- Project Name: Liquity
- Author Name: TokenBrice
- Number of OP tokens requested: 500 000 OP
- L2 Recipient Address: 0xd2D4e9024D8C90aB52032a9F1e0d92D4cE20191B
- Number of LUSD on Optimism: 19,2 M, with 9,023 transfers and 91 holders.
- On mainnet, Liquity has $394.95M of TVL (DeFiLlama).
LUSD has been one of the first stablecoin to come to Optimism, thanks to Synthetix, which used a LUSD wrapper to stabilize sUSD on Optimism that absorbed close to 45M of LUSD on Optimism at some point, and still, has > 15M LUSD mobilized.
Thanks to the launch of Velodrome and the veVELO NFT airdrop Liquity received, a LUSD/USDC pool was created and voted on by the Liquity team. It now has over $1.2M of assets.
Finally, the cBridge added support for LUSD to enable fast withdrawal to mainnet.
While the Liquity protocol is not deployed on Optimism (mainnet only), LUSD, the stablecoin outputted by the protocol, has a solid and growing presence on the network. Along with sUSD, LUSD is one of the few stablecoins that is not centralized nor collateralized by centralized and censurable stablecoins.
More information about LUSD on Optimism is available here: https://www.liquity.org/blog/lusds-growing-usage-on-optimism
The OP tokens will be used to grow and sustain LUSD foothold on Optimism. They will help to attract attention and assets to new integrations and support their growth until a critical mass is reached:
- Liquidity bribes [40%] on Velodrome to grow LUSD/USDC liquidity (200k OP/year)
- Bridge incentives [30%] Incentives on cBridge or Hop to facilitate bridging LUSD back to mainnet (150k OP/year)
- Borrow incentives [20%] (Once live) potentially – borrower incentives for LUSD on Aave/Optimism (100k OP/year)
- Community/Ecosystem Grants [10%]: OP tokens will be distributed as grants to users and developers, building tools and partnerships to help the protocol grow its presence on Optimism. The grants will be paid out directly in OP. (50k OP)
Optimism direly needs credible stablecoins that are not subject to censorship. Indeed, Liquity is a top-tier Ethereum protocol and still the only protocol offering a stablecoin 100% powered by immutable smart contracts.
We believe that growing LUSD liquidity on the network is a net positive by itself, not only for Liquity but also for Optimism, as it diversifies the stablecoin offering and offers a credible hedge if regulation-related issues were to arise on a major centralized stablecoin.
Right now, the only liquid bridge is the official one with the seven days withdrawal delay. Considering that LUSD can only be minted on mainnet by taking on some debt, we’re confident users would be more comfortable bridging their LUSD to Optimism if they know they can withdraw them quickly to repay some debt if needed.
The low transaction fees on Optimism attract users who are concerned about the resilience of their stablecoin but not able to afford mainnet fees on L1 — LUSD on Optimism presents a credible offering to such profiles, currently filled by no other stablecoins.
Liquity has never relied on rewards for usage and still reached the top 20 Ethereum protocols in terms of TVL.
Depending on the integrations obtained (LUSD on Aave/Optimism?), the budget asked for should sustain at least one year of incentives, potentially one year and a half.
Despite being the top stablecoin on Optimism supply-wise at the OP launch (~50M LUSD on Optimism then), Liquity has not received any OP grants so far. Moreover, LUSD was decisive in helping sUSD maintain its peg and reach the massive adoption it’s currently seeing on Optimism.
Liquity has been a supportive actor of the Optimism ecosystem since the Velodrome launch. However, the team usage of incentives is minimal: even the Curve mainnet pool is not incentivized but supported through gauge votes, just like the Velodrome pool. Ultimately, it’s up for discussion within the Liquity team (since the protocol has no DAO and no governance), but I’d like to manage expectations: it’s unlikely.