OIP-4 Implementation Update #2 – Reward Gating Changes & What Comes Next
As part of our commitment to transparent governance and keeping the community informed, we are sharing an update on the ongoing implementation of OIP-4. This follows from Implementation Update #1 where we covered final changes to the Delegate Reputation Score (DRS) model and onboarding logic.
TL;DR – Key Changes at a Glance
According to the implementation schedule outlined below, most of what was proposed in OIP-4 is launching as planned, including the Delegate Reputation Score (DRS) system, which will help inform delegation decisions, and the delegate compensation mechanism, which remains gated by DRS and is set to go live shortly.
However, one important change had to be made: staking rewards will not be gated by DRS, due to technical and architectural limitations.
After deeper technical review, we realized that gating rewards isn’t compatible with maintaining stOBOL as a fully composable, yield-bearing token. We believe the benefits of a liquid, DeFi-compatible staking asset outweigh the drawbacks of removing this gating mechanism.
The current plan still delivers on the core incentives outlined in OIP-4, even if the scope is slightly reduced. We believe that with DRS live and delegate compensation tied to it, we already have a meaningful framework in place to encourage good governance behavior and signal quality to token holders.
For now, we feel comfortable keeping things as they are. The structure is sound, and the incentives are aligned. If in the future we determine that an additional mechanism is needed to further reinforce governance alignment (for example, introducing a form of gating or signaling tied to DRS), we’re open to that discussion. Any change would of course go through the proper governance process, including open discussion and a formal vote.
But today, we believe the priority is to focus on growing the protocol with the Collective, leveraging the strong foundations we’ve already put in place.
What’s Next – Launch Timeline & Collective Participation
Here’s what you can expect:
- Week of July 28:
- DRS scoring will launch publicly on Tally and Curia
- No rewards or delegation mechanics will be affected (for now)
- Week of August 18:
- Launch of Delegate Compensation, gated by DRS
- Active delegates will be eligible to receive a share of the Delegate Rewards Pool
- Launch of Delegate Compensation, gated by DRS
We’ll also share additional communication, guides, and a live AMA to help everyone understand what’s changing and why it matters.
1. No Gating of Staking Rewards via DRS – Why This Changed
Originally, the plan was to gate staking rewards behind the DRS system, meaning that only token holders who delegated to “active” delegates (those maintaining a DRS ≥ 65) would earn staking rewards.
After final implementation reviews with engineering and product partners, we came to an important realization:
While a single staking token (stOBOL) by itself does not currently enable gating of staking rewards without affecting DeFi utility and liquid staking composability, it is technically feasible to gate additional rewards using the autodelegate strategy, where stakers can receive supplementary rewards based on their delegate’s minimum DRS score.
To enforce reward eligibility at the contract level would require each staking position to be uniquely tied to a delegate’s DRS status. On the other end, keeping stOBOL yield-bearing by default makes it more attractive to hold, use in DeFi, and build with. This composability is key to unlocking integrations. The ability for stakers to earn yield regardless of delegation status is a feature, not a bug. Ultimately, this shift strengthens stOBOL as a utility token and helps bootstrap a more vibrant onchain economy for the Obol Collective.
We believe that this upside far outweighs the potential benefits of gating staking rewards by delegate behavior. And as you’ll see below, we’re not losing the governance signal but redirecting it in a more scalable, trustless way.
Instead of compromising on composability and liquidity, we’re choosing a more resilient and future-aligned path:
- stOBOL remains fully fungible and yield-bearing by default
- It encourages broader participation in staking and DeFi
- No staking rewards gating via DRS
- But… DRS will remain a core reputational and visibility system that incentivizes good delegate behavior and influences how delegations flow.
2. What Role Does DRS Still Play?
Even without direct gating of rewards, DRS still provides meaningful incentives:
- Delegate Compensation will still be gated by DRS: only active delegates (DRS ≥ 65) will be eligible.
- DRS remains critical for delegate visibility and influence
- Delegations will still trend toward high-DRS delegates
- DRS will be visible to stakers to inform better delegation choices
- Token holders will be nudged in the UI toward active delegates
DRS is still a powerful mechanism to reward responsibility, signal trustworthiness, and help the collective grow with aligned governance.
3. Additional Implementation Notes
While the updates above reflect the most significant shifts in our launch scope and strategy, we also want to acknowledge two smaller (but important) implementation decisions that have been finalized:
Delegates Compensation Distribution — Square Root Model Confirmed
Following the discussion period, we’ve decided to stick true to the initial proposal and to move forward with the square root model to distribute compensations from the Delegate Rewards Pool.
This means that once a delegate is classified as active (DRS ≥ 65), their share of the pool will be calculated proportionally to the square root of their delegated voting power.
This model helps:
- Support smaller but high-performing delegates
- Prevent reward monopolization by a few large players
- Encourage a healthier and more distributed governance system
While we’ll keep monitoring for edge cases or unexpected abuse, we believe this model strikes a good balance between fairness and decentralization.
DRS Oracle Update Timing Aligned to Governance Cycle
We’ve aligned with Curia on a consistent schedule for publishing on-chain DRS updates via the oracle. This will ensure transparency and predictability in score calculations.
Here’s how it works:
- Oracle updates will occur 6 days after the end of the submission window in each 21-day governance cycle.
- This buffer ensures that all proposals, even those submitted at the very end of the window, have their full 5-day voting period completed before scores are finalized.
- For example: if the submission window ends on June 18, the corresponding DRS oracle update will be pushed on June 24.
This cadence will be used going forward to avoid discrepancies and ensure accurate scoring across all eligible proposals in each cycle.