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Litepaper

Socean's vision

Socean aims to solve the following pain points:
    1.
    Billions of dollars worth of staked SOL sit idle instead of serving as collateral or as liquidity in financial markets.
    2.
    The lack of good tools and infrastructure to monitor and manage stake means that most users delegate to a small handful of nodes--typically the most prominent--and hardly change their delegations thereafter. This comes at the expense of balancing staking rewards and risk and incentivising better network performance.
The Socean stake pool aims to solve these pain points via the following:
    1.
    The SOCN token, representing ownership of staked SOL in the Socean pool, will allow holders to participate and profit in the DeFi ecosystem while earning full staking rewards. We think it is likely that SOCN will replace the use of SOL in many DeFi use-cases, including market making, margin trading, lending, yield farming, and further DeFi innovations in the Solana ecosystem.
    2.
    Socean will provide a suite of tools to make it easy to monitor stake allocation and performance metrics. The protocol makes decisions about its dynamic allocation via a principled, unbiased delegation strategy that takes into account historical data and network health. We aim to maximise staking rewards, reduce specific risk and increase decentralization, and meritocratically support well-performing, lesser-known validators.
Socean's long term goal is to become a fully-autonomous stake management system. This objective will be achieved in stages, gradually replacing managerial roles with on-chain and permissionless infrastructure.

Delegation strategy

Socean will launch with an initial delegation strategy, then transition into a more sophisticated optimal delegation strategy.

Initial delegation strategy

Socean will start by delegating in equal proportions to the top-performing N (50-100) validators that have self-staked at least 100 SOL, and are not in either the minimal security group or the minimal data center security group.
Definitions:
    Top performing: validators with the highest staking returns for the past 5 epochs
    Minimal security group: minimum number of validators whose cumulative stake exceeds 33.3% of all staked SOL
    Minimal data center security group: minimum number of data centers hosting validators whose cumulative stake exceeds 33.3% of all staked SOL
The significance of 33.3% is that it corresponds to the amount of stake required to halt the network.

Future delegation strategy

The Socean team will base its eventual delegation strategy on Bayesian mean-variance optimisation and utility theory. We give a simplified explanation below. The full explanation can be found in our technical whitepaper below
We first define our utility function, which expresses how much we care about APY, risk, and decentralisation:
U=eβTotalSOLαNetworkHealth(w)U = -e^{-\beta \cdot TotalSOL - \alpha \cdot NetworkHealth(\mathbf{w})}
Here,
β\beta
is the degree of risk aversion, and
w \mathbf{w}
is a weighted allocation of stake.
The network health is a function of stake concentration in individual nodes as well as datacenters and jurisdictions.
We use recent work on Bayesian statistics (Bauder et al. 2020) to express the expected utility as a function of historical data, and use gradient descent to find a weighted allocation corresponding to the approximate maximum utility.
Socean will transition over time into becoming fully autonomous. Holders of our governance tokens will be able to vote on pool parameters, including parameters such as
α\alpha
and
β\beta
above.
You can read more details in our technical whitepaper below:
socean_delegation_strategy-2021-07-30.pdf
294KB
PDF
Delegation strategy technical whitepaper

Tokenomics and governance

Socean aims to transition into a fully autonomous, decentralised stake management system. We plan to introduce a governance token that allows tokenholders to vote on the delegation strategy, the management fees, and redeem their tokens for the fees that Socean earns. We will provide more details at a later date.

Last modified 2mo ago