SIP-8: Revenue-Backed sUP Rewards and 7-day Cooldown

Governance
1

Abstract

This proposal establishes a new sUP rewards framework that transitions sUP incentives away from fixed monthly treasury emissions and toward a revenue-backed base reward + upside model.

If approved, sUP rewards will move from a fixed 500,000 UP per month reward schedule to a weekly epoch model with:

  1. A governance-defined base APY target funded first by protocol net revenue routed to sUP.

  2. A variable upside component funded by additional protocol revenue and programmatic buybacks.

  3. A capped treasury emission bridge when protocol revenue and buybacks do not fully cover the base target.

This proposal is intended to reduce reliance on inflationary rewards without capping the revenue-funded upside available to sUP stakers.

Background

SIP-1 activated fee routing to the sUP vault and converted a portion of protocol revenue to UP and routed to sUP stakers.

SIP-2 extended the sUP redemption cooldown from 1 hour to 2 weeks and formalized a fixed sUP reward rate of 500,000 UP per month. At the time, this represented approximately 54.5% APY at then-current staking levels.

Since SIP-2 passed, market conditions and staking participation, including upcoming validators, has changed materially.

SIP-7 attempted to address this by replacing fixed monthly emissions with a 20% target APY. Community feedback made clear that the proposal was perceived as replacing uncapped variable upside with a lower APY target.

SIP-8 takes a different approach. The goal is not to cap sUP upside. The goal is to reduce unsustainable inflationary rewards while making sUP rewards increasingly tied to actual protocol performance.

Motivation

To date, 323,024 $UP tokens have been purchased directly from protocol revenue, with 129,209 of these tokens being sent directly to the sUP vault. A total of 1,633,333 $UP tokens have been sent from the Treasury, representing a 50%+ APY, but also a 1:10 revenue to emission ratio backing sUP APY.

The current reward model relies too heavily on treasury emissions. That may be useful during bootstrapping, but it should not be the long-term foundation for sUP rewards.

Long-term sUP rewards should come from the value Superform creates: protocol revenue, buybacks, validator participation, and ecosystem growth.

Proposal

SIP-8 replaces the fixed 500,000 UP monthly reward model with a base + upside rewards framework calculated on 7-day epochs.

Change 1: Establish a Base APY Target + Uncapped Upside

sUP will target a governance-defined base APY.

The initial base APY target shall be 20%.

The base APY should be funded in the following order:

  1. Protocol net revenue routed to sUP under SIP-1.

  2. Programmatic UP buybacks allocated to sUP rewards.

  3. Governance-authorized treasury emissions, if revenue and buybacks are insufficient (capped at the pre-existing 500,000 UP per month rate)

If protocol revenue and buybacks allocated to sUP from 1 & 2 exceed the amount required to fund the base APY for an epoch, the amount is kept entirely by sUP stakers.

Change 2: Reduce the Existing 14-Day Cooldown Period to 7 Days

The existing 14-day cooldown created significant illiquidity for sUP stakers while the original intent was to create a more robust system for determining governance weight. This proposal reduces the tradeoff users must make when staking.

Mechanism

Each 7-day epoch, the Superform Foundation calculates:

  1. Average eligible active sUP supply.

  2. Protocol net revenue routed to sUP.

  3. Programmatic buybacks allocated to sUP rewards.

  4. Base APY requirement for the epoch.

  5. Treasury emissions needed to meet the base target, if any.

  6. Revenue-funded upside available for distribution, if any.

Rewards are funded and distributed in this order:

  1. Protocol net revenue and buybacks fund the base APY.

  2. If revenue and buybacks do not fully cover the base APY, treasury emissions may cover the shortfall up to the authorized cap.

  3. If revenue and buybacks exceed the base APY requirement, excess revenue-funded rewards may be distributed as variable upside.

Rewards are distributed to the sUP vault at the end of each epoch. When rewards are sent, the vault price per share increases. Active sUP holders benefit through the increased price per share.

Example

Assume 20M eligible active UP staked as sUP.

At a 20% base APY target:

annual base rewards = 20,000,000 * 20% = 4,000,000 UP
7-day base rewards = 4,000,000 * 7 / 365 = 76,712 UP
monthly equivalent = approximately 306,000 UP

Compared with the current fixed 500,000 UP per month rate, the base reward requirement would be slightly lower at that active stake level.

However, under SIP-8, sUP stakers are not limited to the base APY. If protocol revenue and buybacks exceed the base requirement, the excess may flow to active sUP stakers as variable upside. For example:

Superform yearly revenue run rate = $2M
7-day protocol revenue = $38,500
revenue and buybacks allocated to sUP = 385,000 UP
monthly equivalent = approximately 1,540,000 UP
apy = 90%+

In that scenario, the realized sUP APY for the epoch would exceed the base target because protocol revenue outperformed the base requirement.

Rationale

SIP-8 makes sUP rewards more sustainable and more aligned with protocol economics while preserving upside for long-term stakers.

The current fixed monthly reward amount was useful for early certainty, but it no longer scales cleanly with active staking participation, validator growth, or protocol revenue.

A base + upside model is cleaner:

  1. Rewards scale with actual active sUP participation.

  2. Protocol revenue and buybacks fund rewards before treasury emissions.

  3. Active long-term stakers can benefit when protocol revenue outperforms the base target.

  4. Cooldown shares stop earning immediately, preserving alignment with active stakers.

  5. Emissions become easier to reason about, cap, taper, and govern.

  6. sUP remains attractive without relying permanently on excessive fixed subsidies.

This preserves the intent of SIP-2 while improving the mechanism.

It also addresses the main concern raised during SIP-7: sUP rewards should become more sustainable, but the model should not be framed as a hard cap on protocol upside.

Governance Considerations

  • This proposal modifies the reward-rate parameter established by SIP-2 and reduces the SIP-2 cooldown parameter from 14 to 7 days.

  • This proposal does not modify the SIP-1 fee routing parameter.

  • Governance may update the base APY in a future proposal.

  • Governance may update the treasury emission cap in a future proposal.

  • Governance may approve an explicit emission taper schedule in a future proposal.

  • Governance may later modify the cooldown duration or introduce separate reward tiers.

  • This proposal does not create ownership, equity, dividend, or profit-sharing rights.

  • This proposal does not guarantee future protocol revenue, future buybacks, or a fixed return.

  • The base APY is a governance-defined rewards target, not a guaranteed yield.

  • Revenue-funded upside depends on actual protocol revenue and buybacks.

Timeline

  1. Vote passes.

  2. Current fixed 500,000 UP per month schedule is retired at the end of the current reward period.

  3. First 7-day sUP rewards epoch begins at the next reward epoch boundary.

  4. First base + upside reward distribution occurs at the end of that epoch.

Voting Options

For

Vote For to:

  • Replace fixed 500,000 UP per month sUP rewards with a 20% base + upside 7-day epoch rewards framework.

  • Reduce the current 14-day cooldown to 7 days.

Against

Vote Against to:

  • Make no changes.

  • Keep the current reward model based on fixed 500,000 UP monthly rewards under SIP-2 and 14-day cooldown.

Abstain

Abstain from voting.