[DRAFT] [GF: Phase 1 Proposal] Sonne Finance

ARCHIVED & OLD Missions Governance Fund: Phase 1
1

Project name: Sonne Finance

Author name and contact info: Atakan-IntroToDeFi

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

L2 recipient address: 0x784B82a27029C9E114b521abcC39D02B3D1DEAf2

Which Voting Cycle are you applying for? : Voting Cycle #8

Grant category: DeFi

Is this proposal applicable to a specific committee? This proposal may fall under the remit of various DeFi committees.

Project description :

Sonne Finance is an EVM compatible lending/borrowing protocol that launched on Optimism. Sonne Finance provides peer-to-peer lending solutions that are fully decentralized, transparent and non-custodial.

Similar to (and based from) existing lending platforms, users will be able to lend any supported assets on our platform, and use their capital to borrow supported assets.

Sonne aims to be the prime lending platform on Optimism by offering highest competitive incentives for money markets, having the deepest liquidity and being native to Optimism.

Sonne innovates on revenue sharing and tokenomics, where stakers of the protocol gets 2 different type of revenues (VELO and SONNE or USDC), as well as being able to choose the reward asset between SONNE and USDC.

Project links:

Website: https://sonne.finance

Twitter: https://twitter.com/SonneFinance

Discord/Discourse/Community: Sonne Finance

Please include all other relevant links below:

Additional team member info :
https://twitter.com/DefiIntro

We are a team of 5 plus 2 on-demand designers. Our lead developer (gathon) was also the lead developer of one of the biggest NFT marketplaces in Binance smart chain.
Amaterasu is working with me for 2 years, and she is working on lending protocols in particular for 10 months now.
Our community managers are from AdminGuru team, which provides professional community management services for protocols. We are also friends in real life.
Our designers are awarded designers for UI/UX in Turkey. We worked with them for 4 years now (not just for Sonne Finance) and also life-long friends.
Currently, I (atakan-IntroToDeFi) am the only one who is doxxed in our team to public, but all the team members are doxxed to me.

Relevant usage metrics :

  • Total Supply: $43M (Achieved in 11 days.)
  • Total Borrow: $30M
  • TVL : $13M
  • Total staked: 3.8M $SONNE (Sonne Finance ☀️🔴)

Competitors, peers, or similar projects (please link): https://aave.com/

Is this project be open sourced? Yes

Optimism native?: Yes

Date of deployment/expected deployment on Optimism: 28 Sep 2022

Ecosystem Value Proposition:

Lending/borrowing protocols are the basis of DeFi, and currently there is no native lending protocol besides Sonne Finance. Being native to Optimism gives us the power of using our tokens to incentivize lending and borrowing heavily.

In the past, TVL migrations happened from chain to chain when there are single sided good yields without impermanent loss.

It is unlikely that people migrating for 3% yield on USDC, but we already proved that good incentives can change this sentiment. We are planning to be the reason why people migrate and use Optimism, as once they try, they will stick to the fast and cheap transactions.

To add to this, competition is always healthy for customers. Right now, AAVE is non-contested liquidity market. Sonne looks to be the prime liquidity market on Optimism with unique tokenomics, and force other competitors to innovate on Optimism. For example, AAVE has no drive to innovate on Optimism, but when there is competition, they will have to innovate or fall back.

We have no plans to go multichain. Sonne has one aim. Being the best liquidity market of Optimism and focus only on Optimism ecosystem.

Has your project previously applied for an OP grant? No.

Number of OP tokens requested: 250,000

Did the project apply for or receive OP tokens through the Foundation Partner Fund?: No

How much will your project match in co-incentives? We are already incentivizing users to use Optimism and Sonne with 60% of our tokens, which equals to 1000% of requested OP tokens at current prices.

Proposal for token distribution:

How will the OP tokens be distributed?

  • 95% will be allocated to lending/borrowing and staking rewards in order to boost activity. Here’s how 95% will be allocated respectfully:
    • 40% will be allocated to supplying incentives. The pool weights of distribution speeds will be the same with $SONNE reward distribution speeds.
    • 40% will be allocated to borrowing incentives. The pool weights of distribution speeds will be the same with $SONNE reward distribution speeds.
    • 10% will be allocated to bribing USDC/SONNE pool on Velodrome Finance.
    • 10% will be allocated to sSONNE and uSONNE staking reward pools.
  • 5% will be allocated to boost development activity of Sonne Finance. (Article writings, twitter threads, dune analytics creations and UI design improvements.)

Over what period of time will the tokens be distributed for each initiative?

It will be distributed linearly for 6 months.

Please list the milestones/KPIs you expect to achieve for each initiative, considering how each relates to incentivizing sustainable usage and liquidity on Optimism.

  • $100M Total Market Size in the first month (Already $43M)
  • $300M Total Market Size in 3 months
  • $500M Total Market Size in 6 months

One of the main reasons of this proposal is to have trust of Optimism governance, and assure users that Sonne is here to grow both Optimism’s and its own TVL and activity.

Why will incentivized users and liquidity on Optimism remain after incentives dry up?

Sonne is looking to incentivize the activity and providing liquidity at least for 3 years (even after the OP incentives end). Liquidity markets are great for single sided yields without impermanent loss, and enables other protocols to boost their activities (such as auto-compounders, or DeFi vaults). We believe that Optimism Mainnet will continue to be the top layer-2 and more opportunities will be created on Optimism in the future as well.

Once users get used to a chain and love the community, they hardly move to another chain. We are also trying to be as fast and helpful as possible in our community channels to acquire that love and trust, both for the good sake of Sonne and Optimism.

Last but not least, liquidity markets are one of the only protocols providing real yields for suppliers. We can see that with AAVE and Compound on Ethereum are very low on incentives, but they have more than $9B TVL combined on Ethereum Mainnet. We believe that we’ll reach $1B to $2B level on Optimism within 2 years.

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

All of the contract addresses and multisig wallet can be found here: Contract Addresses - Sonne

Staking data for Sonne Finance:

22 Likes
2

I really like the project, I wish all the best for the team.

2 Likes
3

I like the project!
Have you considered incentivising borrowing more than lending since this would potentially optimize the utilization rates thus making lending more attractive?

2 Likes
4

As a long time follower of Atakan-introtodefi both on twitter and youtube, i trust this project of his, all his collective info and vision put into this project of @SonneFinance .
I believe this will be long term project, that why i invested in the first day, and thinking to stay as long as it lives.
I hope to see both OP and Sonne lives forever.

2 Likes
5

After 1 month, we will incentivize borrowing heavily compared to supplying, we already planned that with our own $SONNE token. ( Reward Emissions and Bribes - Sonne )

But we want to be able to incentivize supplying too, so OP tokens will be used equally for both parts.

2 Likes
6

I’ve been following the project and participating in their Discord since the Sonne Liquidity Generation Event (LGE). So far, all their communications and actions seem coherent and legit. I wish them good luck.

2 Likes
7

I have never liked the Total Market Size for Money markets since it includes all the folding being done.
A much more safe metric is TVL which Sonne currently has 12.5M, still an impeccable growth over 13 days. Already 13th place on Optimism TVL.

As such the milestones/KPI should be targeting TVL targets instead of Total Market Size.

Currently the ask+timeline would mean around 10k OP distributed per week.
Regarding the timeline I would reduce to 3 to 6 months.
Consequently the ask should also be reduced in kind.
Remember you can always re apply at a later date once we have confirmation of how the incentives panned out.

As I shared on the discord, I am very happy with how the protocol managed the community questions in regards to the admin function administration, a multisig is a much safer option.

5 Likes
8

Yeah I get the criticism about using Total Market Size, but TVL is also not the best metric to evaluate a liquidity market.

For example if there are $100M supply and $5M borrow, TVL would be $95M.

Comparing this to $43M supply and $33M borrow, TVL would be 1/9 of the size of the previous example, but the second protocol is making 9-10 times more than the first one in protocol revenues, and i would make arguments that second one is healthier.

There is not a single metric that is perfect for liquidity markets, but we had to choose one as a KPI. So we chose Total Market Size. We can choose TVL too, as we would have to adjust the targets.

For the second part of the suggestion, yeah it makes sense. We edited our proposal to 250k OP for 6 months, and if it succeeds, we can make another proposal. All in the good faith of Optimism and Sonne.

5 Likes
9

I like what Sonne is doing and glad to see the progress your collaboration with Velodrome has made. Keep up the good work.

1 Like
10

Sonne is a great addition to Optimism! The team has managed a great launch and doing a good job communicating with the community. I think they’ve developed some really interesting incentive mechanics to sustain high token emission and also partner with other OP protocols like Velodrome. OP incentives on Sonne should attract more people to explore Optimism!

1 Like
11

Congratulations on the explosive tvl captured in just a few days.

Do you estimate that after being competitive for high incentives they will be able to continue to be so organically?
As you envision the long term when apy goes down, what do you think will be the reasons for choosing Sonne over Aave or Iron Bank?

Do you have any metrics on this?

1 Like
13

Hello Atakan, thank for your proposal and congrats on your launch on Optimism! Impressive launch, glad more are are joining to build defi on Optimism.

Here’s a few notes to help you improve your proposal:

  1. I have tried looking up your source code, but found your github repo empty. Can you please include links to your code?
    • Clarify how the allocation for borrowing and lending are distributed to each pool. Are they all split equality between all your pools?
    • Clarify which token will be incentives with 10% of the grant received
    • Clarify which pool will you incentive bribing on Velodrome

  2. If there’s other team members in your team, list them in your proposal

Your value proposition is strong, considering both your speed at your launch and your ability to understand the ecosystem broadly. I think the main concern that you might receive from delegates and the committee is the long term commitment to Soone, given that you have just launched a few weeks ago. My feedback is to you is to prove them that you are in it for the long haul.

  • Your partnership with velodrome is a great start. Continue building relationships as time goes by
  • Show your source code on your github or add the relevant missing links
  • What’s next for Soone? How will it be bring innovative lending market product? How will it achieve its goal of $1B to $2B level TVL within 2 years on Optimism? Consider writing a few words about this in your proposal
5 Likes
14

I love what Sonne has been doing so far! Very happy with the return and that they engage with their community all the time on a daily basis!

1 Like
15

I think that a nice build project. it’s fun to see other defi project on optimism. It’s a nice communauty too.

1 Like
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Hello Marc, thanks for the good wishes and suggestions!

We’ll open the github repo by the time this proposal is up for voting. The draft will be edited by the time!

They will be aligned with the current weight of the pools for SONNE distribution speeds. The future holds if there will be new collaterals/assets in the protocol, but the $OPs will be rewarded based on their weights for speeds at the time.

For example right now, stablecoins have each 3/16 weight and wETH and OP have 2/16 weight respectfully. ( If 3 $SONNE is going to sUSD reward pool, 2 $SONNE is going to wETH reward pool, so if 3 $OP is going to sUSD supply incentive pool, 2 $OP will go to wETH supply incentive pool).

SONNE/USDC pool on Velodrome will be incentivized with 10%. Updating the draft.

Updating the other team members as well.

Our long-term goal is to align not just accepting tokens like ETH/OP but liquid financial NFTs to be accepted in our lending protocol. For example, when veVELO is liquid enough (probably not happening in short term), we will consider listing it as a collateralizable asset. This will also enable us to accept real world assets (like real estate) in the very long term. We are already brainstorming and in touch with Turkish real estate exchange but this will take a very long time as well. We think and believe that in order for blockchains and DeFi to achieve its full potential, it needs to start gaining traction in areas where it hasn’t already touched. We are here not just to provide on-chain solutions, but experiment on off-chain ramp.

But for now, we are sticking to the safest approach possible.

For Sonne to achieve $1B to $2B level, Optimism ecosystem needs to gain traction as well. Vampiring AAVE will not be enough for us. We believe that incentives are running the market for now, and Optimism grants are doing a great work onboarding new builders, but the ecosystem in general lacks incentives for onboarding new users. With the unique staking model of ours, we are able to offer good incentives while holding the price of the token (it’s traded more than the LGE price), and 20% yield on stablecoins like USDC is just hard to deny. We already partnered up with Reaper Farm, and will be partnering up with Beefy which enables huge crowd action towards Optimism ecosystem, and Sonne.

Thanks for the suggestions again, editing the draft, and will appreciate the future feedbacks as well! If there are still questions on your mind, or if our answers didn’t satisfy, we’ll try to answer them again!

4 Likes
17

Thank you for your proposal and congrats on your early traction. We see good alignment with Optimism due to being a native Op project & working with Velodrome. The value-add of Sonne & the proposal to Optimism is not yet clear to us though.

Value-add

As mentioned, Sonne seems to optimize tokenomics but on the product side you seem to not add value or fill an unexplored niche in the current lending ecosystem on Optimism considering that

  • Aave, Hundred Finance, Iron Bank, Granary etc. offer already the same or more lending markets with deep enough liquidity for anyone to borrow
  • Stablecoins such as Angle & yield farming/leverage platforms such as Homora & especially Tarot also offer lending for important tokens and in the case of Tarot for more “exotic” tokens/pairs.

Incentives

In our opinion, for liquidity incentives, Optimism should ask for co-incentives. As an Optimism project, and based on your existing distribution schedule, you are dedicating a large amount of your supply. However, the marketcap is $500K which means it may not last long & we cannot really count on these co-incentives.

The stated KPIs are ambitious, we see utilization is high, and you’re on a good way to reach your first goal. However, we should ask whether this recursive farming is a good KPI to optimize for and IF we should further incentivize TVL growth with Op tokens?

Roadmap of Sonne (might help us understand future value-add)

At this point, it looks hard to support this proposal in its current shape. Maybe some more insights on your near-term roadmap could help us better understand the value-add to Optimism. We see value in an Optimism-native lending product but further advances to the product etc. would likely be a key factor.

3 Likes
18

Really like & support this Defi Project From Beginning. Sonne Finance it is really a great project on optimism :red_circle:, it has gain community trust by its work…Love it….It will be the greatest defi project in future :slightly_smiling_face:

19

Good to see another Optimism Native project.

Do you believe this is the only reason people will move to optimism ?

I would recommend you publish what you have as of now and keep on updating in parallel.

apart form what @ScaleWeb3 has mentioned do you have any stats on user on-boarding such as new addresses, retention ratio. Dune dashboard you shared only contains information related to Sonne token

1 Like
20

good to see this proposal.

1 Like
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I am one of the Synthetix Ambassadors, and a member of the Defi Shadow Committee.

I am an Optimism delegate [Delegate Commitments - #65 by mastermojo ] with sufficient voting power, and I believe this proposal is ready to move to a vote.

3 Likes