Proposal for Community Pool Funding of Staking Rewards


Renew the staking rewards subsidy from the community pool while TVL continues to bootstrap, and until the staking rewards module and Ethos integration for restaked security are completed. We propose that the subsidy be renewed until approximately June 1, 2024, after which any future subsidy, if required, can be evaluated.


During the course of the last staking rewards subsidy (from approximately Feb 2023 to late Jan 2024), the Sommelier protocol was able to effectively bootstrap $70M TVL and accrue fees for stakers of approximately $140,000. The amount of SOMM staked to secure the network grew to 158M SOMM, or 63% of the 250M circulating supply.

With multichain vaults to launch imminently, we anticipate Sommelier’s TVL to grow considerably and therefore accrue even more fees for SOMM stakers. If the most recent month’s accrual were to be annualized, total staker fees would be approximately $500,000 ($65M TVL). The staking rewards rate from these fees is equivalent to ~1.6% assuming 158M staked SOMM and $0.20 SOMM price. While this progress is commendable because many protocols are not distributing earned fees back to token stakers in the form of staking rewards, it may not be sufficiently competitive to maintain the existing staking base nor attract new stakers. Maintaining a strong staking base is vital to the security and operation of the Sommelier network.

At the same time, alternative security models provided by Ethos will allow for a redesign of how rewards for securing the chain and rewards for staking SOMM are computed and distributed. For those unfamiliar with Ethos, Ethos uses EigenLayer to develop a validator protocol for Cosmos chains, addressing the challenge of bootstrapping new chains in the Cosmos ecosystem. Ethos proposes Mesh security, an extension of ICS, where IBC-enabled chains can share security. Validators can opt-in by locking tokens, subjecting them to slashing conditions based on the consumer chain’s protocol. This approach enhances security and token value for native tokens, resolving the bootstrapping issue while minimizing sovereignty relinquishment.

Because these two major developments have not been completed, we propose an interim staking rewards subsidy until approximately June 1, 2024, after which any future subsidy, if required, can be evaluated. These rewards would be distributed out of the Community Pool. Importantly, there would be no change to the total token supply of 500,000,000 SOMM as a result of this proposal as these rewards are all non-inflationary.


This proposal would activate staking incentives funded by the community pool via the incentives module: sommelier/x/incentives at main · PeggyJV/sommelier · GitHub 14

This proposal will adjust two parameters, “DistributionPerBlock” and “IncentivesCuttoffHeight". These parameters control how much SOMM is distributed to stakers every block from the community pool and at what block height these incentives will cease respectively.

If approved, the proposal will set the DistributionPerBlock parameter to ~2.0 (rather than 0) and set the IncentivesCuttoffHeight to approximately 1.8M blocks, or a block height approximately 4 months away. This will enable distribution of the specified number of SOMM per block until the chain reaches the specified block height by approximately June 1, 2024.


Up to ~3.7M SOMM, or ~3% of the current community pool, would be used to temporarily subsidize staking rewards for the period of 4 months. The exact amount of SOMM to be distributed is hard to know in advance, as it depends on block height, but variance is not expected to be greater than 50,000 SOMM.


In this post we outlined a proposal to subsidize staking rewards through the community pool. We believe this is a critical step in bootstrapping the growth of the Sommelier network.

We would appreciate any feedback on how to ensure the proposal best reflects the interests of the Sommelier protocol and community.