Simple Summary
FUSE staking has been funded by inflation since day one. That model served its purpose: it bootstrapped the network and rewarded early validators. But we’re now approaching the end of that runway. With supply nearing the 400M cap and inflation winding down on a fixed schedule, this is the right moment to ask what replaces it.
This proposal upgrades the staking model with a clearer separation between staker and validator roles, introduces a cooldown mechanism to liquid staking, begins capping inflation, and allocates treasury funds to bridge the transition to revenue-funded rewards. It’s a temperature check. We want community feedback before formalizing anything.
Background: Where FUSE Stands Today
FRC02 proposed a max supply of 400,000,000 FUSE. While that hard cap was not enforced in the contract, the step-down inflation schedule it introduced is live and well underway. We’re currently in the 1.5% phase (Aug 2025 to Aug 2026).
At the final step, 0.5% on a ~400M supply means roughly 2M FUSE in annual emissions. Staking yields funded purely by inflation become thin at that level, particularly for delegators without validator economics to supplement them. This is a structural shift that needs a structural answer.
On FRC03 and the L2 Direction
FRC03 explored an L2 staking model for Fuse Ember. We’re closing that chapter. As announced in the Fuse Network Roadmap Update published earlier this month, Fuse is staying on L1. The performance gap that originally motivated the L2 direction no longer exists: the Nethermind node upgrade (v1.29.0 to v1.36.2), developed in collaboration with Liquify, brings throughput to a level that meets the network’s needs without the tradeoffs of L2.
L2 node holder considerations are being addressed in a separate process and are not part of this proposal.
What We’re Proposing
Four changes, introduced together.
1. A clear separation between staker and validator roles
These are two distinct roles with different economics, different responsibilities, and different mechanisms.
Stakers delegate FUSE to validators through liquid staking. They receive sFUSE as a liquid representation of their position and earn rewards from the staking pool (currently inflation, transitioning to treasury and eventually protocol revenue). Entry and exit are relatively low friction, subject to the cooldown period described below.
Validators run the infrastructure. They register through an onchain process, are required to lock up a minimum FUSE stake for a defined period (see governance question below), and earn the standard 15% fee on top of delegator rewards in addition to their own staking yield. Validators can also set their own fee rate, giving them a market-based lever to attract delegation and, in turn, voting weight.
2. Cooldown period for liquid staking
Liquid staking without any cooldown creates an incentive to extract yield without meaningful commitment. We’re adding a 7-day unbonding period for stakers who want to exit. This applies to everyone by default.
If you need to exit faster, there are two paths: convert sFUSE to FUSE through Voltage Finance and pay the DEX fee, or trigger a fast withdrawal and pay a 5% early exit fee. We’re proposing 5% as a starting point and welcome community input on whether that’s the right number.
3. Validator unbonding period
Validators operate under a longer lockup. Entering and exiting the validator set takes approximately 4 days, following the unbonding model used by networks like Polygon. This is an economic safeguard: validators are making a longer-term commitment to the network and the lockup reflects that.
4. Treasury allocation to bridge the transition
To keep staking yields meaningful as inflation winds down, we’re proposing an initial allocation of 50M FUSE from the Fuse treasury to fund staking rewards over approximately two years. This is not inflation. It’s a finite, transparent commitment from the protocol to support the transition.
To give a rough sense of scale: 50M FUSE distributed linearly over two years is approximately 68,500 FUSE per day. At current prices, the annualized yield this generates for stakers depends heavily on total staked supply. We’re working through three scenarios (FUSE price appreciates, holds, or declines) and will share the full simulation before this moves to a formal vote. The 50M figure is our working proposal and may be refined based on that analysis and community feedback.
5. Gradual inflation cap
Rather than allowing inflation to passively wind down toward 0.5%, we’re proposing to introduce a formal on-chain cap and accelerate the transition away from emissions-funded rewards. The exact mechanism will be proposed in a follow-on technical FRC. The principle is simple: staking rewards should increasingly come from product revenue and treasury, not from diluting token holders.
Governance
No changes to the governance model. The existing delegated proof of stake mechanism remains in place: validators participate in on-chain votes directly, and their voting weight is determined by the FUSE delegated to them by stakers. Stakers influence governance through their choice of validator.
This dynamic already creates a natural incentive for validators to compete on fee rates to attract delegation and, in turn, voting power. Validator fee flexibility reinforces this without requiring any changes to the underlying governance architecture.
The Path to Revenue-Funded Rewards
The treasury allocation is a bridge, not a destination. As Solid scales and generates product revenue, that revenue is used to buy FUSE off the open market and distribute it to stakers. This creates direct buy pressure from real commercial activity and keeps stakers aligned with the token’s long-term value.
Protocol revenue in scope in the first instance: transaction fees, Solid revenue, and Voltage fees. The percentage allocated to staking rewards is set by governance and adjustable by community vote over time.
Open Questions for the Community
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Does the staker/validator separation make sense as described? Anything missing from either role?
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Is the 5% fast withdrawal fee the right level, or should fast exits route exclusively through Voltage?
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The validator minimum stake is not defined in this proposal. We’re leaving it open for community discussion. What should the minimum be, and should it vary by network role or be uniform?
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Does a 50M FUSE treasury allocation feel right in size and duration?
This proposal is open for comment. We want to hear from validators, delegators, and FUSE token holders before anything is formalized.