not be too hard to implement from the tech side. Overall, Matt is in support of this idea but does not see it as a top priority.
Please note the suggestion to include an additional "lock" option was suggested by Matt to mitigate the effect of hacks, should the user choose to protect themselves.
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