$KARRAT Allocation for Scalable Node Staking Rewards (v1, Withdrawn)

Final Proposals Withdrawn Proposals
1

KIP Title: $KARRAT Allocation for Scalable Node Staking Rewards
Author: AMGI Studios
KIP Type: Non-Constitutional (Funding)

Summary

This KIP proposes an allocation of 20,000,000 $KARRAT from the KARRATco Treasury to fund a 12-month staking rewards program for participants locking $KARRAT into StudioChain Resiliency Nodes. The program introduces a scalable, community-driven APY model, where rewards increase with total network participation, reaching a maximum 20% APY if 100,000,000 $KARRAT is staked.

The more the community collectively contributes to securing the Resiliency Node network, the greater the rewards unlocked for all. Any portion of the 20,000,000 $KARRAT that is not distributed over the 12-month period will be returned to the KARRATco Treasury.

Abstract

As StudioChain approaches mainnet launch, the KARRATco DAO has an opportunity to bootstrap decentralized network security and incentivize participation through a community-aligned staking rewards model. This proposal requests 20,000,000 $KARRAT to fund a 12-month program supporting and bootstrapping StudioChain’s Resiliency Node layer.

Rather than issuing fixed rates, this program adopts a scalable model where APY rises in proportion to the total $KARRAT staked, capped at 20% if the community stakes the full 100,000,000 $KARRAT available. This mechanism gives the community direct influence over the program’s output, reinforcing the design philosophy of StudioChain’s pool-based staking system.

If less than the full amount is staked, only a corresponding portion of the rewards will be distributed. Any unused funds will revert to the DAO after the program ends.

Motivation

StudioChain is a next-generation L2 tailored for high-performance applications in gaming, AI, and entertainment. Its security and decentralization rest on the success of its Resiliency Node network.

At launch, it is likely that StudioChain will not yet produce meaningful sequencer revenue. Rather than delay community participation or risk insufficient security, this KIP proposes a time-bound staking rewards program to bootstrap early staking for security, aligned with StudioChain’s community-centric ethos.

The scalable APY design puts control in the hands of KARRAT holders. The more they collectively lock into the network, the greater the collective reward. This design aligns incentives, ensures a fair and transparent mechanism, and minimizes unnecessary emissions.

Rationale

The previous fixed 20% APY model has been enhanced into a community-driven scaling mechanism. This approach incentivizes early participation while protecting DAO resources. By creating a curve where the APY grows linearly up to 20% based on the total KARRAT staked (max 100M), participants are rewarded proportionally based on actual engagement and contribution to network security.

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This model is an extension of StudioChain’s broader staking logic: community ownership, pooled security, and scalable opportunity. It ensures that rewards are proportional to effort and stake, and that incentives are earned for providing a critical function to StudioChain, and are not just given.

Specification

  • Requested Allocation: 20,000,000 $KARRAT from the KARRATco Treasury

  • Program Duration: 12 months from StudioChain mainnet launch

  • Reward Model:

    • Scaled APY model up to 20%
    • Full 20,000,000 $KARRAT will be emitted only if 100,000,000 $KARRAT is staked
    • Rewards distributed proportionally based on each participant’s share of total staked KARRAT across all Resiliency Nodes

  • Eligibility Criteria:

    • Locking $KARRAT into a Resiliency Node (individually or via pooled mechanism)
    • Holding a qualifying My Pet Hooligan NFT to access node participation

  • Lock-Up & Unstaking:

    • After staking $KARRAT into a Resiliency Node, tokens are locked for the first 6 months
    • During months 7–12, unstaking is permitted but will be subject to a percentage-based tax (specific rate to be detailed in implementation)

  • Unused Rewards: Any portion of the 20,000,000 $KARRAT not distributed by the end of the 12-month period will be sent to the burn address 0x000000000000000000

Implementation

  • Treasury Allocation

    • 20,000,000 $KARRAT will be allocated to a dedicated staking reward contract

  • Reward Distribution Contract

    • Smart contract will include logic to scale emissions based on total $KARRAT staked
    • Max cap: 100,000,000 KARRAT Staked/Locked = 20% APY

  • Reward Emissions

    • Emissions will be distributed at regular intervals (e.g., monthly) over 12 months
    • No cliff, vesting, or lock-up on rewards

  • Lock & Unstake Logic

    • Initial 6-month lock period on staked KARRAT
    • Unstaking during months 7–12 is allowed but will trigger a tax penalty (parameters to be finalized in implementation layer)

  • Transparency & Reversion

    • Emissions and staking activity will be publicly viewable on-chain
    • Any unused KARRAT at the end of the program will automatically be burnt

Implementation Costs

KARRAT Foundation will cover development, deployment, and audit costs. No additional funding is requested from the Treasury beyond the 20M KARRAT reward pool

Timeline & Cost

- Start Date: At StudioChain mainnet launch
- Duration: 12 months
- Total Cost: 20,000,000 $KARRAT (scalable based on staking participation)
- Unused Allocation: will be burnt if not allocated as rewards

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Key Issues at a Glance

NFT Gatekeeping: Requiring a My Pet Hooligan NFT to participate excludes many holders, harming inclusivity and decentralization.

Contradictory Handling of Unused Funds: The KIP alternates between stating unused rewards will be returned to the treasury and being burned—these outcomes conflict.

Undefined Key Parameters:

No clear APY formula or worked examples are provided.

The unstaking penalty (“tax”) rate is not specified.

Several critical details are relegated to the post-vote “implementation layer,” leaving ambiguity.

Allocation Size Risks: Allocating 20M KARRAT is substantial; if staking participation is low, it might over-reward a small group.

No Anti-Whale Safeguards: There are no caps or limits, risking concentration of rewards among a few large participants.

Lacks Flexibility: The proposal doesn’t allow adjustments mid-program if network conditions change (e.g., high staking volume).

Governance and Trust Gaps:

Core parameters aren’t fixed before voting.

No clearly defined reporting schedule or provisions for emergencies (e.g., smart contract exploits).

Communication Barriers: The KIP is dense with jargon and lacks a plain-language summary.

Technical Oversights: The supposed visual (APY curve) is absent, and there’s no simulation data or specific audit plan provided.

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  1. Will there be an option to autocompone rewards?
  2. What happens when I stake my NFT/KARRAT tokens? Will I still be able to vote for any proposal once I have staked the tokens and one NFT, even though the tokens are locked?
  3. What happens if I want to sell the NFT after I have staked my KARRAT tokens? Is the NFT locked as well while I have staked some KARRAT tokens?
  4. I do believe the initial lock up period of 6 months is way too long. There should be shorter options available as well, maybe with reduced rewards.
1 Like
4

Hi AMGI team,

Thanks for putting up this proposal.
Where my heart was heating up when seeing this proposal, it quickly also cooled off while reading it. Given this “ internal” emotional reaction, I feel I needed to command on this proposal and make some suggestion to improve on it.

Feedback 1: Introduce a More Gradual, Flexible Staking Model
Suggestion: Instead of a single 6-month lock with binary on/off participation, consider implementing a graduated staking model with multiple tranches:

  • No Lock (0 months) → ~2–4% APY
  • 3-Month Lock → ~6–10% APY
  • 6-Month Lock → ~12–15% APY
  • 12-Month Lock → up to 20% APY

This allows participants to self-select based on their risk tolerance and market view, which is especially critical during the later stages of a bull market when the opportunity cost of capital is high.

You could also tier rewards dynamically based on total network stake per tier, maintaining the community-driven scaling mechanism while increasing participation options.

Rationale:
In a volatile and fast-moving market like this one, hard lockups deter rational actors who may otherwise be long-term supporters (like myself). By offering time-based flexibility, the program becomes:

  1. More inclusive to smaller or cautious holders, increasing the odds to reach full scale staking pools.
  2. More adaptable to different portfolio strategies
  3. Better suited to the realities of the crypto cycle

Ultimately, a diversified staking model increases total participation, supports decentralization, and allows the DAO to gather real-time data on what users actually prefer.

Feedback 2: Define a Clear and Transparent Unstaking Tax Schedule
Suggestion: If a lock-up must be enforced, the unstaking penalty (“tax”) between months 7-12 should be clearly defined upfront and follow a sliding scale, e.g.:

  • Unstake in Month 7 → 10% penalty
  • Month 8 → 8%
  • Month 9 → 6%
  • Month 10 → 4%
  • Month 11 → 2%
  • Month 12 → 0%

Collected penalties could either be burned or redistributed to remaining stakers or the DAO Treasury. This should also be specified transparently.

Rationale:
Without a predefined exit cost, users are staking blind and can’t perform proper risk-reward calculations, especially dangerous in the late bull cycle. A transparent penalty schedule provides:

  • Confidence to participate without fearing arbitrary terms
  • Predictability for those considering early exits for their own reasons
  • A clear signal to the market about how the DAO values flexibility vs. commitment

This type of exit tax clarity is also a Web3 standard now, seen in protocols like Curve, Lido, and Pendle.

Optional Hybrid Model:
You might also suggest offering re-stake options: allowing people to begin with a shorter term and upgrade to longer commitments as confidence and market conditions change. That way, the system:

  • Supports onboarding cautious holders early
  • Encourages deeper commitment over time without punishing the risk-averse
  • Aligns with the long-term vision of StudioChain without forcing lock-ins during market uncertainty
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I don’t recommend adding overly complex mechanisms to the proposal that would create a comprehension barrier for stakers, so I wouldn’t recommend offering too many staking options.

I also agree with the concerns raised by SerHopperfield — owning a Hooli is also a barrier for some smaller stakers. What should be done about DAO voting and delegation?

I’m generally in favor of the current framework, and it would be even better if it could attract more people to participate instead of becoming a game for only a few.

6

Thanks for your feedback to the proposal, which is an important part of the process to ensure this proposal works for the community. We feel there is generally positive sentiment towards the proposal providing the consideration of some of the feedback above.

Based on the comments we would say there are a few prevalent themes here are the following which we can address with you.

  1. The inclusion of Hooligan NFTs in the staking mechanism could provide an extra barrier for entry and exclude a number of holders. Particularly those who hold KARRAT but do not hold Hooligans.

The inclusion of Hooligans as part of the staking mechanism (essentially being an access key) was part of the architecture put forward for Resilience Nodes. This was based on the significant role that the MPH community plays in the ecosystem. At the time when Studio Chain was announced, the community expressed the desire for Hooligan NFTs (or a combination of NFTs/Factions) to be nodes, which would have further added barriers and not been inclusive of KARRAT holders who do not have Hooligans. It is important to note here that Studio Chain is a KARRAT initiative that MPH is supporting. Although MPH NFTs could in theory not be part of this mechanism (which could in turn reduce complexity and provide less barrier to entry) this was done to be in support of Hooligan NFT holders and to be inclusive of the community while providing a lighter method than having Hooligan NFTs be nodes.

Changing NFT participation in the current process would require a change to the architecture proposed and modelled by KARRAT. We can lobby for this change providing there is a strong direction from the community to remove the NFT requirement in the process. By removing Hooligan NFTs as an access key, there would be one less barrier to entry making the process simpler.

If this is desired, we propose this could be done in conjunction with the moderators by means of a poll in Discord so it is reflective of the wider community.

More detailed information on how the specific mechanism would work can be provided at the outcome of this poll by KARRAT.

  1. No clear un-staking penalty provided in the proposal.

Anybody at any time will be able to remove their staked KARRAT. In order to remove your stake, there will be a penalty that will be applied to do so. There will likely be a higher percentage during the first 6 months. Clarity around these percentages will be provided before any system goes live. Feedback has been taken on board.

  1. A more flexible staking model - instead of an initial hard 6 month lock and a simplified mechanism

As above, anybody at any time will be able to remove their staked KARRAT. For clarity, 6 months is not a hard lock. We do not propose to take away anyone’s flexibility to remove or add tokens at any time and we understand the requirement for flexibility here. There will however likely be a higher penalty to do so during the first 6 months for the following reasons.

Given Resiliency Nodes play a vital role in Studio Chain’s architecture to secure the network and provide resiliency. There is a need for strong network security and reliable node participation, which benefits from longer-term commitment. Staking to nodes provides a function to help secure the network, therefore this is different to a typical de-fi staking mechanism. We therefore need to ensure that there is adequate and sustained participation. Providing the community with collective control and goals to hit the maximum lock of 100m tokens for the maximum APY can help maximise participation.

Simply changing the model to offer multiple staking options (e.g. 3, 6, 12 months) with variable APYs, with longer commitments earning higher rewards is a good approach for normal staking programmes but the model designed here is to reward proportionally based on actual engagement and contribution to network security.

Typical staking systems often provide a reverse approach where they offer higher rewards to the earliest stakers which then starts to decline as more stakers get involved. We want to maximize participation here. Therefore if stake participation is low, it does not over reward a small group.

We stand by the scalable APY design. It puts control in the hands of KARRAT holders. The more they collectively contribute into the network, the greater the collective reward. This design aligns incentives, ensures a fair and transparent mechanism, and minimizes unnecessary emissions. This is a pioneering and compliant design which has been developed with legal guidance. It has the potential to set a new standard for others to follow. Rather than defaulting to the same old approach, we have the opportunity to lead from the front while pushing progression and defining the future.

It is simple, it provides one option to stake and the APY will adjust according to the amount of overall participation.

  1. Discrepancy between unused APY allocation being returned to KARRATco or burnt if the 100M target is not hit.

To clarify if the 100M target is not hit, these tokens will be returned to the KARRATco. The statement which refers to a burn will be removed from any formal proposal.

  1. Will you still be able to vote for any proposal once you have staked the tokens, even though the tokens are locked?

Yes this has been considered as part of the design here. So you will still have the equivalent voting power, even when your tokens are staked. We believe this is important to ensure continued participation for all in the KARRATco.

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In conclusion, we have provided some more clarity around some of the concepts challenged and the questions and options of addressing some of these. We are happy to work with the moderators on getting some of the above more in line with the community wants and needs whilst still maintaining a structured approach to resilience nodes in line with the architecture set out by KARRAT. Anything not addressed will come out either in line with an FAQ or further details.

To note all contracts will also undergo auditing by leading smart contract audit houses.

7

My view may differ from that of most community members. I believe we should avoid overly complex mechanisms, high APYs, and high staking thresholds, such as complicated staking combinations. Complex mechanisms will only drive potential KARRAT buyers away from the project, whereas what I need is community expansion. We need volume, even if it comes from traders.

I’m fine with the current proposal because this mechanism won’t be difficult for potential newcomers to understand, and using this as a framework, slight adjustments can be made based on community.

I understand it’s difficult to satisfy the interests of all groups. However, in the node staking proposal, it’s clear that KARRAT is far more important than Hooli and other NFTs, even though I am a giant Hooli holder.

KARRAT is a better choice for expanding the community. When the community expands, everyone will benefit.