Allocation Strategy for NIGHT Tokens

[Jenisis]

Hello Sundae DAO,

Following the recent community discussion on how to best utilize the ~2.2M NIGHT tokens earned by the SundaeSwap protocol, we’re opening this temperature check to gauge readiness for the next step in governance.

These tokens represent a meaningful asset for the DAO and will play an important role in shaping SundaeSwap’s liquidity environment and long-term sustainability. Several paths have already been explored, each with its own set of tradeoffs and potential benefits for liquidity providers and the broader ecosystem.

This temperature check is meant to measure whether there’s sufficient support to advance one or more distribution strategies toward a formal on-chain proposal. If it fails to reach the threshold, we will proceed with a vote on only Option 1 as the default option.

Context

The following options reflect the main approaches discussed in the Sundae DAO forum and community feedback around how best to utilize the ~2.2M NIGHT tokens earned by the protocol. They represent a range of strategies, from immediate LP rewards to long-term ecosystem growth, and are presented here to gather focused feedback from the Sundae × Midnight team before moving forward with a formal DAO temperature check.

Options

Option 1 - Direct Distribution (Snapshot Match)
Distribute the ~2.2M NIGHT directly to liquidity providers based on the same snapshot used to generate the original NIGHT tokens, on the same vesting schedule.

• Simple distribution to match the NIGHT vesting schedule.

• 1 year claim window, counted from each vesting period; any expired tokens reverting to the DAO treasury.

Option 2 - DUST Engine / Strategic Retention
Retain NIGHT in the Sundae protocol to generate DUST and subsidize transaction fees (especially on Midnight). Instead, distribute an equivalent token. This token will be redeemable in the future through a smart contract in return for NIGHT with a 30% bonus. This smart contract will be funded by 100% of protocol revenue generated by a version of SundaeSwap built and deployed on Midnight until all ~2.86M NIGHT tokens have been redeemed.

• Improves user experience for SundaeSwap on Midnight through gasless swaps.

• Gives the Sundae protocol a strategic advantage in the Midnight ecosystem.

• Creates long-term strategic utility for the DAO.

Option 3 - Hybridize Option 1 and Option 2
Allocate exactly 2.1M NIGHT pro-rata as in option 1. At the time of claim, allow users to opt in to forfeiting their NIGHT claim in return for the revenue share token described in Option 2. Allocate the remaining ~100k NIGHT to the Sundae Labs team to cover the cost of modifying the claim portal to support this option.

• Allows each user to choose which option is more valuable to them

Next Steps

If this temperature check receives sufficient support, a formal proposal will be drafted to reflect the preferred approach(es) and brought forward for DAO voting.

• Interested

Thank you for your participation.

[jerry]

Thank you for the detailed temperature check, Jenisis it’s a thoughtful approach to handling these 2.2M NIGHT tokens and aligning them with SundaeSwap’s long term vision.

To clarify my understanding The proposed distributions particularly in Options 1 and 3 seem tied to the original snapshot for liquidity providers, meaning holders who only stake or hold SUNDAE without having provided liquidity in the qualifying pools wouldn’t directly receive NIGHT allocations. Is that accurate?

If so, I’d propose a modest tweak to broaden appeal and drive ecosystem growth Allocate lets say 10% to 15% of the tokens roughly 220k - 330k NIGHT for a targeted airdrop to pure SUNDAE holders via a fresh snapshot. This could vest over time to encourage retention, while keeping the bulk focused on LPs as outlined. The rationale? It rewards loyal governance participants, lowers the entry barrier for new users curious about Midnight integration, and could spark viral interest potentially increasing TVL and liquidity without diluting the core LP incentives. Thoughts from the community on folding this into a hybrid option?

[Quantumplation]

All three involve a snapshot from the liquidity providers; Option 1 passes through those allocations directly; Option 2 gives the NIGHT to the Sundae treasury directly, but uses the snapshot to distribute a token worth 1.3 NIGHT each, funded from revenue of a privacy focused DEX on Cardano; and Option 3 lets users choose which they want to receive on a case by case basis; it means the Sundae DAO will have less NIGHT overall, because many will choose just to receive their NIGHT immediately, so the effectiveness of what the DAO can do with that NIGHT will be greatly reduced.

Your proposal would have to be a separate competing temperature check at this point. That being said, the DAO will be receiving it’s portion of the NIGHT from it’s protocol owned liquidity, so there is a portion of NIGHT that could be allocated to a purpose like that without modifying this proposal.

[jerry]

Thanks for the update on the temperature check great to see 100% interest from the voters so far!Appreciate the clarity makes perfect sense. The POL portion is the perfect home for this, and I agree no need to muddy the current LP focused proposal. I’ll hold off and draft a clean separate temperature check focused solely on a modest sundae holder airdrop from the DAO treasury pool. Will aim to align timing with the formal Lp proposal draft so both can move in parallel without overlap. ill come Back soon with a tight version. Thanks for the steer!

[bog1]

I’m a bit confused by option #2 . What do you mean by equivalent token ? The redemption would be something else rather then night token ?

For me option #1 sound the way to go since i would like to retain my share of night token based on the snapshot and would gladly be in favor of having sundae run a midnight pool/node and deposit my share in there !

[antisdelnoah]

Option 1 seems the most fair because the LPs are the source of the ADA for which the $NIGHT was rewarded.

[Quantumplation]

Option 2 would issue a token which is not NIGHT, but on the same pro-rata split as if we did option 1; each one of those tokens would be redeemable for 1.3 NIGHT, instead of 1 NIGHT. Where would the extra 0.3 NIGHT come from? As we build out a version of SundaeSwap that works on Midnight, it will be designed to take protocol revenue and purchase NIGHT to fund that distribution. So it would be on a delay, and the length of that delay would be dependent on how much revenue the Midnight version of SundaeSwap generated. All of this would be designed to be done purely through smart contracts, without involvement from Sundae Labs. So once it was built, it would be automatic.

Option 3 allows each user to choose whether they want to receive NIGHT (as in option 1), or the revenue share token (as in option 2).

[Quantumplation]

Note that all 3 options end up distributing NIGHT to the LPs that generated that NIGHT; it’s just a question of choice, timing, and amount.