World Liberty Financial staking proposal puts $1m price tag on USD1 market making

A proposal from the creators of World Liberty Financial, the Trump-backed crypto project, aims to put a price on the ability to profit by market making its USD1 stablecoin.

According to the February 25 proposal, those who hold and stake 10 million WLFI tokens — dubbed Node stakers — will receive the right to convert USD1 directly to other stablecoins through the project’s partner market makers. This will allow Node stakers to profit from small price differences that emerge between USD1 and other dollar-pegged tokens.

“WLFI subsidises the market makers to maintain one-to-one parity, effectively passing the arbitrage opportunity — which today is captured exclusively by institutional market makers at ~10–15 bps — to Node stakers,” the project said in the proposal. Bps, or basis points, is a common financial term referring to one hundredth of a percentage point.

At current WLFI token prices, governance participants need to spend around $1 million to become Node stakers.

Since the start of the year, World Liberty Financial’s USD1 stablecoin has swelled to a circulating supply of over 4.7 billion, becoming the fifth-largest stablecoin on the market.

Although USD1 and many of its rivals are backed one-to-one by dollars, they are not hardcoded to trade at that price, and instead rely on market forces to keep them close to their targeted value.

This creates a lucrative opportunity for market makers — financial firms or individuals who continuously offer to both buy and sell various stablecoins and profit when they deviate from their targeted value.

World Liberty Financial’s new proposal ensures that firms that want to take advantage of market-making opportunities for USD1 also give something back to the project.

WLFI lock-ups

The proposal comes just days after World Liberty Financial said it suffered a “coordinated attack” that briefly knocked USD1 off its target dollar value.

“Attackers hacked several WLFI co-founder accounts, paid influencers to spread FUD, and opened massive WLFI shorts to profit from the manufactured chaos,” a Monday post from the official World Liberty Financial X account said.

USD1 returned to its targeted dollar value the same day it broke its peg. Yet, spooked investors have pulled out over $290 million from the Trump-linked stablecoin since the incident, according to DefiLlama data.

World Liberty Financial’s proposed staking system also overhauls how the project’s governance operates more generally.

Those who wish to vote on proposals must lock up their tokens for a minimum of 180 days.

According to the proposal, governance power will be weighted by the amount of tokens staked and the remaining lock-up duration using a non-linear formula to prevent excessive concentration of voting power.

“This ensures that voting power is held by participants with long-term alignment to the protocol who elect to participate in the governance consensus mechanism, not short-term holders or speculators,” the project said.

In addition to the $1 million Node staker requirement, those who stake over $5 million worth of WLFI will receive additional benefits, including guaranteed direct access to the project’s team for partnership discussions and eligibility for any future economic incentives.

Stakers will receive additional WLFI tokens as rewards at an annual rate of around 2%, as long as they participate in governance votes. WLFI staking rewards will be funded by the project’s treasury.

The WLFI token has traded down around 1.6% since the proposal was posted to the World Liberty Financial governance forum.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.