Apr 19, 2021

8 min read

STEP Tokenomics

Overview

Step Finance is a portfolio visualisation platform which aggregates all LPs, tokens, farms and positions that a user may have associated with their wallet and displays it in an easy to use dashboard with various useful metrics and visualisations. Step aims to be the page which DeFi users have open all day with all the functions and information they need to make informed decisions.

Step will also enable users to interact directly with their favourite protocols from within the dashboard which could include farming, pools, swaps and automated strategies. Many of these value added services will be done for a fee which will be collected and used to buyback and distribute tokens to STEP tokenholders. Today we will discuss the tokenomics behind STEP token.

Base Functionality

Step must connect to the relevant Programs (smart contracts) built on Solana and query them to be able to get the information necessary to display to a user and execute transactions. Step’s core functions that are implemented or planned are:

Wallet balances:

Dashboard view of all tokens you have associated with an individual address with options to consolidate multiple wallet addresses into the one view and display value over time denominated in a selection of base currencies.

LP tokens view:

Get information related to current LP tokens you hold in Solana AMMs and visualise performance of the pools over time, vs base currency/hodling, fee revenue, impermanent loss, yield and APYs.

Yield Farming and Staking:

Step will provide a table of current yield farming opportunities on Solana with easy one-click entry into any of the farms. Enter, exit and claim yield farm rewards on this page. This page also handles single asset staking on Solana validator nodes.

DEX positions:

The base AMM from which all DEXes on Solana are using or forked from is Serum. This is a full orderbook DEX where users can buy and sell any supported token. Step will display current wallet balances, open orders, unsettled balances and any other related information to user positions in Serum.

Investment Strategies:

Step was founded in the February 2021 Solana Defi Hackathon as an automated strategy platform. This page will cover automated strategies like DCA, EMAs and RSIs and others which users can enter into with potential in future to enable users to make their own custom strategies.

Swap aggregation:

All Programs on Solana are composable and as such liquidity can be fragmented among various pools and AMM programs. It is therefore important to be able to ensure users get the best possible deal on their swaps and Step being a DeFi aggregator is well placed to offer swap aggregation from within Step.

Design

Design is crucial to STEP being the front page of the Solana ecosystem. The STEP team aims for Step.finance to be a page which is used everyday by everyone in the Solana ecosystem. Step will be something which will have coverage of all other projects on the Step dashboard, providing an easy to use ‘Wallet view’ for all the coins, LPs, farms and positions a user may have associated with their wallet.

Design Principles:

Dashboard should be high level view immediately for NET worth of users account
User should be able to interrogate the information to view the underlying values associated with their wallet.
People first, interactions should be natural and mirror how people already interact with DeFi.

Tokenomics

The STEP token ensures there is a clear alignment of incentives between users, tokenholders and the team so that Step can continue to grow in a sustainable and productive manner for the benefit of all DeFi users. It is therefore crucial that the $STEP token have strong fundamental value accrual structures in place which build value over time.

Overview:

Max Supply 1 000 000 000

Emission Period: 2 years

Weekly Emission Reduction: -4%

Airdrops % of Supply: 1%

Team % of Supply: 20%

Team Lockup: Lockup over 2 years vested in 25% increments every 6 months.

Treasury % of Supply: 12.219%

Presale Investors: 11.780%

Presale Lockup: 2 years vesting. 50% available after 1 year, 50% available year 2.

Community & Ecosystem % of Supply: 55% (LPs and Trade executors)

Token Type: SPL (Solana Native)

Principles:

Value accrual to the STEP token is key focus
2 year emission schedule with 4% weekly reduction. Early risk takers rewarded and new supply entering circulation reduces over time and helps build long term value given static or growing buyback demand. Mirrors similar tokenomics of other yield aggregators (Harvest, Pickle, Yearn, etc).
No new emissions go to STEP native staking pool. This dilutes supply away from value productive TVL accruing activities.
‘Trade Executors’ are defined as users who execute transactions on the Step platform which incur a fee. We may choose to incentivise this in future.
Community reward emissions % is split between LPs vs Exchange Executors weekly. The % split may change over time. Current split at launch is 60% to Trade Executors 40% to LP Stakers
The Treasury should be sustainable and have enough supply to pay for top talent.
80% of fees on Step go to STEP stakers and 20% to the Treasury.

Staking and Buybacks:

Step.finance will have a single asset pool for the STEP token.
This pool receives NO emissions. It only receives income from revenue generated by step.finance
Step will charge fees for services on step.finance with 80% of fees going to stakers and 20% to treasury.
STEP also has incentivised liquidity pools which will receive new emissions. At launch this will be STEP/USDC and potentially RAY/STEP.

Value Accrual

It is essential to the success of the project that STEP actually generates revenue and adds value to the token. Therefore there are several value accrual mechanisms for the token itself which will further generate positive interest and incentives in a positive feedback loop. The below is a list of value accrual mechanics that the team intend to implement on the Step platform:

Transaction fees: The most basic and simple value accrual is STEP taking a fee on certain interactions on the STEP platform (swaps, yield farms, automated strategies, bridges etc). The majority of this fee revenue goes to stakers of the STEP token (80%) with the remaining 20% sent to the treasury.

Buyback and distribute: The core value accrual mechanic of STEP is buyback of STEP tokens from revenue generated by transaction fees in the protocol which are then distributed to stakers. This gives a native APY for staking the STEP token and aligns incentives of tokenholders and the team with the success of the STEP platform. This is awarded proportionally to the liquidity an LP stakes in this pool.

Reducing supply emission rate: Supply emissions should reduce over time without any large cliffs (like evident with SWRV which did a 90% cliff in emissions that made their TVL fall from $700m to $3m and cause people to forget/leave the project). The optimal scenario is a gradual reduction in new emissions over time at a set rate. For STEP this emission reduction will be 4% weekly of the community and ecosystem reserve. With a steady or increasing demand and a falling emission rate there reaches an inflection point where buybacks volume is greater than new emissions creating NET positive buy pressure on the STEP token.

Aggregation: A core part of the Step Finance platform is being an aggregator for various user actions like AMM Swaps and Yield Farms. Step will implement a swap router on Solana for improved liquidity and price discovery in AMM swap pools and also offer a number of tools for yield farmers like single asset entry/exit into LPs, autocompounding yields and managed yield farm vaults. Fees collected for these services will flow back to STEP stakers.

Lockups: Incentivising users to take coins off the market is one way to reduce potential sell pressure and ensure given flat or growing demand that there is NET positive buy pressure. STEP intends to implement various lockup LP pools where tokens will be locked for a specified amount of time and be able to share in a higher rate of emissions or staking revenue compared with staking pools which allow immediate withdrawal.

Automated Trading Strategies: Step started as an automated strategy platform and our intent has always been to build out this functionality. There are various automated vaults and trading strategy contracts on Solana which STEP will be exposing to users on the Step dashboard. Step will charge a fee to enter and exit these vaults and potentially for some strategies a performance fee as well. These fees will accrue to STEP stakers.

Stake for Access: There are a number of investment indicators, analytics, portfolio insights which Step plans to make available to users who are stakers of STEP. Stake-for-access is a superior model to subscriptions or paid plans and adds additional value to STEP token holders.

Fiat-Defi integrations: Step intends to implement arms length widgets which can handle fiat on/off ramps into Solana via Step. This brings more money into the Step ecosystem, puts it to productive use in Step strategies and swaps and ensure Step remains a focal point for access into and out of the Solana ecosystem. Step has a fiat partner onboard for this once we are ready for development.

Referrals: Referrals are a growing value additive mechanism in the crypto world with DeFi projects such as 1INCH utilising it effectively. One user may refer others via a weblink and earn a share of the fees. Step intends to implement this system for Swaps and potentially other automated strategies.

Cross chain Integration: Being multi-chain capable is a core principle at STEP finance, there are several bridges under development on Solana, we will support all of them and likely take a small fee on each tx. Adding additional blockchains is a path towards more TVL, users, revenue streams for STEP..

Governance:

Step.finance has a core team of 3 who initially will guide the direction of the project. There will be no governance functions initially but the team is open to exploring further tokenholder involvement in the decision making process once STEP token is established.

It is important in the beginning of a project’s life that the founding team has control over the direction and development of the project. Only after reaching a phase in the project’s life where the direct day to day input of the founders are not necessary to the continued development of STEP would a governance DAO be considered.

Conclusion:

This is the initial token mechanics for the STEP token and may be subject to change at any time. The Step team is focused on value accrual for the Step platform with our core principle being that Step Finance should be the platform everyone has open everyday when monitoring their portfolio. Given this, with user attention there are many ways we can add value to users which in turn will benefit STEP tokenholders and our team are constantly evaluating the best options here going forward.

For updates to STEP tokenomics over time we will be posting here on our blog but also at https://docs.step.finance. This will also include specific formulas for fees. At time of writing the general rule is 80% of any fee charged will go to the STEP staking pool and 20% to Treasury.