Stake DAO Tokenomics Update: Migrating from veSDT to vlSDT
Following the approval of SDGP-63, the Stake DAO protocol is rolling out a major upgrade to its governance and staking system. veSDT is being deprecated and replaced by vlSDT, a simpler, more flexible, and more accessible governance token for the Stake DAO protocol.
This post explains what is changing, why, and what existing veSDT holders need to do.
Why veSDT is being deprecated
The veSDT model, inspired by Curve Finance's vote-escrow design, served the protocol well in its early years. Over time, however, several structural limitations became increasingly difficult to ignore:
- Decaying voting power. Even users who committed to a four-year lock saw their influence erode week after week, forcing them to re-lock simply to maintain their position which was frustrating, and counter-productive.
- Active management overhead. Optimizing voting power and boost required users to avoid claiming rewards, leading to awkward workarounds where boosts were maintained only by not interacting with gauge contracts.
- High barriers to entry. A four-year lock is a significant commitment, and one that discouraged many otherwise willing participants from joining the system.
- Friction in boost markets. Selling and delegating boost was unnecessarily complex because of the linear decay of veSDT, leading to OTC negotiations rather than a clean, unified marketplace.
vlSDT is designed to remove these frictions while preserving the long-term alignment that makes governance staking meaningful.
What changes with vlSDT
The new model is built around a single, simple principle: 1 SDT staked equals 1 unit of voting power, with no decay.
| Feature | veSDT (legacy) | vlSDT (new) |
|---|---|---|
| Voting power | Decays linearly over time | Flat 1:1, no decay |
| Lock duration | Up to 4 years | 8 weeks |
| Exit mechanism | Wait for lock expiry | Request unstake + 8-week cooldown, or early exit with a penalty |
| Boost on liquid lockers voting power | Up to 2.5x | Up to 2.5x |
| Fee distribution | Proportional to veSDT balance | Proportional to vlSDT balance |
| Delegation | Decaying, capped by lock duration | Non-decaying, up to 1 year, integrated with BoostRegistry |
In practice, this means stakers can stake once and keep their full influence for as long as they choose to remain in the system. No re-locks, no decay math, no behavioural gymnastics around when to claim rewards.
How vlSDT works
Staking
Staking SDT issues vlSDT, Stake DAO's non-transferable governance token, at a 1:1 ratio. Voting power and boost utility are credited immediately. While holding vlSDT, users may:
- Participate in on-chain governance of the Stake DAO protocol, on the matters and within the limits set out in the protocol documentation.
- Receive a share of any USDC distributions made by the protocol, funded by a portion of fees from certain Stake DAO products and allocated pro-rata by the fee distributor smart contract.
- Apply a boost to their liquid-locker voting power, or delegate that boost to another address.
Unstaking and the 8-week cooldown
Rather than a hard four-year lock, vlSDT introduces a soft lock: users who want to exit can request an unstake at any time, which triggers an 8-week cooldown.
Effective immediately on submitting the request, for the portion unstaked the user no longer holds the corresponding governance voting power, no longer accrues USDC distributions, and loses the corresponding boost on their liquid-locker voting power.
At the end of the cooldown, the SDT can be withdrawn without penalty.
Early exit
Users who need their SDT before the cooldown ends can withdraw early, subject to an early-exit penalty that decays linearly from 25% at the start of the cooldown to 0% at the end. This makes the system cycle-resistant, holders cannot dump the moment the price moves without paying a meaningful cost, while still preserving an exit path for anyone who genuinely needs one. The penalty is distributed to remaining vlSDT holders.
Delegating the boost
Users may delegate all or part of their vlSDT boost to another Ethereum address for a duration of their choice, up to one year. Delegation is irrevocable for its duration: once submitted, it cannot be cancelled or modified, the delegated vlSDT cannot be unstaked until expiry, and the delegating address does not enjoy the corresponding boost during that period.
This should help unify a previously fragmented boost market and replace ad-hoc OTC arrangements with a clean, on-chain mechanism.
Migrating from veSDT
Migration is user-initiated, voluntary, and one-way. Calling the migrate function on the veSDT contract transfers the locked SDT into vlSDT and credits the user with the full underlying amount regardless of their remaining lock time. Voting and boost utility are issued immediately.
A few important points for current veSDT holders:
- veSDT is sunset. It no longer accrues new rewards or governance rights and no longer provides boost utility. To continue receiving USDC distributions, governance rights, and boost utility, veSDT holders need to migrate.
- Migration is irreversible. Once executed on-chain, it cannot be undone.
- After migration, the cooldown rules apply. SDT held via vlSDT cannot be withdrawn on demand, an unstake request starts the 8-week cooldown described above.
- Existing boost delegations need to be redelegated under the new BoostRegistry framework.
Security
vlSDT contracts have been audited by Trust Security. This does not constitute a guarantee of preservation of the capital, and unexpected behaviours can still happen. The audit report is accessible here.
What this means for the protocol
vlSDT is a meaningful step in the evolution of the Stake DAO protocol. It lowers the barrier to entry for new stakers, removes the management overhead that the previous model imposed on long-term holders, and creates a cleaner foundation for the boost marketplace and partner integrations. Combining the 8-week cooldown and the boost-delegation framework preserves the long-term alignment that governance staking is meant to encode, without forcing users into commitments that no longer make sense for them.
Existing veSDT holders are encouraged to migrate at their convenience to keep participating in governance, USDC distributions, and the boost system.
Legal notices and important considerations
This post is provided for informational purposes only. It does not constitute an offer of securities, financial instruments, or regulated services under applicable European Union, Swiss, or international financial regulations, including Regulation (EU) 2023/1114 on Markets in Crypto-Assets ("MiCA"). It does not constitute investment advice, financial promotion, or solicitation. Participation in staking, governance, or migration mechanisms is voluntary and undertaken at the sole risk of users.
Staking, unstaking, migration, and the issuance of vlSDT are smart-contract interactions recorded on-chain. They do not create any custody or deposit relationship with the Stake DAO Association or any affiliate. Users retain full control of their private keys and transaction initiation; neither the Association nor any affiliated entity has unilateral access to user funds.
vlSDT does not create any entitlement to profits, dividends, or guaranteed returns. USDC distributions to vlSDT holders are variable, are not guaranteed, and depend on protocol activity. The Stake DAO Association does not guarantee the security, profitability, or continued operation of the vlSDT system.
Migration from veSDT to vlSDT is irreversible. Unstake requests are recorded on-chain and cannot be cancelled. Boost delegations are irrevocable for their duration: until the delegation expires, the delegated vlSDT cannot be unstaked, the delegating address does not receive the corresponding boost, and the delegation cannot be transferred to a different recipient. The early-exit penalty rate is a protocol parameter and may be adjusted by governance.
Participation in the vlSDT system entails technological, market, governance, and regulatory risks, including but not limited to smart-contract vulnerabilities, governance capture or manipulation, liquidity and exit constraints, regulatory changes affecting crypto-assets, and economic model failure. To the maximum extent permitted by law, the Association, contributors, and governance participants shall not be liable for any direct or indirect losses arising from participation in the vlSDT system.
Staking, unstaking, claiming rewards, and migrating between tokens may each constitute taxable events in the user's jurisdiction. Users should consult their own tax adviser.
The Stake DAO protocol does not collect, store, or process personal data within the meaning of GDPR or Swiss FADP. All interactions occur via public blockchain addresses. Any off-chain interfaces operated by third parties remain subject to their own privacy policies.