[Mission Request] Optimism Dominance in Yield-Bearing Assets (3 of 4)

Governance Fund Missions šŸ¹
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Optimism Dominance in Yield-Bearing Assets (3 of 4)

Delegate Mission Request Summary:

This mission is part of a package that is intended to make Optimism the dominant venue for trading and creating yield-bearing assets. The target assets include real-world assets (RWAs), yield-bearing DeFi tokens that are simple in structure, and staked ETH.

This mission is specifically designed to incentivize the importation of $70,000,000 of yield-bearing assets to Optimism. Assets that are bridged into Optimism and then subsequently deposited into DeFi protocols will target a 5% annualized reward incentive (in OP) on top of whatever native yield is produced by the DeFi protocol and underlying asset. This program is intended to only cover assets that are permissionless in their transfers between addresses.

Requirements to be whitelisted should be minimal, and whitelisting is mainly to avoid subsidizing scams and to assist in tracking assets.

Users may not earn rewards simultaneously through this Mission and Superfest, which is funded through the Foundation. If an eligible asset is bridged to Optimism and then deposited into an eligible DeFi protocol, this Mission cannot provide that user with rewards until the Foundation-funded incentives are depleted or ended. For the avoidance of doubt, to the extent that there is overlap between this Mission and a Foundation-funded initiative, Foundation funds should be used to reward users first, and then this Mission can reward users.

S5 Intent

Intent 3: Grow application devs on the Superchain

Proposing Delegate

GFX Labs

Proposal Tier

Scales up to tier of proposer

Baseline Grant Amount

1m OP total. This is to be distributed to users that bridge whitelisted assets and deposit them into whitelisted DeFi protocols. In the event the rewards budget is exhausted before the ended of the period, the rewards will be provided on a first-in-first-out basis. The Grants Council, at its discretion, may choose to limit the amount of OP rewards that can accrue to a single whitelisted asset to avoid crowding out of other assets.

Should this Mission be fulfilled by one or multiple applicants

Multiple

Submit by

[Date to be set by Grants Council]

Selection by

[Date to be set by Grants Council]

Start Date

[If applicable]

Completion Date

Six months from Mission approval.

Specification

How will this Delegate Mission Request help accomplish the above Intent?

This incentive program is intended to encourage users to migrate yield-bearing capital assets onto Optimism. The presence of such assets organically increases the TVL secured by Optimism over time as yield accrues to those assets, and they tend to be economically productive assets that encourage longtermism. As part of a broader, four-part package to attract RWA, staked ETH, and other yield-bearing assets, we expect this program to

What is required to execute this Delegate Mission Request?

  • A whitelist of eligible yield-bearing assets with permissionless token transfers. This includes at inception: wstETH, rETH, cbETH, sfrxETH, USDM, USDY, and bI0B1. wstETH and rETH are already important assets on Optimism, cbETH and sfrxETH are assets closely associated with major Superchain members, and USDM, USDY, and bI0B1 are permissionless tokens that were recently vetted and approved for Arbitrumā€™s treasury diversification.
  • A process for asset issuers to apply for whitelisting by the Grants Council or its appointed agents. This process should ensure assets have permissionless token transfers on Optimism and their issuing chain, and are not scams, but should otherwise be fairly permissive.
  • A whitelist of eligible protocols for users to deposit bridged assets into to be eligible for rewards (contingent upon teams actively assisting in data collection, to include at inception: Aave, Beefy, Exactly, Interest Protocol, Compound)
  • A process for protocols to apply for whitelisting by the Grants Council or its appointed agents. This process should ensure the protocols meet the following criteria:

Support at least one whitelisted asset as collateral or for lending by users,

Provide data collection support to the Grants Council and its agents,

Are present and fully operational on Optimism no later than May 1, 2024.

How should the Token House measure progress towards this Mission?

  • Number of yield-bearing assets whitelisted for this program.
  • Amount of yield-bearing assets bridged onto Optimism from Ethereum and other chains.
  • Duration of stay by those bridged assets.

Milestones

  • Optimism users have bridged in and deposited $70,000,000 of reward-eligible, yield-bearing assets in DeFi protocols.

How should badgeholders measure impact upon completion of this Mission?

  • Aggregate capital inflows from the real-world economy, Ethereum, and other chains for yield-bearing tokens on Optimism.
  • Number of RWAs and yield-bearing projects deployed on Optimism that also have permissionless token transfers.
  • Trading activity of permissionless yield-bearing project tokens on Optimism DEXs like Velodrome, Uniswap, and Curve.
  • Amount of yield-bearing assets held in Optimism DAO treasuries, to help foster economic resiliency of those organizations.

Have you engaged a Grant-as-a-service provider for this Mission Request?

No.

Has anyone other than the Proposing Delegate contributed to this Mission Request?

No.

This Mission Request is considered failed or withdrawn if the other three missions labeled ā€œOptimism Dominance in Yield-Bearing Assetsā€ do not pass.

Which metric will the success of this Mission Request be evaluated against?

The North star metric against which this Mission Request should be evaluated is TVL, because the initiatives outlined above aim to attract an influx of additional assets. This metric was suggested by the foundation and approved by the Grants Council.

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A North Star Metric has been added at the bottom of this Mission Request in an effort to enable the Collective to make data-driven decisions. By using a single metric for each Mission Request, the Collective is better able to evaluate the performance of all the Season 6 missions in a standardized manner, which will be critical when the Collective makes decisions about Intents, budgets, or other critical components of governance.

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Hi @GFXlabs ,

First, this is a great incentive program to increase TVL in DeFi on Optimism. I have a couple of questions about this MR:

  • Is there already a process in place for DeFi protocols on Optimism to get their yield-bearing assets whitelisted?
  • Is this program also for yield-bearing stablecoin protocols on Optimism e.g. HAI?

Hope to hear from you soon!

,Bless 0xR

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Great question. At the moment, someone (or multiple someones) still need to be selected to assist with tracking/distributing rewards, which is part 4 of this group of missions. Then any new additions will obviously have to be made while keeping in mind the capacity/ability of that someone to add new assets.

For those wishing to very quickly move forward or avoid having to rely on an applicant for part 4 to agree to expand the whitelist, one solution might be to simultaneously apply to add the asset/protocol to the tracked whitelist and offer to track the rewards just for that asset/protocol pro bono. Then youā€™re not sitting around blocked by other work to come first.

In the specific case of HAI, Iā€™m not sure how it could qualify, just at a glance, since this mission is intended

Specifically, how could HAI be considered

I suppose you could make some creative arguments around what constitutes bridging (e.g. from the real world perhaps?) but Iā€™m not familiar enough with HAI to know if such arguments exist. But this was written with the intention of pulling in new assets from elsewhere.

We and others on the Grants Council are keeping track of ways this and other missions could be improved through additions, trimming, or removing ambiguity. Hopefully v2 of this proposal (if it warrants trying a v2) in subsequent seasons, will better address edge cases and be better organized ahead of time. Missions specifically for home-grown assets like HAI, where the backing is already on Optimism, might also make sense for future missions of their own.

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Thanks for the clarification and quick reply @GFXlabs ! I do have a few more questions that arose

  • Where could I read more about what and why there is a 4-part MR? Do teams apply for a specific part and are there specific OP amounts that can be requested per part of the MR?

  • Is this MR only for tracking assets being bridged into DeFi protocols on Optimism?

  • Can ā€˜user incentivesā€™ be used to attract users to a yield-bearing stablecoin on Optimism even though some users might not have bridged capital to Optimism to interact with this protocol?

I am asking these questions to understand which part of this MR could apply to our soon-to-be-launched yield-bearing protocol on Optimism.

Bless 0xR

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They were all just strategically aiming at the same goal. Each one is generally standalone and has its own budget.

Yes.

This probably needs more information to answer, just to be sure what youā€™re asking. But if itā€™s for something not yet launched, youā€™ll notice:

Happy to brainstorm ideas together about a mission in a few months when they can be submitted again. You and anyone else are free to DM about what some impactful mission requests might be for Optimism main net.

As a reminder, for anything related to the current grants cycle, please come to Grants Council office hours or otherwise communicate in public (like you have on this thread).

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Hi @GFXlabs !

Thank you for these responses they help a lot. I will try to attend the grant council office hours.

In addition to contextualizing a bit more, We were approved for a builder grant 2 in the previous season. We are currently building a yield-bearing stable coin on the OP stack and are trying to see if any MRs could help attract capital to the protocol through OP user incentive programs this season.

This is the main reason I was trying to understand this MRā€™s goal and maybe apply for it. But maybe there is a better MR under the same Intent for our needs.

Is this better to further discuss this in the Grant Council office hours or easier to shoot you a DM?

Bless 0xR

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If you want to discuss applying for this season, then office hours is the place to go. But only questions about process and not merits of an application can be discussed.

Because youā€™re working on something that sounds like it isnā€™t live yet, probably better to think about drafting a Mission Request thatā€™s a solid fit and maximizes impact and allows for planning, rather than shoehorning into the (relatively few) missions available now. Look to Season 7 (early January).

Other than ourselves, @AnthiasLabs is also already beginning to plan several months in advance, so you could also try them. GFX and Anthias both see the Missions available now as leaving open some gaps that need to be covered next time. Other delegates may also be interested in helping to draft a proposed Mission, too, so ask around!

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Hello @GFXlabs

I am Franz and reaching out on behalf of Balancer.

We are thrilled to get an application going for this Mission as soon as they open again as we believe that we have the primed technology to host IB assets.

However, while reading through the mission request, some questions came up:

  • A whitelist of eligible protocols for users to deposit bridged assets into to be eligible for rewards (contingent upon teams actively assisting in data collection, to include at inception: Aave, Beefy, Exactly, Interest Protocol, Compound)
  1. It seems that Balancer would not be allowed at first, unless the pools are integrated into Beefy or Exactly and rewards are streamed via their platform, is this assumption correct?
  2. Is there already a process how we could whitelist Balancer as an eligible protocol?

Assets that are bridged into Optimism and then subsequently deposited into DeFi protocols will target a 5% annualized reward incentive (in OP) on top of whatever native yield is produced by the DeFi protocol and underlying asset.

  1. Targeting a 5% APR on top of the IB asset is a moving target, since it will change when TVL changes. Is this a hard metric or just a desired target to help planning for reward distribution?
  2. We are successfully running grant programs on both Optimism and Arbitrum that target IB assets. These programs donā€™t target a specific APR but make sure that incentivized pools are integrated into our ā€œcore-pool frameworkā€ in order to sustain the TVL after the grant program finishes. Currently, using this approach, we see additional APR of 1.5%-3.5% on top of the IB yield, depending on asset and pool composition. Would such a distribution mechanism also be approved for this mission?
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Hi franz. As written, AMMs probably canā€™t directly be whitelisted due to the requirement to support collateral and lending:

The mission request was written with lending protocols specifically in mind. In hindsight, an additional mission request tailored for AMMs (and the increased difficulty of tracking assets in an AMM as those assets are being LPā€™d) would have been a good thing to think of.

As noted upthread, the good news is mission requests are periodically renewed, replaced, or edited. If thereā€™s one lesson from the current missions (which didnā€™t even manage to earmark the entire authorized budget), itā€™s that we should all be planning now for the mission requests in the next season.

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Apologies, I completely missed that part. I guess weā€™ll wait for some AMM tailored mission for IB assets :slight_smile:

Also, please have a look at our Dune dashboard which does a great job in tracking assets on Balancer. Tracking the assets might be more difficult than on lending protocols, but each AMM should have the capabilities to track their own assets.

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Maybe of interest to those commenting on this thread so far, there are very open-ended micro grants available this cycle. Perfect for running an experiment to justify a future, larger grant:

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Hi @GFXlabs !

Thank you for this advice!

Sounds good, I will reach out to @AnthiasLabs or other delegates to co-write a mission request for next season. Do delegates still propose the MR this season? or do they only vote on MRs?

Bless,

0xR

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Delegates could propose them, though someone from various councils (depending on what kind of MR it was) needed to sponsor it to get it to a vote. You can see the vote to approve each from the vote.optimism.io voting portal.

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Origin would like to request a whitelisting status for superOETHo (OETHā€™s OP rollout) among the other LSTs listed, so that users can benefit from the high yield and tight peg of superOETHo, as they have done in the past with OETH on Ethereum and Arbitrum.

Origin plans to make superOETHo the dominant LST on Optimism by yield generation and tightness of peg to ETH. Origin will make a significant effort to encourage users to migrate their OETH from Ethereum and Arbitrum over to Optimism, which will organically increase the TVL secured by Optimism over time as yield accrues to superOETHo. Origin was able to increase the OETH TVL on Arbitrum from $0 to $5.6m in six weeks, and we believe we are capable of finding the same success with rolling out OETH on Optimism.

OETH on Ethereum and Arbitrum feature permissionless token transfers, and superOETHo on Optimism will as well. Origin has already begun the process of obtaining a credit rating for OETH to help ensure users that OETH/superOETHo is not a scam.

To stay aligned with this mission, Origin can ensure rewards are given ONLY to users that bridged wOETH and minted superOETHo.

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Can you provide links to any documentation you think is relevant for the Grants Council to evaluate whether to include this asset? Github repos, any audits, and general docs would all be helpful.

Also, note that this is unlikely to be considered for a formal inclusion until the asset is live on Ethereum, Optimism, or another major chain. If you have a launch date, then please include that as well.

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Here are the relevant resources:

Website: https://originprotocol.com/
dApp: https://originprotocol.eth.limo/
Analytics: OETH Analytics | Overview
Docs: https://docs.originprotocol.com/
Audits: Audits | Origin
Github: Origin Protocol Ā· GitHub
Repo: origin-dollar/contracts at master Ā· OriginProtocol/origin-dollar Ā· GitHub
Arbitrum stats: https://dune.com/originprotocol/arbitrum

OETH has been live on the Ethereum mainnet since May 2023. The soft launch of superOETHb, the OETH iteration on Base, is slated for this week. The contract address for superOETHb has already been deployed and will be ramped up until the official launch around September 10th. The intent to roll out OETH on both Base and Optimism has been mentioned several times over the past few months, most recently here: Introducing Super OETH, Coming Soon to Base

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In the line with the amendment we posted to [Mission Request] Optimism Dominance in Yield-Bearing Assets (2 of 4), we belive the May 1, 2024 deployment clause should also be removed from this Mission Request.

Reasoning for this change can be read here.

The specific changes we propose for this MR:
Delete the following line from this MR: Are present and fully operational on Optimism no later than May 1, 2024.

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This seems reasonable to us as the author.

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The Grants Council voted to remove the following line from this MR: Are present and fully operational on Optimism no later than May 1, 2024.

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