[Mission Request] Optimism Dominance in Yield-Bearing Assets - DEX Liquidity for YBAs

Governance Fund Missions 🏹
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Delegate Mission Request Summary

This mission request seeks the onboarding of more RWAs and yield-bearing assets to Optimism via DEX integrations. This MR ties in with the four Season 6 RWA MRs posted by GFX Labs, so it will reuse multiple of the same goals and criteria.

While assessing current and potential applicants for [Mission Request] Optimism Dominance in Yield-Bearing Assets (3 of 4), we discovered that DEX liquidity was needed more than lending market integrations for multiple of the whitelisted RWAs, so we intend to address that issue here by promoting DEX integrations and incentivization for RWAs/other yield-bearing assets coming to Optimism.

S6 Intent

Intent 3A

Proposing Delegate/Citizen

Anthias Labs

Total grant amount

500,000 OP - This is to be distributed to DEXes that will then distribute to users for the purpose of bridging assets and depositing them into whitelisted DeFi protocols. In the event the rewards budget is exhausted before the end 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

How will this 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 long term Optimism alignment. By bringing more capital to the Superchain, we will inevitably bring more developers as well.

What is required to execute this Mission Request?

  • A whitelist of eligible yield-bearing assets with permissionless token transfers. This includes at inception: wstETH, rETH, cbETH, sfrxETH, USDM, wUSDM, USDY, sGYD, mooBIFI, superOETH, GYD 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 Arbitrum’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.
    • To apply for a whitelisted spot, an asset issuer should leave an application in this forum post below with reasoning for why it should be eligible. New RWAs/YBAs can then be whitelisted via a Grants Council vote.
  • 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: Uniswap, Kim, Aerodrome, Velodrome, Balancer, Aevo, Beefy, Gyroscope, Contango, Aura, and Curve)
    • To apply for a whitelisted DEX spot, a DEX should leave an application in this forum post below with reasoning for why it should be eligible. New DEXes can then be whitelisted via a Grants Council vote.

All protocols applying for must provide data collection support to the Grants Council and its agents.

How should governance participants measure impact upon completion of 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.

Has anyone other than the proposer contributed to this Mission Request?

No

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 in grantee’s protocol as this Mission Request plans to grow the amount of TVL on the Superchain via the migration of more RWAs and YBAs to Optimism.

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How exactly would the OP be distributed in this case – by Merkl drop or something of that nature?

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Hey Jack - tagging @Gonna.eth here who will likely have clearer context on the mechanism we are currently using for distribution. But we are envisioning that distribution will be done in the same way as for the MR below from GFX Labs:

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Just so everyone is up to date, for the mission cited, the requirement to track and distribute incentives has been pushed onto the protocols themselves rather than a third party to do the tracking for them. This was in response to most protocols indicating they had the capacity to do so.

You may or may not wish to delegate this responsibility to protocols applying to access incentives. This is relatively straightforward for users simply bridging in + depositing collateral into a lending protocol, but may be less so for DEXes.

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We strongly believe that Contango should also be granted a whitelisted status, for 3 main reasons:

  1. It can be used to distribute rewards to specific markets and assets with higher capital efficiency, as shown by several rewards campaigns run directly on it.

  2. It’s a key protocol that builds on spot and lending markets, and drives revenue and growth to them.

  3. It’s the leading platform for looping on yield-bearing assets (LSTs, LRTs, etc.).

Let’s dive into each point:

  1. Rewards distribution → Contango is built on top of spot and lending markets. Any reward accrued by swapping, lending or borrowing on the underlying markets, is also accrued by Contango users. Recently, Contango developed its own mechanism to centralize and distribute rewards on its UI. This allows any entity (chains, dexes, lending markets, LSTs, etc.) to incentivize whatever instrument they prefer. Compound was the first protocol to use this mechanism to incentivize its LSTs and LRTs markets on Arbitrum, achieving an ROI of 905x, meaning that for every $ spent in ARB rewards, Compound attracted $905 in open interest (source). Similar OP campaigns run on Contango also had outstanding results: the recent SuperFest campaign on Contango had a ROI of 443x (source); the ongoing OP grant on Contango has a current ROI of 463x. This system is highly efficient as you incentivize a single protocol and end up spurring growth and driving revenue to others at the same time.

  2. Spot and lending markets → By design, Contango allows users to build leveraged positions by looping automatically on lending markets. In this process, spot markets are used too: any swap is routed to the best price source, via aggregators. See below for a full list of spot and lending integrations. Higher open interest on Contango drives growth and revenue to lending markets; higher volume on Contango drives growth and revenue to spot markets. Simply put: Contango is everyone’s best friend.

  3. Yield-bearing assets → Currently 90% of Contango open interest and volume is related to LSTs, LRTs and yield-bearing stablecoins (source), confirming a strong demand from defi users to lever up on these yields. Major points integrations are also active on Contango, so users can farm those on leverage too. Last but not least, Contango managed to establish itself as the go-to place for loopers because it displays really valuable metrics for them (e.g. market impact on rates) and because the interface is catered for both advanced and inexperienced users.

So, given the above points, if the Council deems it relevant, all rewards of this MR could be distributed via Contango by incentivizing all agreed whitelisted assets, on the agreed whitelisted markets; Contango simply needs to know which instruments, which side (long/short), which markets.

Alternatively, we recommend whitelisting Contango and allow rewards accrued on the underlying markets to accrue to its users as well.

APPENDIX:

a) What is Contango: intro article

b) Relevant links:
Website: https://contango.xyz/
Docs: https://docs.contango.xyz/
Twitter: @Contango_xyz
Stats: https://dune.com/contango_xyz/contango-v2

c) Protocols that Contango built upon on Optimism:

SPOT MARKETS: 0x/Matcha, 1inch, Balancer, Balmy, Bebop, Changelly, DEX Conveyor, DODO, Enso, Kyberswap, LIFI, Magpie, Odos, Oku, OKX Dex, Open Ocean, Paraswap, Portalsfi, Rango, Squid, Uniswap, XY Finance. This is achieved via an integration with Balmy.xyz SDK.

LENDING MARKETS: Aave, Compound, Moonwell, Exactly, Silo.

// Please let us know if a similar whitelisting application should be posted on this other MR. //

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I have a strong preference here for allowing projects to determine how best to distribute to their ends. Centralizing distribution was difficult and poor UX during Superfest; meanwhile, all of the DEXs have well-built management of how best to incentivize on their own platforms and superior distribution to whatever could be managed internally.

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Agreed here. I believe this is how it is currently being done for the related MRs given this response from @GFXlabs

-Charlie

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500,000 OP - This is to be distributed to users that bridge whitelisted assets and deposit them into whitelisted DeFi protocols.

In this case, the mission requests should be amended such that the grants are going directly to protocols and are distrbuted to users “for the purpose of bridging assets and depositing them into whitelisted DeFi protocols” – there are several DEXs whose incentive mechanisms aren’t based on a 1:1 distribution to liquidity providers.

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That is a good call–just made an amendment to that total grant amount description section. Let us know if that updated wording is how you are seeing things as well @jackanorak

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Thank you for submitting this whitelist request @Contango – Contango’s Optimism-deployed leverage product aligns with this MR, and as this is before any sort of voting on the approval or rejection of this MR, we have added Contango directly to the whitelist.

We will be refraining from adding the point about all rewards of this MR being distributed via Contango for now as some applicants may prefer otherwise.

Thanks again for the detailed writeup @Contango . We would encourage more Optimism-deployed perp or spot DEXes to do the same.

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Origin would like to request a whitelisting status for superOETHo (OETH’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, Arbitrum, and now Base.

OETH features 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.

OETH has been live on the Ethereum mainnet since May 2023. The soft launch of superOETHb, the OETH iteration on Base, happened a few weeks ago. The contract address for superOETHb has been deployed and the official launch happened on September 9th. The intent to roll out OETH on both Base and Optimism has been mentioned several times over the past few months (here as well).

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, was able to increase the OETH TVL on Base from $0 to $7.8m in two weeks, and we believe we are capable of finding the same success with rolling out OETH on Optimism.

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 · GitHub
Repo: origin-dollar/contracts at master · OriginProtocol/origin-dollar · GitHub
Arbitrum stats: https://dune.com/originprotocol/arbitrum

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Origin has submitted an application for this mission via Charmverse.

Since the official launch of Super OETH 10 days ago, superOETHb has grown its TVL to over $119m to become the #1 Pool on Aerodrome and 3rd largest Base protocol by total TVL. Origin still plans to launch superOETHo and has already added its logo to the OETH dapp. Please whitelist superOETHo as we intend to replicate the Super OETH success on Optimism and anticipate incredible growth.

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Hi @pete - happy to share that a vote is now live among Grants Council members for superOETHo whitelisting. We should have clarity on this soon. Thank you for submitting.

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Thank you, we will stand by to answer questions if there are any

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WHITELISTING REQUEST FOR sGYD

Gyroscope would like to request whitelisting of staked GYD, sGYD.

sGYD is the yield-bearing version of Gyroscope’s stablecoin, GYD. sGYD follows the ERC-4626 standard. GYD reserve assets are deployed to earn yield, but yield is only emitted to holders of staked GYD, as such sGYD holders earn an amplified reserve asset yield.

Currently, 4,940,000 GYD is in circulation. Of this amount, 140,400 GYD is staked on Ethereum and 474,600 GYD is staked on Arbitrum. As such, about 12% of GYD is staked and a significant yield amplification for sGYD holders exists. The sGYD yield is currently at 12% on Ethereum and 10.5% on Arbitrum.

BACKGROUND CONTEXT ON GYROSCOPE

GYD itself is issued by Gyroscope, which sets out to create stablecoin superliquidity. Gyroscope has a dual-offering of concentrated liquidity AMMs and a meta-stablecoin with advanced onchain risk controls. Additional information is available here.

Gyroscope was audited by Nethermind, Trail of Bits, and Runtime Verification. Audit reports are available here.

GYROSCOPE ON OPTIMISM

Gyroscope is already whitelisted in this MR for its CL AMM. There are synergy effects in also whitelisting the yield-bearing stablecoin, sGYD.

Gyroscope would like to strengthen its presence on Optimism via this grant and already has several partnership agreements in place to do so, with for example, Mountain Protocol, Beets, Beefy Finance and Ajna.

Gyroscope currently has one CL AMM live on Optimism. It is available here via Beet’s UI who are operating Balancer’s Optimism instance. Gyroscope’s AMM has seen significant success so far and already facilitated a total swap volume of 450m USD on Optimism. Gyroscope’s AMM’s concentrate liquidity on a per-pool level, making it easy for LPs to join as there is no operational burden. This is demonstrated by the fact that 672 different LPs are currently deploying assets into the one previously launched wstETH/WETH pool.

Gyroscope’s stablecoin offers similar UX benefits, allowing its holders to get one-stop-access to a diversified basket of stablecoins and advanced onchain risk controls. The yield-bearing version currently also offers very competitive yields, especially when compared with larger stablecoins such as sUSDe (4.5% APR) or sDAI (6.25% APR).

Lastly, Gyroscope has valuable experience on how to best use grant funding, demonstrated by the fact that a recent grant of Ëś 75k USD led to a TVL increase of 16m USD.

ADDITIONAL INFORMATION

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WHITELISTING REQUEST FOR GYD

Gyroscope would like to request whitelisting of GYD.

GYD is a meta-stablecoin with advanced onchain risk controls. It is collateralized with other stablecoins, which are deployed to earn yield. Two forms of yield-bearing GYD are in production: (1) a savings product sGYD that accrues yield to an ERC-4626 token, and (2) a liquidity pool integration that accrues yield to a liquidity pool gauge.

The second yield-bearing form of GYD has three concrete advantages for liquidity pools:

  1. the main trading asset remains GYD with a unit of account that maintains a 1:1 peg
  2. order routing through the pools is simpler and doesn’t require wrap and unwrap of ERC-4626 tokens
  3. unlocks more flexible and efficient incentive structures: e.g., allows LPs to choose between points and native yields, which makes the pie of incentives larger for those who prefer one or the other

Consequently, if a GYD pool has an active yield stream to its pool gauge, it can be considered a yield-bearing asset. If GYD were whitelisted and Gyroscope received an OP grant, only those GYD pools with an active reserve asset yield stream would be incentivized.

BACKGROUND CONTEXT ON GYROSCOPE

GYD itself is issued by the Gyroscope protocol, which sets out to create stablecoin superliquidity. Gyroscope has a dual-offering of concentrated liquidity AMMs and a meta-stablecoin with advanced onchain risk controls. Currently, about 4,940,000 GYD is in circulation. Additional information is available here.

Gyroscope was audited by Nethermind, Trail of Bits, and Runtime Verification. Audit reports are available here.

GYROSCOPE ON OPTIMISM

Gyroscope is already whitelisted in this MR for its CL AMM. It also applied for whitelisting of the directly yield-bearing stablecoin, sGYD.

Gyroscope would like to strengthen its presence on Optimism via this grant and already has several partnership agreements in place to do so, with for example, Mountain Protocol, Beets, Beefy Finance and Ajna.

Gyroscope currently has one CL AMM live on Optimism. It is available here via Beet’s UI who are operating Balancer’s Optimism instance. Gyroscope’s AMM has seen significant success so far and already facilitated a total swap volume of 450m USD on Optimism. Gyroscope’s AMM’s concentrate liquidity on a per-pool level, making it easy for LPs to join as there is no operational burden. This is demonstrated by the fact that 672 different LPs are currently deploying assets into the one previously launched wstETH/WETH pool.

Gyroscope’s stablecoin offers similar UX benefits, allowing its holders to get one-stop-access to a diversified basket of stablecoins and advanced onchain risk controls. The yield-bearing version currently also offers very competitive yields, especially when compared with larger stablecoins such as sUSDe (4.5% APR) or sDAI (6.25% APR).

Lastly, Gyroscope has valuable experience on how to best use grant funding, demonstrated by the fact that a recent grant of Ëś 75k USD led to a TVL increase of 16m USD.

ADDITIONAL INFORMATION

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Thanks for this whitelist submission for GYD @jooooo5as - we have shared your request with @Gonna.eth, Grants Council Lead. It will go to a vote among Grants Council members shortly.

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Thanks for considering it @AnthiasLabs . Please note, Gyroscope is applying to whitelist GYD and sGYD, two separate assets.

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Any specific projects or applications you envision emerging from this influx of capital. @AnthiasLabs

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WHITELISTING REQUEST FOR sMONEY

Defi.money would like to request the whitelisting of its yield-bearing stablecoin, staked MONEY (sMONEY).

sMONEY is the yield-bearing version of defi.money’s native stablecoin, MONEY. Utilizing the ERC-4626 standard, sMONEY accrues yield automatically over time through a share price model, starting at 1 sMONEY = 1 MONEY. The exchange rate of sMONEY to MONEY then gradually increases as interest is accrued from defi.money’s revenue, making sMONEY holders beneficiaries of the protocol’s revenue.

Currently, the yield for sMONEY is derived directly from defi.money’s revenue and is dynamically adjusted to help maintain the peg of MONEY. If MONEY trades below $1, the percentage of revenue directed to sMONEY holders increases, encouraging users to buy and stake MONEY to help restore the peg.

Currently, 1,540,000 MONEY is in circulation. Of this amount, 585,000 sMONEY is staked on Optimism. As such, about ~38% of MONEY is staked with yields for sMONEY currently at 4.26%.

BACKGROUND CONTEXT ON DEFI.MONEY

MONEY is issued by defi.money, a stablecoin issued entirely by onchain native assets—transforming volatile and underutilized assets into liquid, usable money. With the implementation of Automated Loan Protection (ALP), MONEY is the first protocol on Optimism to provide volatility protection through soft liquidations on loans. Additional information is available here.

Defi.money was audited by Chainsecurity, Mixbytes, and Bail Security. Audit reports are available here.

defi.money is also partnered with LlamaRisk, providing risk parameter recommendations for onboarding new chains and assets using the LLAMMA simulator.

DEFI.MONEY ON OPTIMISM

Defi.money is already deployed on Optimism, with the sMONEY contracts solely deployed on OP mainnet. The presence of sMONEY on OP mainnet gives users access to a censorship-resistant, truly decentralized, and yield-generating asset.

Defi.money has strategic partnerships and integrations to strengthen its position on Optimism, with planned collaborations to deepen liquidity and use the yield-bearing stablecoin as collateral.

Whitelisting sMONEY would provide Optimism users with a competitive yield-bearing stablecoin option.

ADDITIONAL INFORMATION

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