[GF: Phase 0 Proposal] Lyra Finance

Project Name: Lyra
Author Name: Mike
Defillama TVL (at snapshot): $31,948,436
Transactions/day (at snapshot): 325
Tier: 2
Optimism native: Yes
Revisions to metrics used: N/A
Number of OP tokens to claim: 3,000,000
L2 Recipient Address: 0xB6DACAE4eF97b4817d54df8e005269f509f803f9
Proposal for token distribution (under 1000 words):

The Optimism Collective is a new type of community that’s digitally native, sustainable and fair. Lyra began the era of Optimism native projects and today, we are submitting one of the first proposals to the $OP governance fund.

How will the tokens be distributed?

Our community has three pillars:

:man_construction_worker: Builders
:droplet: Liquidity
:woman: Traders

Lyra’s $OP distribution will reward each of them.

:man_construction_worker: Builders

Amount: 600,000 $OP
Criteria: Build on Lyra and apply to the Grants Council

We’re going to build a vibrant ecosystem on top of Lyra. Composability is DeFi’s superpower and projects like Polynomial and Brahma have demonstrated the potential of building on Lyra. Public goods such as Lyra Live and The Short Put provide value to the whole community and align with Optimism’s ethos.

Whether you’re building the next DeFi Option Vault, a community newsletter or anything in between, all builders will be eligible to apply.

:droplet: Liquidity

Amount: 1,700,000 $OP
Criteria: Become a Lyra Liquidity Provider

Liquidity is essential for any crypto protocol and it plays a crucial role in Lyra. By depositing to the Option Market Pools, LPs provide the collateral that the AMM needs to trade. LPs will be eligible for a share of $OP relative to their stake in the pools.

$LYRA was the first token distributed on Optimism, reducing fees for token holders. However, building L2 native token liquidity is challenging and $OP incentives will help Lyra build the most liquid L2 token.

:woman: Traders

Amount : 500,000 $OP
Criteria: Start trading on Lyra

Increasing trading activity is Lyra’s fundamental goal and the $OP token presents an opportunity to onboard an array of new users. A rebate on trading fees will reduce friction and help Optimism and Lyra attract more activity. Since launch, traders have paid over $600k in fees to Lyra Liquidity Providers.

:open_book: Ecosystem

Amount: 200,000 $OP
Criteria: To be administered by Lyra Governance

To inspire the next generation of Optimistic builders, Lyra will host a virtual hackathon and create content to educate builders on what to build with options and how to build on Lyra.

:mantelpiece_clock: Retroactive

Up to 10% of the total allocation will be distributed retroactively to the builders and users that helped build the Lyra community.

How will this distribution incentivize usage and liquidity on Optimism?

:people_holding_hands: More Builders

Without builders, there’s no stuff. From smart contracts to dApps and everything in between, both usage and liquidity on Optimism start with building more stuff. We think this one is a no brainer!

:ocean: Liquidity Migration

Lyra’s ignition program caused the single largest spike of TVL on Optimism. LP incentives will encourage another mass migration of liquidity from L1.

:person_cartwheeling: More Traders

Every trade on Lyra is a transaction on Optimism and to date, we’ve seen over 8000 unique traders make almost 19000 trades. Trader incentives will enable Lyra to attract even more first time users to Optimism.

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

:house: Builders make things that last

While incentives are temporary, smart contracts and public goods built on Optimism are permanent. By directly incentivising builders, we will create an immutable foundation that exists long after the conclusion of the incentives.

:bar_chart: Trader retention

When people start trading on Lyra, they don’t stop. We have an almost 70% trader retention rate.

:chart_with_upwards_trend: Gas savings

Users are paying 200x less in fees than they would on L1.

Over what period of time will the tokens be distributed?

We will target distribution over 6 months. The exact rate at which tokens are distributed will be left to the Grants Council and Lyra Council to be ratified by governance in the upcoming LEAP-24.

How much will your project match in co-incentives?

Builders - Grants Council will match $LYRA to $OP up to $50k per month

Liquidity - $LYRA distributed as per the framework in LEAP-21

Citizens - Trade fees matched up to a 100% total rebate

Note

This proposal is subject to approval by the Lyra Council. Specific allocations within each category are yet to be finalised.

61 Likes

The strong focus on builders strikes me as the best part of this proposal. Additionally, giving incentives to Lyra will retroactively reward one of Optimism’s first native apps which has driven significant usage to the chain, including my own usage, relatively insignificant though that may be. Retroactively funding projects building the ecosystem is the entire point of the OP Collective’s token distribution. Lyra has turned me into an ambassador for Optimism, and I believe it is proper to reward their community.

16 Likes

I think Lyra is the best options marketplace, along with Opyn. And Optimism is the home of complex financial instruments, the marriage is perfect and the incentives in OP would be well used. If staking were released on Optimism and not just L1, it would be interesting to incentivize single staking of the Lyra token as well

5 Likes

Hi dev, don’t get me wrong :pray:
this proposal isn’t even benefit for optimism dev/user, the only great decision is share 1,000,000 $OP for lyra builder

suggestion: Liquidity
(Amount: 1,500,000 $OP Become a Lyra Liquidity Provider), make this as “special”
1,500,000 OP only for people who add liquidity with pair
OP/LYRA and LYRA/ETH + start program staking LYRA to get OP (with minimum 30 days staking lyra or less)
benefit for both project and can be increase LYRA STAKING

second suggestion : (Amount : 500,000 $OP
Criteria: Start trading on Lyra 3) earn trading reward only for people who trade ETH/USD, BTC/USD and OP/USD(if there any)

noted: remember this at the end of this program OP community will be vote any proposal if they agree or not for distribution OP to the project, so make it interesting

7 Likes

I think the proposal is quite good and in line with what is the ethos of the fund: “Each project must submit a proposal for how they will spend the tokens to grow usage of their project on Optimism”

Use the funds to promote trading pairs like OP/LYRA or LYRA/ETH do not really grow usage of the Lyra dapp itself (options market) but to DEXs (uniswap,…). Same for pairs ETH/USD, BTC/USD, OP/USD… seems off of the purpose of the funds allocated to Lyra for this round.

The focus in the growth of the Liquidity should be one of the main focus (+builders!) and it’s reflected into the proposal. Pools use sUSD so another native protocol like SNX benefit of it too. Also would allow builders on top of LYRA like POLYNOMIAL to have better liquidity an keep growing their own vaults. I see it could increase Lyra’s TVL from 30M to >90M $ of new capital bridged to OP.

I see the proposal as it is a win-win for Optimism ecosystem.
Better tools build on top + better liquidity > better efficiency and prices > more use by vaults/traders > more added value and synergies within Optimism.

6 Likes

I’m so excited about this proposal. Totally support it!

2 Likes

Lyra is indeed one of the excellent projects in the early stage of op. although I didn’t make much contribution to the whole ecological construction, I still think OP should give a certain retrospective airdrop, because without the early application in ecology, Op has no ecology. Lyra’s participants made a great contribution to the ecology of OP in the early stage.

6 Likes

the proposal should be win win solution for user and dev

2 Likes

Liquidity is only work as long as reward is there, i would suggest move some fund from here to Traders, that will encourage users to use platform for long time.

3 Likes

Fully agree with the builder incentives, and the trading fee rebates are a good idea too.
I’d urge caution with the ~50% liquidity incentives, as it often attracts mercenary liquidity. Something to consider would be an initial bootstrapping, but a steeper drop-off, and reinvesting some of the tokens back into builders and/or traders.

3 Likes

The problem with increasing trader rewards is that it leads to wash trading. Lyra is already matching trading fee rebates up to 100%, and anything more than that would probably be pointless beyond pumping stats.

Increasing liquidity in combination with increased trading allows for reduced slippage and in turn a better trading experience, which hopefully captures long term users.

5 Likes

Quite true, and this is something that’ll need to be modulated at the Lyra/LEAP end.

2 Likes

Thanks for your feedback everyone! We are actively discussing in the Lyra discord if anyone wants to join us in there: Lyra _/. Firstly we want to finalise the retroactive component of the distribution. I will attempt to summarise the discussion from our Discord below.

Retroactive Summary

Optimism intends to incentivise future activity and usage on the network. I think we can agree that the vast majority of tokens should be forward-looking. Should we do a retroactive distribution at all? If so, to who?

Well, without traders and LPs we wouldn’t have qualified at all. But they have also been rewarded with LYRA in proportion to their trading/liquidity. Also, some of the early LPs have been farming and dumping LYRA.

LYRA token holders haven’t directly contributed to trading or liquidity on the protocol. However, I believe those that have participated in governance have indirectly contributed by electing the council which oversees the protocol.

I think the following groups should be eligible for a retroactive distribution:

  • Traders (that didn’t dump)
  • LPs (that didn’t dump)
  • LYRA holders that voted in an election

We could also make the trading and LP criteria independent of volume/liquidity and create a flatter distribution than we will get with future incentives (H/T Spreek).

Edit: Builders would also be eligible for retroactive $OP, but that will be handled on a case by case basis via the Grants Council.

10 Likes

I’m good to see new criteria for retroactive rewards, to find really friends that will walk together with us TBH :slight_smile:

4 Likes

I want a better eligibility criteria. let the team come up with a new idea.

2 Likes

Yes, I wholeheartedly agree!

3 Likes

I like that you guys are giving alot to builders: ex: Poly, Braham, and The Lyra Short Put. Way to be on top of submitting your proposal before everyone else! You guys got your stuff together. The idea to give a small percentage as a retroactive is great as it rewards your loyal users while saving alot for future distribution.

6 Likes

Wonderful progress ! Congrats to Lyra Finance for locking in with Optimism

4 Likes