[DRAFT] [GF: Phase 1 Proposal] Curve

So I guess the problem is that (as currently constructed), this proposal doesn’t really represent Curve doing anything to bring TVL to Optimism. It would be the 1M in OP rewards doing that.

Drop 50k/week in direct LP incentives on Beethoven or Uni/Arrakis and you’d see similar results. Drop that much on Velodrome bribes, you’d likely be able to attract 2x the TVL. And any of those options wouldn’t come with the need for fees or bribes to head off chain.

I’d like to see this proposal reflect some kind of mutual investment from Curve and/or it’s major stakeholders commensurate with the ask from Optimism Governance.

I also continue to think that working with the foundation to explore a partner grant for a full Curve deployment on Optimism might be a better first step for all parties.

Can help make intros there if helpful!

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  1. Thank you for offering your help to make intros. The dev team does not need any grant to build on Optimism (although if offered organically from Optimism’s side without us asking for it, we won’t say no). This proposal only wants incentives for Optimism users through Curve, and does not ask for any incentive to build on Optimism. Personally: dev teams asking for incentives to build is … not aligned with the ethos of crypto and open finance.

  2. Our veCRV implementation is already deployed across all chains, but it hasn’t been activated yet for the reasons I mentioned earlier (dependency on a pending EIP that deprecates Merkle Patricia Trees in favor of Verkle Trees).

  3. It is in Optimism’s best interests that a variety of markets be incentivised, since that diversifies liquidity. Aggregators take care of the rest.

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Lido Finance is set to offer its staked Ether across all L2 networks starting with ARB and OP first out the gate. OP could become the main place to swap stETH if this Curve liquidity mining proposal goes through as liquidity begets liquidity. This could be a massive benefit to the OP ecosystem.

Is this a grant for Optimism growth or a fealty payment to Curve?

fealtypayment

As others have mentioned, would it not require multiple other layers to be deployed onto Optimism to even get a functioning self contained Curve ecosystem on Optimism?

Why only now when grants are on the table has Curve decided to actually make any movements with Optimism, especially since Curve is so well funded on its own?

If you’re going to post from other forums, please post enough context so participants here can understand my response:

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Incidentally, this poster seems to have made some kind of generalization about me based on my support of this proposal that may be affecting his judgment:

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I was not sure if the Gov forum was family friendly so edited out my loose wording, thanks for providing the extra context though. I am highly skeptical of Op grants being easily granted to well capitalised projects where there is a large potential for it to be siphoned off chain and back to mainnet.

See my expose on Perpetual Protocol that did something more explicit here:

I can see a similar eventuality in this instance although not as blatant or as deliberate, but due to Curve’s main mechanisms being outside of Optimism.

Yeah, we’ve been working with Lido since launch. OP will certainly be the place to swap stETH, but we won’t need to send any more fees back to L1 than necessary to do that. :wink:

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As some have expressed concern over mercenary liquidity and all the benefits of the program going back to mainnet, it may be useful to look at a previous instance of Curve being the beneficiary of such an incentive program.
From early October 2021 to January 2022, Curve was one of the protocols selected to receive a grant in WAVAX as part of Avalanche’s Rush program aimed at developing DeFi on the chain. The WAVAX grant was redistributed by Curve to liquidity providers of the aave (3pool equivalent with lending) and tricrypto pools. The chart below shows the TVL of these two pools over time, with the highlighted area denoting the duration of the Avalanche Rush program:

As you can see, the incentives (doubled with CRV incentives) proved extremely successful and helped drive the TVL from nothing to over 1 billion dollars. There was a TVL dip in both pools once the rewards ended, but this only proved temporary. By February both pools had recovered and the aave pool went to reach a new ATH in TVL and maintained deep liquidity until the recent market downturn.

Not only did the incentivized pools maintain their TVL long after the incentive program had ended, they also did so in a more competitive environment. Another stableswap platform with veTokenomics, Platypus, launched on Avalanche in January and went on to reach over 100m TVL (they too, benefitted from incentives as part of the Avalanche Rush programs). This should assuage the concern raised by the Velo team above, as it shows that competition is not a zero-sum game It helped increase the overall TVL of the Avalanche protocol while both competitors also increased their TVL. A competitive ecosystem on Optimism will bring more users and more value than a single monopolistic player.

Finally, one should note that the growth of Curve’s TVL as a result of the incentive programs also created many positive externalities as other projects built upon Curve. On Avalanche, Abracadabra, Beefy.finance, Blizz, Yeti.finance, Yield Yak are some of the protocols that offered products relying on Curve pools and yield, which themselves brought more users and liquidity to the chain.

tl;dr Liquidity stays on Curve even after incentives are gone; Curve growth strongly contributes to development of the chain’s ecosystem.

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I may have just woken up but that chart shows 4 months after incentives ended the TVL was less than where it started… :face_with_monocle:

I want to be clear: I think a fully deployed Curve would absolutely be good for both Optimism and Velodrome.

Velodrome’s success depends 100% on the success of the ecosystem, which is why we’re increasingly vocal in governance. I think it is clear now that some of the early proposals led to less than ideal outcomes and that is something we’re committed to doing our best to help avoid going forward.

Every new grant has an opportunity cost and dilutes those previously distributed, so we need to make sure the ROI is there as we continue to invest.

For me personally, subsidizing TVL and volume that will ship 50% of fees off chain may be a deal breaker given the existence of alternatives (not just Velodrome) that don’t require this kind of value extraction. Likewise for the requirement that projects will have to go to mainnet to engage in Curve governance to have a shot at having a gauge that might be eligible for the rewards.

If in the future these obstacles are removed, I’ll feel differently. I think the future is on L2 and Optimism users should be able to get the full Curve experience if we’re going to drop 1M in incentives on it.

That said, if these aren’t deal breakers for others here is something I think could make the proposal stronger.

Choose a single public good pool (like tri crypto) and vote to make it eligible for CRV emissions on Optimism. Then work with a collection of Curve stakeholders to commit to a certain amount of voting power that would be dedicated to this pool over the duration of the incentive program. Then request an equal proportion of OP incentives as a match or boost to those emissions.

This way, you are growing Curve on Optimism with OP incentives in a way that doesn’t gatekeep participation to those with mainnet presences. You are also functionally matching the incentives that Optimism governance is granting you, demonstrating a commitment to ecosystem investment.

Market nuked. Some coffee in the morning helps!

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This is a good suggestion, thanks. (I hear this may actually be in the works already). We will discuss with Curve team about launching and gauging a tricrypto on Optimism. Tricrypto is indeed an important one imo

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To be clear, we’re talking about 0.02% of volume being sent to layer 1 (not some random other chain). Assuming ~$1m volume per day, that amounts to $73,000 per year. I think it’s a bit hyperbolic to call that deal-breaker level “value extraction”.

Speculatively, traders could plausibly save that much on slippage alone.

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Not up to speed on this proposal but I saw this on the twitter feed. Pretty weird angle to take? Threatening to focus on a different L2 if they don’t get a grant?

I think it’s worth noting that the expected amount to be “extracted” to L1 is far less than the amount that Velodrome directly airdrops to veVELO lockers (~500,000 OP). These airdrops provide no direct value to the Optimism ecosystem and are essentially a subsidy to boost the price of VELO.

Indeed, the majority of OP funds requested by Velodrome directly benefit Velodrome development with no direct benefits to the Optimism ecosystem more broadly. For example, 600,000 OP are allocated to “protocols that integrate Velodrome’s liquidity layer” and another 600,000 are allocated to developing a “vote delegation and autocompounding feature that is directly built into Velodrome”.

By contrast, distributing OP tokens to LPs (as in this proposal) incentivizes liquidity on Optimism, a direct benefit to the ecosystem.

Given these details, it’s hard to avoid the conclusion that Velodrome is trying to push a double standard to “lock out” their perceived competitor.

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So just so you know - we withdrew this grant request from governance after receiving 3m $OP from the partner fund. Those incentives have actually done a lot to help onboard a huge amount of TVL ($123m).

By incentivizing veVELO lockers to vote, and direct emissions (of variable value, depending on token price), we are incentivizing liquidity.

These airdrops provide a direct value to the Optimism ecosystem, as witnessed by Optimism’s climb from #15 to #11 on DefiLlama’s “All Chains TVL” rankings.

We love Curve, and have repeatedly said that we are eager for Curve to continue expanding on Optimism once the technical hurdles presented by Curve team member’s above allow for it.

Let me state publicly: I am not concerned in the slightest about the impact of a $1.6m grant in terms of any “competition” between Curve and Velodrome. I think our system is robust, and we are actively working to improve our UI, bribing contract, and other elements of our protocol. That should and will be our primary focus.

Anyway, as Cryptoyieldinfo stated, our real fight is against the CEXs, not a protocol that we have long admired, and that I personally have been using faithfully since launch.

I support granting curve OP to incentive their growth on Optimism.

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Despite the furious back channeling, discord spamming, unrelentless tweeting, Velodrome team (apparently the frontline of Optimism governance) has yet to explain a very simple thing. This misunderstanding (some would say FUD) was evident from the very start, has been elaborated on, and actively deflected with irrelevant, out-of-context screenshots from these other venues. This form of engagement that Velodrome prefers has drawn praise from some quarters as “hustle” or “being passionate” and self-described as unavoidably part of “an inherently political process”:

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I do believe it is worthwhile to cut through the noise. Very rarely can one find the original causal force that starts a complex mass moving. But sometimes you can find one screenshot:

This “feeling” (less than one day after the draft proposal was posted) that value will entirely flow back to Mainnet is the initial, powerful impulse that has led to this wide-ranging discussion happening in multiple venues of social media. Everything since then has been some form of elaboration or deflection on this basic feeling.

So let’s put aside all the noise. Let’s put aside the silly inaccuracy about pool2s in the tweet, which he repeated here, and let’s put aside the various leading questions asked by Alex Cutler in his posts here, including his strange screenshot of Mainnet pools, before he finally decided to “weigh in”.

Let’s talk about this feeling that value will flow back to Mainnet. Why would someone feel that 2 basis points of volume going back to Mainnet will result in everything else going back to Mainnet?

On the face of it, this is an absurd claim.

Rather than address why 2 basis points of volume is so crucial, they ask a related but quite different question, which is easier for them to defend. In behavioral economics, this is called the substitution heuristic. When faced with a hard question you can’t answer, you substitute a similar, but different question that is easy to answer. It is quite deceptive and easy to pull off and funnily enough, not always done to you by others but by yourself. Why? So that your smoll brain can avoid facing reality.

Instead of asking the relevant question, they substitute with:

  • do you believe it’s right for value to flow back to Mainnet?
  • do you believe Optimism should incentivize value to leave Optimism?
  • do you believe people should be voting on Mainnet for something that affects Optimism?
  • do you believe Curve should be doing more on Optimism?
  • do you believe people should be allowed to use Curve on Mainnet if they use Curve on Optimism?
  • isn’t it better to not use Mainnet at all?

Note how many of these questions have to do with beliefs, particularly about seemingly deep issues that when actually pondered are quite vapid. For example, “do you believe Curve should be doing more on Optimism?” Obviously more Curve LPs will come if there are more incentives. So the practical matter is, if you want Curve LPs to come, you give them more. And why do you want them to come? Because the more of them, the better the trading and more traders come too. There is no deep philosophy here.

That doesn’t matter if the purpose is to deflect of course. Then the more absurd the better, as people get distracted from the real question:

Would 2 basis points of all the volume Curve brings to Optimism going back to Mainnet result in everything else going back to Mainnet?

So remember, next time the Velodrones ask you, “Something something value on Mainnet?” just ask them to answer this first. This is in fact the most pertinent question if you are interested in making money trading on Optimism, not in holding some vague idealistic philosophy that happens to very coincidentally align with defending one protocol’s moat.

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hey just fyi in the above post I noted that I support granting Curve their requested $OP.

We should certainly not rely on my “feelings”! Appreciate you laying out the numbers for us.

I do hope that a revision of the proposal will provide more clarity around co-incentives and maybe outline something Curve can bring to Optimism in the near future (tricrypto, for ex, as mentioned above would be amazing.)

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Been a bit busy… started writing that earlier and just posted it now, maybe after nobody cares anymore :). I think it still has some value though in reiterating what I believe to be the fundamental question here. Thanks for your other post and your support.

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I understand and appreciate your emphasis on numbers. I do disagree that our questions around this grant come from a place of fear / trying to maintain a competitive edge (ex: we have OP, they dont), but that the original points have been a bit lost in a nasty argument that I for one have zero interest in engaging in.

I do think its important that grants consider carefully the structure of protocols that are multichain, I do think governance is a political process - it involves debate - as you have participated in!

And I also think that Curve expanding their liquidity incentives to Optimism pools is a net positive for the ecosystem.