[DRAFT] [GF: Phase 1 Proposal] KyberSwap

This is a resubmission under the new proposal format. Community vote has not taken place. Link to previous proposal under the old format: [READY] [GF: Phase 1] KyberSwap

Project Name: KyberSwap by Kyber Network

Author Name and contact info: @shaneMkt | Twitter: shaneMkt | Email: shane@kyber.network | Telegram: shaneHk

I understand that I will be required to provide additional KYC information to the Optimism Foundation to receive this grant: Yes

L2 recipient address:

0x5891be896ed4a79ed928c55b17fbbecdb46f8a00

Which Voting Cycle are you applying for?:

Cycle 8 - season 2

Grant category: DeFi

Is this proposal applicable to a specific committee? (If so, please link to committee): DeFi

Project description (please explain how your project works):

KyberSwap is a DEX aggregator and liquidity platform that aims to provide the best rates for traders on Optimism, while enabling liquidity providers to maximize earnings through capital efficiency. Kyber is an Ethereum and DeFi pioneer and was the most used DeFi protocol in 2019.

KyberSwap is deployed on Optimism and shares its motivation for a collaborative cyberspace. OP incentives would be used by KyberSwap to drive user, liquidity, and ecosystem growth. Chainlink is also supporting KNC price feeds on Optimism so KNC can be used as collateral on lending platforms.

KyberSwap brings substantial benefits to Optimism users:

  1. For Traders: KyberSwap aggregates liquidity from different DEX pools (including KyberSwap’s), getting the optimal trade route and best price. This may even route volume to external DEXes such as Velodrome or Uniswap depending on the quality of liquidity, thus further contributing to the Optimism ecosystem. Traders can identify tokens that are ‘Trending’ or ‘Trending Soon’ using a detection algorithm that tracks on-chain metrics as volume and market cap.

  2. For Liquidity Providers: LPs deposit tokens into liquidity pools and earn compounding fees. Pools are flexible and have features such as anti-sniping and concentrated liquidity, mimicking higher levels of liquidity and achieving better capital efficiency, volume, and returns. By extension, this means OP grants used as liquidity incentives would result in a much bigger impact on liquidity and swap rates compared to typical DEXes.

  3. For developers: Optimism Dapps and wallets can integrate with KyberSwap pools and aggregation API to provide the best rates for their own users, saving time and resources.

Project links:

Founders/Advisors/Team:

Founders and Advisors

Proposal author from Kyber team

Please link to any previous projects the team has meaningfully contributed to:

Kyber is a mature project that is a pioneer in the Ethereum and DeFi space and has been operational for 4+ years without facing any major vulnerability.

  • Kyber initiated and co-launched Wrapped Bitcoin (WBTC), the most used wrapped version of BTC in the DeFi space today, and we aim to bring similarly innovative initiatives to the Optimism space.
  • Kyber has partnered with Lido Finance to bring low slippage, optimized liquidity for liquid staking pairs such as wstETH and wstMATIC (as well as USDC, ETH, LDO liquidity) to Ethereum, Polygon, Optimism, and Arbitrum.
  • Kyber has partnered with Multichain to provide an alternative UI with seamless bridging of cross-chain assets.
  • Created the Waterloo Cross-chain Bridge in 2019, a decentralized practical bridge between EOS and Ethereum, which inspired NEAR protocol’s Rainbow Bridge.
  • Kyber has organized and participated in various hackathons that contributed to the launch of top DeFi projects. Examples:
    • Kyber DeFi Hackathon 2019 with our partners Enzyme Finance (previously called Melon), Synthetix, Chainlink, bZx, Compound, and WBTC, helped launch Zapper (previously called DeFiZap)
    • Kyber’s bounties in Ethereum hackathons such as ETHSingapore and ETHBerlin helped launch 1inch.io
    • InstaDapp won a Kyber bounty with their integration in ETHIndia 2018, contributing to their successful launch

Relevant usage metrics (TVL, transactions, volume, unique addresses, etc. Optimism metrics preferred; please link to public sources such as Dune Analytics, etc.):

KyberSwap metrics

  • Over $11.6 Billion+ worth of lifetime trading volume

  • 577K web visits (Average last 3 months - similarweb)

  • 616K cumulative lifetime unique users on Ethereum (New + Legacy KyberSwap - pro.nansen.ai)

  • 6,000 average DAU

  • 15,000 average daily transactions

  • Current total TVL on KyberSwap pools: $81M (concentrated liquidity at $15B equivalent)

  • Total TVL accounting for aggregated DEXes: $24B

  • Deployed on 13 chains including Optimism, with 70+ total DEX integrations.

  • Current DEX integrations on Optimism: Velodrome, Uniswap, Curve, BeethovenX, Synapse, Zipswap, and Synthetix

  • Top 2 in DEX volume despite not having received any OP grants before and with much less Total Value Locked (TVL) compared to the current highest-TVL DEXes Velodrome and Uniswap. Source: Dexs - DefiLlama

    • TVL (21 Nov 2022): KyberSwap $4M, Velodrome $65M, Uniswap $39M.
      Note: Volume displayed on defillama is direct volume through KyberSwap pools, not KyberSwap aggregator volume.
  • Top volume contributor for wstETH on Ethereum, Optimism, and Arbitrum. Source: Wrapped stETH Price in USD: WSTETH Live Price Chart & News | CoinGecko

  • More KyberSwap liquidity pool stats can be found on our KyberSwap analytics dashboard and aggregator stats can be found on our holistics dashboard.

Competitors, peers, or similar projects (please link):

Curve, Uniswap, Velodrome, 1inch, Paraswap

Is/will this project be open sourced?

Yes

Optimism native?

No. Ethereum native. But already deployed on Optimism.

Date of deployment/expected deployment on Optimism:

July 13, 2022

Ecosystem Value Proposition:

  • What is the problem statement this proposal hopes to solve for the Optimism ecosystem?

Deep crypto liquidity is essential for any burgeoning ecosystem such as Optimism, and this is relevant to both new and mature DeFi or GameFi projects alike. Market makers/liquidity providers need a capital efficient and flexible venue to add liquidity and earn from their contributions. In parallel, traders need a simple method to aggregate liquidity from different DEXes to swap tokens at the best rates. There is a lack of a single DEX platform that offers both important functions (efficient liquidity + best rates through aggregation) at the same time for users, while incentivizing them to participate in the Optimism ecosystem.

  • How does your proposal offer a value proposition solving the above problem?

KyberSwap will use the OP grants to bootstrap and deepen liquidity for popular pairs on Optimism. This is achieved by incentivizing liquidity providers to deposit liquidity (and yield farm) into KyberSwap’s concentrated liquidity pools, which would enable much more efficient use of their precious capital. KyberSwap would endeavor to utilize the OP grants in a sustainable manner so that liquidity is retained beyond the yield farming period. Moreover, KyberSwap will be using our own KNC funds to encourage more trading on Optimism, further contributing to volume and fees earned by liquidity providers on KyberSwap and even external DEXes such as Velodrome or Uniswap (via liquidity aggregation for the best rates).

ALL OP grants will be distributed to Optimism users for their benefit. The Kyber team or KyberDAO will not be receiving any of the funds.

Grants would be allocated as incentives for popular token pairs that have the highest potential for usage and trade volume on Optimism. This is especially pertinent for pairs that currently lack concentrated liquidity support and are capital inefficient.

The following pairs are being considered for OP incentives (subject to change; will be further discussed with the Optimism team):

  • USDC / USDT

  • USDC / WETH

  • OP / WETH

  • DAI / WETH

  • DAI / USDC

  • USDC / SUSD

  • USDT / WETH

  • WBTC / WETH

  • USDC / WETH

  • OP / USDC

  • DAI / USDT

OP incentives may be allocated evenly between the pools or according to specific criteria such as the historical trading volume of the token pair and the liquidity level on Optimism etc.

Roughly $2M+ worth of KNC would also be given to Optimism users for liquidity mining, with additional rewards for ancillary marketing and community activities.

We are also partnering with QiDAO and Lido Finance to facilitate deeper liquidity for their relevant token pairs on Optimism. The current pairs are already being incentivized on Optimsim:

  • USDC-MAI
  • wstETH-USDC
  • wstETH-ETH

Why will this solution be a source of growth for the Optimism ecosystem?

1. Bringing users and developers to Optimism

  • KyberSwap has multi-chain exposure; 13 chains including Optimism (already deployed), Ethereum, EthereumPoW, Polygon, BNB Chain, Avalanche, Fantom, Cronos, Arbitrum, Velas, Aurora, Oasis and BitTorrent, with more to come. With incentives, users and developers from other networks would be highly motivated to bridge to Optimism. This would be the case for popular DeFi projects as well e.g. QiDAO and Lido Finance, whom we have partnered with on a multi-chain level.

  • Farming incentives, along with KyberSwap’s concentrated liquidity, auto-compounding LP fee, and anti-sniping features, will increase TVL and volume, driving higher yields and attracting more LPs. We ran a similar campaign on Polygon last year and hit an ATH TVL of $145M.

  • KyberSwap’s concentrated liquidity (through Elastic Pools) enables trades to have much better slippage for a given level of TVL when compared to a typical Uni v2 AMM DEX. For example, KyberSwap is already the 2nd highest volume contributor on Optimism despite not having received any OP and with much less TVL compared to Velodrome (which has received 3M OP grants and requested another 4M) and Uniswap.

2. Deeper liquidity: Swap with better slippage and at the best rates

  • KyberSwap Elastic’s concentrated liquidity pools enable high capital efficiency for LPs; similar to the Uni v3 tick-based AMM but with compounded fees for LPs in a full price range pool and anti-sniping/JIT that protects earnings.

  • Unique NFT liquidity position farming mechanism (the first in DeFi to our knowledge) which can account for both time of active liquidity provided and target trading volume of the pool.

  • As a DEX aggregator, KyberSwap users always enjoy the best rates, and this indirectly brings volume and fees to other DEXes on Optimism e.g. Curve, BeethovenX, Synapse, Zipswap, Uniswap, and Synthetix.

  • Developers can integrate KyberSwap’s aggregator API to enable the best rates for their own Dapp users on Optimism. E.g. KyberSwap was integrated by DEXTools.

3. Additional KNC marketing rewards

  • KyberSwap will provide additional KNC rewards on top of liquidity mining incentives through various marketing activities including referral campaigns, trading contests, lotteries, and airdrops etc., which would help attract more users to Optimism.

4. Media coverage of Optimism

  • KyberSwap will be spending resources for owned, earned, and paid PR/Media to promote the liquidity mining campaign and other activities, bringing further attention to the Optimism brand.

5. Investments in the Optimism Ecosystem and Community

  • Kyber Ventures actively invests in DeFi/GameFi Dapps and builders and this would apply to Optimism-based projects too. This would help to grow Optimism’s Dapp ecosystem, which would in turn result in a rise in users, volume, and liquidity.

  • Pre-Covid, Kyber ran the largest monthly Ethereum meet-up events in Vietnam and is an active member of the Ethereum community in Singapore. We have the experience to invest in and grow the Optimism community at the local grassroots level, especially in Southeast Asia.

Has your project previously applied for an OP grant? If successful, please link to your previous grant proposal and provide a brief update on milestones achieved with the grant. If unsuccessful, and this is a resubmission, please specify how you have incorporated significant changes in accordance with feedback.

This proposal is a resubmission under the new proposal format. We previously applied for 900K OP under the old format (previous proposal link) and have received positive support from multiple parties including at least 2 Optimism delegates:

KyberSwap is currently a top 2-3 DEX on Optimism in terms of trading volume and close to No.1 in volume. Our current request for 900,000 OP is less than ⅓ of the amount allocated to Velodrome previously, and less than ¼ the amount Velodrome is requesting for in their 2nd round of grants.

Number of OP tokens requested:

900,000

Did the project apply for or receive OP tokens through the Foundation Partner Fund?:

No

If OP tokens were requested from the Foundation Partner Fund, what was the amount?: N.A.

How much will your project match in co-incentives? (not required but recommended, when applicable):

Roughly $2M+ worth of KNC would also be given to Optimism users for liquidity mining, with additional rewards for ancillary marketing and community activities. More can be considered depending on the success of the initial campaign and future grants.

Proposal for token distribution:

  • How will the OP tokens be distributed? (please include % allocated to different initiatives such as user rewards/marketing/liquidity mining. Please also include a justification as to why each of these initiatives align with the problem statement this proposal is solving.)

100% for liquidity mining campaigns to benefit Optimism liquidity providers. In addition, KyberSwap will utilize our own KNC funds to boost trading volume via trading contests and marketing initiatives.

  • Over what period of time will the tokens be distributed for each initiative? Shorter timelines are preferable to longer timelines. Shorter timelines (on the order of weeks) allow teams to quickly demonstrate achievement of milestones, better facilitating additional grants via subsequent proposals.

Over 6-12 months, with ample time for more users to be aware of the campaign and bridge assets to Optimism. This also gives KyberSwap the flexibility to continually optimize our liquidity mining campaign and marketing efforts for the best possible outcome.

  • Please list the milestones/KPIs you expect to achieve for each initiative, considering how each relates to incentivizing sustainable usage and liquidity on Optimism. Please keep in mind that progress towards these milestones/KPIs should be trackable.

    • Maintaining our top 2-3 position in DEX trading volume on Optimism, while targeting the No.1 spot.
    • Increasing the number of KyberSwap trading pairs/pools on Optimism by at least +8. Currently about 8 actively traded pairs.
    • Increasing total TVL on KyberSwap pools by at least 2x (>=$7.4M). Currently about $3.7M.
    • Increasing total 24H Volume share contributed to Optimism to >=20%. Currently at 18%.
    • Improving our 24H Volume/TVL ratio by at least +5%. 24H Volume/TVL is already among the highest among DEXes on Optimism (1.88 on KyberSwap vs 0.63 on Uniswap, 25 Nov 2022)
    • Partnerships/Collaborations with at least another +2 DeFi projects on Optimism to amplify the impact of OP grants received. Currently partnered with Lido Finance and QiDAO.
  • Why will incentivized users and liquidity on Optimism remain after incentives dry up?

KyberSwap has devised a strategy for sustainable liquidity mining on Optimism through:

1. Active optimization of the liquidity pools and incentives

  • KyberDAO funds (already approved by KyberDAO earlier) would be used to seed liquidity on concentrated liquidity pools on Optimism. Depending on market conditions, the LP fee tier and price range of the pools can be customized and liquidity reallocated to ensure better rates and volume, which in turn increases organic yield APR% for LPs.

  • Moreover, OP and KNC incentives can be capped for each farm once the optimal TVL (to achieve best rates) is reached, to ensure more efficient use of incentives.

2. New volume-based yield farming mechanism

  • Apart from the typical yield farming model based on the time period of an active liquidity position, KyberSwap introduced a new type of farm for tick-based AMMs (that have NFTs representing the liquidity position). This type of farm distributes incentives based on both the time period AND the target trading volume that the liquidity position is supporting. As such, liquidity incentives will be used efficiently for better performing farms that generate higher volume (and fees for LPs).

When the OP incentives end, TVL and user adoption are expected to have already hit the required threshold to capture sufficient trading volume and fee APY%, thus retaining existing liquidity providers and attracting new ones.

Moreover, there will still be KNC incentives allocated for other activities on Optimism beyond just liquidity mining. KyberSwap plans to have a close, positive, and long-term collaboration with the Optimism team to bring more users, liquidity, and growth to the ecosystem.

Please provide any additional information that will facilitate accountability:(smart contracts addresses relevant to the proposal, relevant organizational wallet addresses, etc.)

KyberSwap smart contracts have been audited by ChainSecurity and KNC and KyberDAO contracts by Hacken.

Developer Documentation: https://docs.kyberswap.com

Social channels

This is a resubmission under the new proposal format. Community vote has not taken place. Link to previous proposal under the old format: [READY] [GF: Phase 1] KyberSwap

1 Like

As a aggregator,The volumn/TVL is meaningless.I used many aggregators in optimism,such as odos and 1inch,and their route usually use kyberswap because of your aggregator’s function.I think it creates lots of volumn to your protocol.You should list the data you own pool volumn/TVL to certificate your TVL efficience.If you want to rank according to volume or volume/TVL,you should refer to you own pool volumn or volumn/TVL.If you want to rank the protocol’s total volume,you should to compete with aggregators rather than Dexs.

And,your KPIs are too general.I see so many “increasing” words in your target.Every protocol can increase it’s trading pairs/pools/TVL/Volumn thanks to the grant.Please give more sincerity.

1 Like

Hi @Mingyue thanks a lot for the feedback! To clarify, the volume and volume/TVL statistics shown above on Dexs - DefiLlama are indeed based on volume from our own liquidity pools (from our Elastic and Classic protocols). A high volume/TVL for KyberSwap vs others would mean that given the current TVL in our own pools, we are able to generate relatively more volume (hence more capital efficient).

KyberSwap is both a DEX aggregator and liquidity platform. For traders/makers, we have an aggregator UI and API that aim to provide the best rates. For liquidity providers, we have our own concentrated liquidity pools with high capital efficiency. We separate the tracking of those 2 sets of statistics:

Other DEX aggregators (e.g. 1inch, Paraswap) are of course able to source liquidity from any suitable DEX/AMM (e.g. Uniswap, Velodrome, Curve, as well as KyberSwap), depending on their preferences and algorithms to determine the best swap rate. Together, this facilitates volume and liquidity for the benefit of the Optimism ecosystem. Generally, if volume from DEX aggregators often goes through a particular DEX/AMM, it would mean that it is providing competitive rates for users (since aggregators are meant to source for the best rate).

Regarding our KPI, we will definitely look into making them more concrete and update the proposal before it goes into [READY] mode! :pray:

1 Like

Thanks,nice reply.

I’m now extremely intrested in how you achieve so much volume which is comparable with Uniswap with such little TVL.And does it means high trading fees reward to LP providers?

According to the figure from your website shows the protocol achieve almost 17M$ with 3.9M$ TVL daily.Assuming the LP trading fee rate is 0.3%,that means 1.3%daily and 477%APR!
Is it really?Please give me some guidance on where I’m wrong.

2 Likes

Here are some reasons for our recent progress:

1. More flexibility compared to a typical DEX

  • KyberSwap LPs can customize their own price range. The narrower the price range you set, the more capital efficient or ‘concentrated’ your liquidity is; meaning you provide better rates with a given TVL hence relatively higher volume. The trade-off is that you don’t earn fees if market price goes out of your range.
  • LPs adding liquidity into our concentrated liquidity pools can also select different LP fee tier options: 0.008%, 0.01%, 0.04%, 0.3%, 1%. You don’t have to rely only on 0.3% as an option. For stablecoins, a lower fee tier may achieve much higher volume and overall fees earned.

2. Efficient trade routing for diverse pairs

  • We select diverse pairs for the same token and optimize for the best swap rates and volume through our custom aggregator routing. For example, instead of just USDC-ETH, we can route through USDC–>wstETH–>ETH. Other DEXes may not be as efficient or flexible. Our unique trade mechanisms and proven volume/TVL track record are why partners like Lido and QiDAO are working with us!

3. Additional benefits for LPs to help them earn more

  • Other reasons why LPs may want to add liquidity on KyberSwap are our ‘just-in-time attack’ protection and auto-compounding fees that help LPs earn more, both of which Uniswap v3 currently lacks. More details on how KyberSwap compares to Uniswap v3 can be found here.

Could you elaborate on how Kyberswap API works? Is it possible Kyberswap router more favors its own pools rather than optimizing the trade rate? Thanks