dHEDGE
https://gov.optimism.io/t/review-gf-phase-1-proposal-dhedge-v2-revised/3321
Recommendation
We support this proposal due to signs of specific PMF and the possibility of extending services in a targeted way but have some feedback that would have made it stronger.
Background
dHEDGE is a yield strategy aggregator. It pools independent providers’ yield generation strategies and allows users to seed them for rewards.
It’s been in secular decline for over a year, with the lone noticeable bump in TVL attributable to its arrival on Optimism.
Certainly part of this is due to macro headwinds and systemic declines in yields, but in general we’re unclear how much product-market fit dHEDGE have managed to hit in this time.
Where they have had success has been as a hedging solution for SNX stakers - it’s been the most visible growth driver for the protocol on OP. There is undeniably value being offered here. Our hypothesis is that dHEDGE’s primary objective ought to be to discover new strategies and target motivated users of those strategies.
In general, this kind of activity is good for Optimism; this protocol helps other protocols work better, as we’ve seen with Synthetix hedgers. We think there could have been more direct facilitation of new solutions like this rather than the untargeted supporting of pools with no clear indication of new development.
It would be interesting to see dHEDGE brainstorm OP-specific, socially useful yield strategies and consider how best to support them.
Asks
245k OP to distribute to dHEDGE pool tokens, ~10k OP / week
We’re of the opinion that this was defined too indiscriminately and by construction leads to nonsticky TVL. Why? Because their headline yield — how well the strategy works — is what matters. A poorly yielding investment plan with a subsidy returns to being just a poorly yielding solution once the subsidy expires.
This is unlike, for instance, yield protocols whose economic success depends on certain types of protocol/partner activity or user beliefs and can be bootstrapped.
105k OP for DHT/OP liq mining bribes, 17.5k OP / month, or ~4.4k / week, matched 1:1 with DHT
We’d want to know why it’s necessary to target $1.2mm TVL on their coin when to date they’ve only had half this (currently have $500k across chains) and been able to function well. DHT isn’t required for their yield strategies. In addition, dHEDGE has a treasury and thus the capacity to bribe themselves. Overall, we don’t see any obvious material benefit from subsidizing this piece but would be happy to discuss.
What this does for Optimism
To be clear, we believe this protocol can continue to serve unique functions for the ecosystem. This proposal lacks the specific definition required, but we think that some post hoc tuning of the OP distributions (considering we’re already in voting) would make this a fine grant.