A New Way Forward: StellaSwap’s Governance & Tokenomics Reborn

6 min readSep 27, 2024

A New Way Forward

It is time for us to take StellaSwap to the next level. As the leading DEX on Moonbeam and Polkadot, we’ve been focused on creating a powerful DeFi application beyond just a trading venue. In order for us to continue to light up the ecosystem, there needs to be a radical upgrade on two critical foundations of our protocol: Governance and Tokenomics.

Preface: STELLA Token Has Been Basic

When we launched StellaSwap more than 3 years ago, our launch was predicated on a very basic tokenomics. This basic tokenomics failed to take into consideration key principles of “true” utility (as opposed to singularly focused on emissions-propping) and value-accrual. The truest utility that was missing in our tokenomics was perhaps the most important one: governance.

Decentralization without community governance is a contradiction.

Empowering the community and tapping on the wisdom of the crowd will set us on the right path towards decentralization, as well as unlocking our potential to reach new heights. As DeFi has evolved radically, so must we.

StellaSwap Reborn: New Tokenomics & Gov Launch

With that, we present our groundbreaking plan to migrate StellaSwap towards full governance. This comes in 2 stages;

Phase V1 — (October 2024)

On the 1st phase (V1), we’ll be engaged in 2 key events: 250M token burn & veSTELLA launch.

#1: 250M (50%) Supply Burn/Slash 🔥

We’ll be slashing our total supply from 500M to 250M. The justification is such;

⚫️ Current supply is only at 9% of total supply, after 3 years of being live
⚫️ At current daily emissions, it’ll take 24 years to reach Total Supply
⚫️ Coupled with an absence of governance & utility, sell-side pressure is extremely high

Based on rigorous cross-analysis and backtesting, it is more optimal for us to reach Total Supply within the next 5 years.

We’re going to burn 50% of the Total Supply across a duration of 5 weeks, starting with the first burn event on Oct 4. Every week, 50M STELLA will be burnt. The burn address will be made public. The schedule of burn will be as such;

🔥 Week 1 (Oct 4): 50M STELLA burn
🔥 Week 2 (Oct 11): 50M STELLA burn
🔥 Week 3 (Oct 18): 50M STELLA burn
🔥 Week 4 (Oct 25): 50M STELLA burn
🔥 Week 5 (Nov 1): 50M STELLA burn

#2: New Token Model: Vote-Escrow (VE) STELLA with Burn & Booster

Our new token system is based on Andre Cronje’s VE (3,3) model that incorporates Curve’s locking/VE model, which incentivizes long-term holders, with Olympus DAO’s game theory (3,3) model that focuses on staking mechanisms that results in maximum value-accrual for tokenholders and increases protocol sustainability (by focusing on fee-generation).

Beyond that, the transition towards veSTELLA is vital for;

🔵 Ecosystem Growth: Creating a flywheel effect where protocols attract users for their votes with their own token, users accumulate or lock STELLA longer to receive more returns and more voting power, and to receive more boost.

🔵 Fosters Bribing Wars: Projects will be incentivized to acquire more STELLA and vote with it to receive STELLA rewards on their preferred pool.

🔵 Longer STELLA Lockups: Longer lockups of STELLA results in lower selling pressure.

Let’s take a look at the pillars of veSTELLA.

➡️ Voting Power (Gauge Voting)

veSTELLA holders will be bestowed with voting powers that will allow them to dictate STELLA incentives to any of our pools. Users will need to lock their STELLA to generate veSTELLA, with their voting power directly dependent on the lock duration. Maximum time lock of 2 years will grant them the maximum voting power.

Bear in mind that there will be a decay of one’s voting power so users will need to constantly re-lock their STELLA. In order to automate this process, we’ll launch with our Relay Strategy, which is a “set & forget” method for users with the core strategy around voting on the most profitable pools in the pursuit of profit maximization.

➡️ Significant Revenue Sharing

With veSTELLA, tokenholders will earn:

⭐️ Protocol revenue paid in USDC
⭐️ 83.5% of total trade fees (7X increase!)
⭐️ 10% of LSD revenue
⭐️ 100% of bribes

Previously tokenholders earn 11.5% of protocol revenue from trade fees.

➡️ Bribe System

Bribes are incentives offered by Projects/Stakeholders that want to “bribe” veSTELLA voters towards their pool of choice, in the form of any whitelisted token rewards. veSTELLA voters that vote for the pool with bribes will earn 100% of the bribes.

➡️ Burn Mechanism

To further strengthen tokenholder value, we’ve decided to introduce a burn mechanism in the form of a 50% penalty for early withdrawals. This means veSTELLA holders can “unlock” but will incur a slash of 50% of their STELLA, which will be burned forever. This ensures a deflationary path of STELLA that will benefit long-term holders.

Here is a summary of our new veModel compared to our old xSTELLA model.

Phase V2 — (1st Quarter 2025)

The second phase — called V2 — will be expected to launch on the first quarter of 2025. V2 will be focused on our protocol governance infrastructure as well as the last component of our VE Token model: Yield Booster.

#1: Protocol Governance

In the pursuit of true decentralization, we will launch our governance infrastructure that allow tokenholders to manage and improve the entire protocol. Voting power will be based on users’ veSTELLA lock.

The components of our governance system comprises of the following;

The scope of discussions and proposals will start with the following areas;

⚫️ LSDs
⚫️ Emission parameters
⚫️ Budget
⚫️ Fee changes
⚫️ Token whitelisting
⚫️ Product integrations

#2: Yield Booster

The last component of our veModel will be an LP boost mechanism for veHolders. Going a step further to award loyal holders of veSTELLA with additional incentives will serve to encourage users to buy and hold STELLA to increase their farming returns.

In order to receive the boost, users would need to stake veSTELLA in the pool along with their LP, which would be determined per farm for up to 200%.

An example is when a user has a position in STELLA-GLMR pool worth $10,000 and holds $1,000 worth of veSTELLA, he would receive a boost of 50% for his STELLA rewards.

Next Steps

The full details and parameters will be furnished on our docs (gitbook) nearing the launch of our V1 & V2. There will be a migration of xSTELLA to our new veSTELLA model, and we will develop a tool that will make that transition super easy.

If there is any questions that you may have, please do not hesitate to contact our team at our official Discord here.

About StellaSwap

StellaSwap is a hybrid DEX that features a standard, stable and concentrated liquidity AMM to facilitate the most optimal price discovery for assets on Polkadot. As the largest DEX and an integrated DeFi gateway, users can access the ecosystem with ease through our native bridge, swap-for-gas feature, as well as various DeFi opportunities in a click of a button.