Step Reward Options are a unique incentives program for users of the Step platform and stakers who delegate SOL to the Step Validator. Reward Options are airdropped to eligible Step user’s wallets every 5 days and can be claimed on the Step Dashboard.
This guide will explain how they work and how to qualify for airdrops each period.
There's often confusion among users who are new to call options and Step’s Reward Options.
Let’s start by defining the necessary terms:
A Call Option contract gives you the right, but not the obligation, to buy the underlying asset at the Strike Price before the contract’s expiry date. If the Strike Price of the call option is below the asset’s current trading price, you’re able to buy it at a discount to the current market. Who wouldn’t want to buy an asset cheaper than the current market price?
Strike Price: The price at which you have the right to buy the underlying asset.
ITM (In the Money): If an options contract is ITM, the current market price is above the Strike Price. Meaning, if you choose to exercise the option and buy the asset at the Strike Price, you will be buying the asset at a discount to current market value.
OTM (Out of the Money): If an options contract is OTM, the current market price is below the Strike Price. There would be no point in buying an asset at a higher price than current market value, so the options contract cannot be exercised if it remains OTM at the expiry date.
Step Reward Options function as a call option on STEP with an issued strike price +10% higher than the price of STEP at the time they are minted and are valid for 15 days.
Step Reward Options were designed to be a less dilutive system to token holders than typical farming/liquidity providing emissions programs often found in DeFi.
In a bear market, Reward Options are likely to expire OTM (out of the money) and therefore no new coins are issued resulting in no dilution to holders. In a bull market with appreciating asset prices, more of the issued call options will end up exercisable and ITM.
During uptrending markets, token emissions will have less negative impact on the STEP token than comparably, if the same emissions occurred in a down trend.
When markets rally, the Step Dashboard then becomes an ideal place to regularly swap tokens, as swappers will earn additional Step rewards for every trade they make.
The only forms of STEP token emissions are Step Reward Options and payouts to community members who participate in the StepDAO Bounties Program.
All wallets delegating SOL to the Step Validator receive Reward Options relative to their proportion of staked SOL every 5 day period. Those using Directed Stake on either Marinade or SolBlaze liquid stake platforms to stake with Step's validator are also eligible. Directed Stake allows users to choose which validator they delegate SOL to, and in return receive the LSTs (liquid stake tokens) mSOL or bSOL.
Advanced DeFi users should consider increasing their staking rewards by using mSOL or bSOL staked to the Step Validator within other Solana protocols such as Orca or Kamino.
Reward Options are airdropped for free to users of the Swap feature on Step pro-rata to the amount of fees paid relative to other users within each 5 day period. This makes swapping on the Step Dashboard the most profitable place to swap tokens during bull market periods.
The full mechanism and details of Step Reward Options can be found in our docs here.
The last six periods of Reward Options distributions can be found on the Dashboard here.
Still not fully grasping Step Reward Options?
Let's go through a quick example to solidify your understanding:
In this example:
$1.00 is the Strike Price.
The coupon was the Call Option contract.
When GARY coins went above the $1.00 Strike Price, the coupon became In the Money (ITM)
If you swapped on Step or staked SOL with the STEP validator within the previous 5 days, you will see your Reward Options near the top of the Dashboard.
Note: Reward Options won't immediately appear after your first swap, you will have to wait until the next batch to be airdropped to users. New Reward Options are issued every 5 days.
Users wanting to claim their airdropped Reward Options will need a balance of USDC in their wallet to purchase the discounted STEP tokens. Only ITM options have the claim button enabled next to them; OTM options cannot be exercised.
With enough USDC in your wallet to exercise the call option, hit the Claim button and approve the transaction from your wallet.
The USDC used to purchase STEP is sent to the Step fee wallet.
150k STEP is is available per 5 day period, distributed pro-rata to the amount of SOL stake and fees they have paid compared to everyone else who paid fees in that 5 day period.
Reward Options are valid for a 15 day period from issue date and will expire if not exercised in that time.
The USDC sent to the fee wallet is used buy back STEP tokens from the open market, and distributed evenly to xSTEP stakers. The intent with Reward Options for the team is to place bids with the USDC below the exercise price thereby buying back more than is issued and placing a floor price on STEP.
This is a far more productive method of new emissions to enter circulation as it only happens after a fee to the protocol has been paid that new supply enters circulation, mercenary ‘farm and dump’ LP emissions are avoided and USDC acquired from exercised Reward Options is used to set floor pricing on STEP and market buy STEP to be sent to xSTEP stakers.
For those interested in tracking protocol revenue, the fee wallet can be publicly viewed on the Step Dashboard.
Along with USDC acquired through Reward Options, all other protocol revenue generated by the Step Organization is sent to the fee wallet to purchase STEP and distribute to xSTEP holders.
The staking APY for xSTEP stakers is non-dilutive to holders, as the STEP distributed to stakers was previously purchased by the fee wallet using protocol revenue. No new tokens are emitted into circulation to make up the staking APY.
For more info on the staked form of STEP, see our Learn Guide How to: xSTEP
More info on brands under Step Organization can be found on the StepDAO website.
Any questions about Step Reward Options or the Step Organization?
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