Update sip-420.md

content/sips/sip-420.md

@@ -14,13 +14,13 @@ created: 2025-01-06
 
 <!--"If you can't explain it simply, you don't understand it well enough." Simply describe the outcome the proposed change intends to achieve. This should be non-technical and accessible to a casual community member.-->
 
-This SIP proposes a mechanism for SNX stakers to provide staked SNX to protocol-owned staking pool, where the protocol will own the debt and use it to generate yield via Ethena. This reduces the complexity of staking for individual stakers while making the overall system more capital efficient.
+This SIP proposes a mechanism for SNX stakers to provide staked SNX to protocol-owned staking pool, where the protocol will own the debt and use it to generate yield (e.g. via Ethena). This reduces the complexity of staking for individual stakers while making the overall system more capital efficient.
 
 ## Abstract
 
 <!--A short (~200 word) description of the proposed change, the abstract should clearly describe the proposed change. This is what *will* be done if the SIP is implemented, not *why* it should be done or *how* it will be done.-->
 
-This SIP proposes the creation of a protocol-owned debt pool, effectively enabling “delegated staking.” SNX holders can contribute their existing debt positions to this pool, which can support a lower issuance ratio (e.g., 200%) because there is no concern about bad debtors within the pool. Over twelve months, debt positions (but not the collateral) will be transferred to this new staking pool. The protocol will use its newly minted sUSD to mint sUSDe (via the Ethena protocol), providing additional yield. Meanwhile, a higher c-ratio (1000%) will be enforced for solo stakers, incentivizing them to join the delegated system. The collateral from the treasury staking position will be redistributed to all participating stakers over a multi-year period, and an sUSD/USDe liquidity pool will be incentivized for the liquidity of the stablecoin. Finally, 250k SNX from the treasury will be allocated as a bonus for the core contributors who implement this proposal at the council's discretion.
+This SIP proposes the creation of a protocol-owned debt pool, effectively enabling “delegated staking.” SNX holders can contribute their existing debt positions to this pool, which can support a lower issuance ratio (e.g., 200%) because there is no concern about bad debtors within the pool. Over twelve months, debt positions (but not the collateral) will be transferred to this new staking pool. The protocol will use its newly minted sUSD to generate returns for the DAO and it's stakers (e.g. by minting sUSDe via the Ethena protocol). Meanwhile, a higher c-ratio (1000%) will be enforced for solo stakers, incentivizing them to join the delegated system. The collateral from the treasury staking position will be redistributed to all participating stakers over a multi-year period, and an sUSD/USDe liquidity pool will be incentivized for the liquidity of the stablecoin.
 
 ## Motivation
 
@@ -50,14 +50,13 @@ No inflation and mediocre fees have created minimal incentive for SNX staking, e
    - Allow more efficient capital deployment without the risk of bad debtors.
 4. **Transfer each debt position (but not collateral) over 12 months**  
    - Gradual transition ensures minimal disruption to existing stakers.
-5. **Use the sUSD from the delegated pool to mint sUSDe via Ethena**  
-   - Leverage Ethena to generate yield.
+5. **Use the sUSD from the delegated pool to generate returns**  
+   - For example by leveraging Ethena to generate yield.
+   - Penalties, in the form of jubilee reductions, to apply to debt leaving before the 12 months period ends.
 6. **Transfer a portion of the treasury staking collateral to other stakers over 2-3 years**  
    - Redistribute collateral systematically and fairly among participants. Approximately 10m SNX should be allocated for this incentive.
 7. **Incentivize a liquidity pool for sUSD/USDe**  
    - Encourage stable trading between these two synthetic assets.
-8. **Allocate 250k SNX as a bonus**  
-   - Reward core contributors who implement this proposal at the council’s discretion.
 
 ### Rationale
 
@@ -92,10 +91,10 @@ Planned tests will include:
 
 - Issuance ratio for delegated staking (initially proposed at 200%).  
 - C-ratio for non-delegated stakers (initially 1000%).  
-- Time windows for transferring debt vs. collateral.  
+- Time windows for transferring debt vs. collateral (initially proposed at 12 months with a linear debt reduction).
+- Early exit penalty for leaving the pool within 12 months (initially proposed to linearly reduce from 100% at the time of entering the pool to 50% at the end of the 12 months).
 - Incentive amounts for the sUSD/USDe pool.  
-- Amount of SNX allocated from the treasury for implementation bonuses (250k SNX)
-- Amount of treasury collateral to be used as staking incentives (10m SNX)
+- Amount of treasury collateral to be used as staking incentives (initially proposed at 10m SNX).
 
 ## Copyright