Create sip-422.md

Author: 0xrobin2192

content/sips/sip-422.md

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+## sip: 422
+title: Simple SNX Staking
+network: Ethereum
+status: Draft
+type: Governance
+author: Robin (@robin2192), Fenway, Kain
+created: 2025-04-27
+
+## Simple Summary
+
+Introduce a debt-free staking mechanism for SNX holders on mainnet that distributes 5 million SNX in rewards over 52 weeks. Users can unstake at any time, but earned rewards are subject to a time-based penalty if they exit before the end of the program. Forfeited rewards are returned to the Treasury.
+
+## Abstract
+
+This SIP proposes a new SNX staking initiative designed to be simple, transparent, and flexible. Users stake SNX and earn rewards pro-rata over 52 weeks. If users unstake before the program concludes, a penalty is applied to their earned rewards, starting at 100% and linearly decreasing to 10% throughout the staking period. At the end of 52 weeks, no penalty applies.
+
+The penalty system incentivizes long-term alignment while allowing liquidity at any time. All forfeited rewards are returned to the Treasury.
+
+## Motivation
+
+Historically, SNX staking required users to manage sUSD debt, creating complexity and friction. With the launch of the 420 Pool and protocol-managed debt, there is an opportunity to offer a simple, flexible staking mechanism to engage passive SNX holders during the transition to Synthetix V4.
+
+This initiative provides yield to SNX holders without the burden of debt, encourages long-term participation, and ensures Treasury recapture of forfeited rewards in case of early exit.
+
+## Specification
+
+### Staking Mechanics
+
+- **Network:** Ethereum Mainnet
+- **Token:** SNX
+- **Program Duration:** 52 weeks
+- **Reward Pool:** 5,000,000 SNX
+- **Reward Emission Rate:** 5,000,000 SNX ÷ 52 weeks ≈ 96,153.85 SNX/week
+- **Eligibility:** All wallets that deposit SNX into the staking contract.
+- **Entry/Exit Flexibility:** Users can deposit or withdraw SNX at any time. Principal SNX is never penalized; only earned rewards are subject to penalties.
+
+### Penalty Mechanism on Early Withdrawal
+
+- **Applies to:** Earned SNX rewards only (not principal stake).
+- **Penalty Rate:**
+    - Starts at 100% penalty at program launch.
+    - Decreases linearly to 10% by the start of week 52.
+    - At program conclusion (after 52 weeks), penalty = 0%.
+- **Penalty Formula:**
+    - Penalty % = max(10%, 100% - (Week_Number / 52) * 90%)
+- **Examples:**
+- Withdrawal at week 13 → ~77.5% penalty.
+- Withdrawal at week 26 → ~55% penalty.
+- Withdrawal at week 39 → ~32.5% penalty.
+- Withdrawal at week 52 → 0% penalty.
+- **Penalty Destination:** All forfeited SNX is returned to the Treasury Council.
+
+## Rationale
+
+This mechanism offers several key benefits:
+
+- **Simplicity:** Users no longer manage debt or complex vesting mechanics.
+- **Flexibility:** Users can exit at any time, with clear penalty-based consequences.
+- **Transparency:** The penalty rate is predictable and easy to display on UI.
+- **Treasury Alignment:** Early exit penalties return value directly to the Treasury.
+
+It creates a smooth glidepath toward long-term SNX holding without locking users into rigid structures.
+
+## Technical Specification
+
+### Smart Contract Requirements
+
+- Accept SNX deposits and enable withdrawals.
+- Track user's deposit amount and cumulative rewards.
+- Calculate weekly rewards based on proportional stake.
+- Apply a withdrawal penalty to earned rewards based on the current program week.
+- Route forfeited rewards to a Treasury address.
+
+### Configurable Parameters
+
+- Weekly emission amount
+- Penalty floor (initially 10%)
+- Treasury destination address
+- Ability to pause deposits or withdrawals (emergency powers)
+
+## Test Cases
+
+1. **Full Term Completion:**
+- User deposits on day 0.
+- User withdraws after 52 weeks.
+- No penalty applied; user receives full earned rewards.
+1. **Midway Exit:**
+- User deposits on day 0.
+- User withdraws after 26 weeks.
+- 55% penalty applied to earned rewards.
+1. **Late Entry, Early Exit:**
+- User deposits at week 10.
+- Withdraws at week 39.
+- Penalty based on week 39 (~32.5%) applied to all earned rewards.
+
+## Reference Implementation
+
+A new staking contract will be developed and audited by Synthetix core contributors or approved vendors. Upon SIP approval, the Treasury Council will allocate 5 million SNX to fund the program.
+
+## Security Considerations
+
+- Ensure accurate calculation of user rewards and penalties.
+- Protect against manipulation of withdrawal timing or re-entry exploits.
+- Conduct security audit prior to deployment.
+- Provide monitoring tools for Treasury inflows from forfeited penalties.
+
+## Copyright
+
+Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain/zero/1.0/).