Idea: Introducing Stablecoin Rewards for OIS Stakers

Ideas Bank
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Summary

This proposal explores the idea of distributing a portion of OIS (Oracle Integrity Staking) rewards in stablecoins (e.g., USDC primarly from the Pyth DAO Reserve) instead of exclusively in PYTH tokens. The goal is to reduce sustained sell pressure on $PYTH, better align incentives with long-term supporters, and make OIS staking more attractive to a broader set of participants while preserving $PYTH’s strategic role in governance and protocol alignment.

This is an idea-stage proposal intended to gather community feedback and assess feasibility (economic, technical, and legal).

Motivation

Currently, OIS rewards are primarily distributed in $PYTH tokens. While this aligns stakers with the protocol, it also:

  • Increases circulating supply through emissions

  • Creates predictable sell pressure from stakers who need liquidity

  • Encourages short-term farming behavior rather than long-term commitment

Core Idea

Introduce an option (or partial mechanism) for OIS staking rewards to be paid in non-PYTH assets, primarily stablecoins such as USDC, sourced from protocol revenue or treasury allocations.

Key principles:

  • PYTH remains the staking asset (no change to OIS security model)

  • Stablecoins are used only for rewards, not governance power

  • Rewards favor long-term, loyal stakers rather than short-term farmers

Revenue Source Considerations

The current primary revenue source for stablecoin rewards is Pyth Pro, Pyth Network’s premium data offering that generates protocol revenue from institutional and professional users.

Using a portion of Pyth Pro revenue for OIS rewards would:

  • Align staker incentives with real protocol usage and adoption

  • Avoid excessive $PYTH emissions and supply inflation

  • Create a clearer link between oracle performance, data demand, and staker rewards

Any allocation from Pyth Pro revenue would remain subject to DAO governance decisions, treasury constraints, and legal review.

Possible Reward Structure (Conceptual)

This is one illustrative model; exact mechanics are open for discussion.

1. Dual-Source Rewards

  • Base rewards: PYTH emissions (unchanged or reduced)

  • Bonus rewards: USDC sourced from:

    • Protocol revenue

    • Treasury-approved allocations

2. Loyalty / Duration Boost

  • Longer staking durations via OIS receive higher reward multipliers (eg 1.25x, 1.5x, 2x)

  • Early unstaking forfeits part of the stablecoin bonus

  • Encourages alignment with Pyth’s long-term vision

3. Anti-Farming Design

  • Stablecoin rewards vest or accrue over time

  • Boosts are non-transferable and reset on unstake

  • Emphasis on consistency, not capital size alone

Why Stablecoins?

  • Reduces immediate sell pressure on $PYTH

  • Introduces real yield perception for stakers

  • Attracts participants who prefer predictable returns

  • Separates security alignment ($PYTH staking) from reward extraction

Importantly, this does not eliminate $PYTH rewards entirely, but complements them.

Buybacks vs. Stablecoin Rewards

A common counterargument is that protocol revenue should be used for $PYTH buybacks instead.

This proposal does not oppose buybacks. Instead:

  • Buybacks support price and long-term value

  • Stablecoin rewards support user behavior and retention

A hybrid approach may be viable, depending on revenue scale.

Open Questions for the Community

  1. Revenue Source: Which revenue streams (if any) are appropriate for OIS rewards?

  2. Allocation: What percentage should go to buybacks vs. staker rewards?

  3. Legal / Compliance: Are there jurisdictional constraints around distributing stablecoins?

  4. Governance: Should stakers choose between PYTH-only or mixed rewards?

  5. Security: Any unintended incentives affecting oracle quality or participation?

Next Steps

  • Gather feedback from stakers, node operators, and governance participants

  • Request input from Pyth Foundation / legal contributors on feasibility

  • Refine into a formal proposal if community interest is strong

This idea aims to strengthen OIS by rewarding loyal participation, reducing reflexive sell pressure, and aligning incentives with Pyth’s long-term sustainability. It is not a finalized design, but a starting point for meaningful discussion.

*Community feedback, critiques, and alternative designs are encouraged.

Special thanks to @arguer , @Amensch for your ideas and contributions.

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Illustrative Scenario

This idea should be viewed as an incremental step toward a more sustainable OIS, not something that needs to be implemented immediately.

While current OIS inflation (8% ARY) may not feel problematic in the short term, it is material over a long time horizon. The intent of this proposal is therefore to explore whether protocol revenue could naturally offset or reduce $PYTH emissions over time, rather than replace them outright.

The goal of this section is to assess whether such a mechanism is plausible and achievable under realistic revenue assumptions, not to propose specific parameters.

Currently, we have:

Total $PYTH staked in OIS Target staking APY Monthly $PYTH emission
~972M PYTH 8% ~6.48M PYTH

Resulting Implications:

If the DAO were to fund 50% of OIS staking rewards in USDC, the approximate monthly stablecoin requirement under different $PYTH price assumptions would be:

$PYTH Price Monthly USDC (50% offset)
$0.06 ~$195k
$0.10 ~$324k
$0.2 ~$648k
$0.5 ~$1.62M
$1 ~$3.24M

These figures are intended to illustrate that partial emission offsets are not inherently “far out”, particularly at current or modest $PYTH price levels.

Interpretation

  • At current staking levels and APY, even relatively modest DAO revenue could offset a non-trivial portion of $PYTH emissions

  • While the short-term impact may be limited, emission reductions compound meaningfully over time

  • If the price of $PYTH increases significantly, the revenue required to sustain a given APY would rise accordingly

Again, these numbers are illustrative only and meant to inform discussion — not to set expectations or parameters.

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Closing Remark

More generally, I hope this sparks a broader discussion around how DAO revenue could be used over time. Supplementing OIS rewards is just one possible direction, not a prescription.

There are many other reasonable uses of protocol revenue — buybacks, treasury management, ecosystem incentives, or approaches we haven’t thought of yet. The point here is to start thinking more deliberately about how revenue can support long-term sustainability and alignment as Pyth matures.

Happy to hear feedback, pushback, or alternative ideas from the community.

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this can be a good one
looking forward for the big boys take on this

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Thanks for your reply.
I am also looking for response from the pyth team or douro lab :blush:
Anyway I am glad to initiate this idea.

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Good thinking

Reserve rewardning locked in stakers could bring in some heat back to ios

Lookin fwd

Gg

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Ser, read it fully and need to state my concern as well:

  1. We are discussing the selling pressure. Well, if we are talking about Pyth staking and APY in PYTH that is understandable, if we are to switch to stable model it means that actually Pyth token needs to be market sold to acquire the stables, hence the same market pressure can happen in this way

  2. From another option of view, if you could provide please some data f.e. how many addies are selling their rewards vs how many people are restaking their rewards. It’s quite a thin line here and would be very great to identify exact number to confirm either the validity of such a proposal or not

I guess we should also assess the overall conditions of the market as well

Just my 5 cents - keen on to hear your opinion on that

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Solid proposal mate and something I have seen floated within other communities also with staking rewards.

I think one way to avoid sell pressure to achieve this solution would be to use a portion of the DAO revenue already acquired in USDC for these payments if it were to go ahead. Although this would then take away from buybacks going towards the Pyth Reserve.

Keen to see what the team think and I think this is definitely worthy of consideration alongside other options for uses of DAO revenue.

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My view is that Pyth rewards paid in Pyth tokens to both publishers and OIS stalkers would not increase sell pressure at tiny prices.

At high prices sell pressure would increase dramatically. Holders might sell their staked OIS tokens at a price beyond the tokens perceived future value. This might have a destabilizing effect on price feeds if the volume of tokens unstaked was high. That’s something to consider.

If the market believes the future token value is $1000 then they would likely hold at $100 or $50.

Whether a OIS staker is paid in Pyth or stable coins will not have a material impact on the price of the Pyth token. I believe that leaving rewards in Pyth token is beneficial to the price. The greater the price the greater the reward.

The main focus should be on planting a sufficiently large perceived value into the minds of the market.

This is done by increasing revenue at an incredible pace. Possibly by adding new revenue sources and penetrating new markets.

Second, if the Pyth tokens held, including OIS staked tokens, could be used as collateral for loans. I believe that would be appealing to wealthy investors increasing buyers and reducing sellers.

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Great write up mate, its clear you have put a lot of thought into it.

  1. I dont know if , having stables as bonus rewards will negate the sell pressure for emitted $PYTH tokens.
  2. The regulatory uncertainity over providing stables as incentives, that puts us in unchartered territorries
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Dear ser,

Thanks for your reply. Actually I have written an example scenario of how to use the DAO revenue for OIS. We are not going to sell pyth token to USDC or any stables.

Hence there will not be market pressure in this way.

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Exactly, I am proposing an idea to use a portion of the DAO treasury in USDC for OIS.

This post is for discussion purpose. I want to hear more feedbacks from our community members. Also, from the team.

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Dear ser,

Yeap the regulatory uncertainity is potentially an issue. And, I cannot provide any legal advice in this matter. But, I guess the whole market is now shifting from narrative to more revenue-oriented or with real usecases. We need to cover it soon or later.

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