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

Governance Fund Missions 🏹
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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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