[READY] [GF: Phase 1 Proposal] Saddle Finance

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[GF: Phase 1 Proposal] Saddle Finance

Incentive Proposal

Project Name:

Saddle Finance

Author Name:

Weston Nelson - ENS: westonnelson.eth, Twitter: @westonnelson

Number of OP tokens requested:

500,000

L2 Recipient Address:

Gnosis Safe, 4/7 Multisig on Optimism: 0x2aBD4c0070bc784b7BFD18d947b9d28657070862

Relevant Usage Metrics:

For general usage metrics regarding Saddle, please refer to the: Saddle Extended Dashboard on Dune Analytics

As well as: DeFi LLama

Optimism alignment:

Saddle Finance is a decentralized stableswap protocol designed for pegged asset swaps and a team that is deeply aligned with the values of Ethereum and the Optimism Collective.

One of Saddleā€™s core tenets is a commitment to opensource software and this consistent declaration by the team demonstrates how much Public Goods are valued by the Saddle team and community. Core value proposition is to be a leading provider of low slippage trades in pegged assets across multiple chains and be a reliable and trusted platform for many years to come in the DeFi ecosystem.

Proposal for token distribution:

The OP tokens will ultimately be used to incentivize the adoption of various liquidity pools across the Optimism deployment of Saddle and other potential pools as well, bringing more stablecoins, pegged assets such as $wBTC and $alETH for example, to Optimismā€™s L2.

Saddle is already live on Optimism with 2 liquidity pools, and just yesterday announced a milestone partnership with Frax Finance where the additional deployment of 13 new pools is underway, with 3 of those coming to Optimism. So, attracting liquidity to Optimism is essential and as such the OP token will be used to incentivize ecosystem participants to stake their assets in Saddleā€™s LPs to earn OP incentives and also the additional incentives from the new $SDL tokenomic upgrade and unlock based largely on models popularized by Curve Finance and Ribbon Finance.

How will the OP tokens be distributed?

Propose the following distribution of the liquidity mining rewards to begin immediately but also give the team autonomy and flexibility to make changes if need arises due to gauge voting outcomes or new liquidity pools, market dynamics, etc.:

  1. 15% $OP - saddleFRAXBP, (FRAX, USDC)
  2. 15% $OP - saddleFRAXBP, (saddleFRAXBP, USDT)
  3. 30% $OP - saddleFRAXBP, (saddleFRAXBP, sUSD) [Synthetix]
  4. 40% $OP - Pools TBD (sETH/ETH, alETH, ETH, sETH, renBTC/wBTC, etc.)

There is also a mechanism is planned for implementation which is a highly creative, gamified mechanism to utilize the $OP tokens to attract additional TVL and users to Optimism in a swift manner.

How will this distribution incentivize usage and liquidity on Optimism?

Liquidity is highly needed right now on Optimism, and by supporting the Saddle team that is firing on all cylinders; this is an excellent way to signal both Optimismā€™s commitment to attracting user growth as well as drive real adoption to L2 because of the significant need for another stableswap protocol.

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

Having deep liquidity on any chain is a critical component of long-term sustainability. These incentives will likely lead to significant TVL growth within the Saddle protocol on Optimism and also other protocols on Optimism as users become more comfortable with the L2 and begin to harvest rewards and engage with other protocols - this is a logical outcome when considering how reliable the UX for Optimism has been and volume and net new users is expected to grow significantly from Saddleā€™s value it brings to the ecosystem combined with the low cost of interacting on L2. Additionally, this also opens the door to multiple other synergies becoming possible.

Over what period of time will the tokens be distributed?

The OP tokens allocated will be distributed over a 3 month period, and would start from the date Saddle receives the tokens, they will be added to the pools immediately to incentivize user and TVL growth immediately.

How much will your project match in co-incentives?

Saddle is in the process of deploying significant incentives as the multi-chain partnership with Frax gets moving and gauge system goes into full effect. These are expecting to continue and adapt to market conditions to continually make sure incentives are best aligned with growing both Saddle and L2 adoption on Optimism.

Please reference these two blog posts from Saddle for more information about $veSDL and the tokenomics:

:sparkles::red_circle: :red_circle: :sparkles:

9 Likes
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Great to see Saddle Finance investing into their Optimism expansion. This proposal seems to be comparable to the Balancer/Beethoven proposal, which is widely supported.

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I wouldnā€™t say it is very similar really. This proposal, once the OP is spent the liquidity will move on to the next yield farm. Balancer/BeethovenX proposal includes using protocol fees to bribe for pool emissions indefinitely. OP incentives will create artificially high protocol fees which will lead to continued emissions long after the OP has been fully spent.

This is your vanilla print OP for Saddle liquidity mining proposal. That is fine of course but imo the Balancer/BeethovenX is quite a bit better compared to this.

4 Likes
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For for lazies, providing the stats from the link provided in the proposal.
DefiLama

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grafik491Ɨ587 26.5 KB

There are many chart on Dune related to different statistics but could not find any chart related to OP Chain.

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This proposal seems to be very short-term focused on liquidity and only broadly discusses co-incentives and long-term alignment with Optimism.

In its current shape, we would not support it and recommend a shift in focus towards more sustainable growth on Optimism and long-termism, for example including builder incentives, tooling, co-growth initiatives - considering that Saddle adds only small additional value to the Op ecosystem with Uniswap, Curve and other DEXs already being present.

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Iā€™m abstaining as voting on a proposal that allocates 100% of OP towards liquidity on a competing exchange to Balancer/BeethovenX could be perceived as a conflict of interest.

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I will be abstaining from this vote since my fund Scalar is an investor in Saddle.

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But what about votes of your community? if youā€™re investor this is doesnā€™t mean automatically skip, have you already ā€˜checked a temperature of your votersā€™?

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Hi Linda - first just wanted to acknowledge you for stating thisā€¦this is progress to meā€¦although we may have a long ways to go in improving towards the best governance; if we are here for long-term iteration of governance in the digital worldā€¦this kind of transparency is not likely to be ever found from the past/current setups in placeā€¦so :pray: :pray: :pray:

  • So I for one, sincerely appreciate the dedication being put on display here from @linda in regards to the understanding of Delegatesā€™ responsibilities and ethical/moral implications.

  • I do have some thoughts on this though that I hope you might consider - can go deeper and share more details if necessary too if you would find it helpful, but personally, if I had invested in the Fund, I would then of course want you to be voting ā€œForā€; so now throw in this Proposal here, it like automatically puts you in a bit of a pickle no two ways about it!

  • If we go down the route of any external interests overpowering your influence as a Delegate, I donā€™t think that is the best path for Optimism because really then it opens the door to almost all Delegates likely having strong arguments made for/against them abstaining in almost all votesā€¦which I just donā€™t see the best path forward for us all. I think most reasonable people understand this though; but would love to hear other thoughts as well.

  • With this in mind then, I genuinely donā€™t see anything wrong - in any capacity - voting for or against something here; in your capacity as a Delegate. As long as the Proposal isnā€™t clearly malicious; seems reasonable, etc. of course; but beyond that - to me - if the answer is that it passes those standards, my POV would be to vote on the Proposal as you see inclined; without a doubt.

Cheers!

Weston

  1. A quick sidenote that is important as well - wanted to get this feedback to the OP team as well as you and @OPUser @Exosphere, other Delegates, one other aspect that I am not sure if it is a bug or what but Abstaining actually seems to hurt Proposals rather than simply doing nothing if I am interpreting Snapshot correctly - so there is some sort of bug; or the Strategy is set incorrectly or something with the Snapshot set up.
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Why hurting? Why would you say so?

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Good question: So it appears to be set up to somehow change the overall status of the voteā€¦

ā€¦when to me; an Abstain should not have any impact. I will try to find some examples but hopefully that makes sense!

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Hey @0xWeston thank you for taking the time to write a proposal to Optimism governance.

I have some questions.

Your contracts are I guess opensource. Is your frontend and all UI code also?

  1. co-incentives: I am not sure I understand. Can you specify in a few sentences what kind of co-incentives you plan to match the amount of 500,000 $OP with?
  2. What puts me off the proposal compared to similar proposals is the amount of tokens (half a mil $OP) and the short duration in which to burn them for incentives (3 months). I think itā€™s too little a time and too many tokens and the minute they dry up the mercenary users will dissapear.
1 Like
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Hey @0xWeston Thank you for tag and if I havent said this before, I really appreciate your proactive nature and I am not sure how many projects you are involved with but stay with us respective of the result of your proposal, we need community member like you.

As far as your comment on abstain is concerned. Here is a comment form Bobby.

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Cheers! :red_circle: :pray:

Wow that was fast lol - thank you for the update!

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Itā€™s a tricky position because when you say I should be able to vote for the proposal if it ā€œseems reasonable,ā€ itā€™s still all subjective based on the person. For those that strongly disagree with me on it, they might say that I was biased in the vote. Since abstaining from the vote does not count towards the voting total, I think this would be the best path at the time if Iā€™m a direct investor in the project. I really donā€™t have any guidance on this to my knowledge and I would rather be on the conservative side.

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@lefterisjp - excellent questions!!!

#1

For me OSS is a huge part of Web3ā€¦which is why I personally took notice of Saddle. To answer your question, an emphatic YES! :sparkles:

Here is the Saddle Organization on GitHub and then the specific repositories for the smart contracts that make up the protocol are here and the frontend code here. This is very important to me personally as well.

#2

To keep it brief (can go deeper if needed) - co-incentives are essence baked into Saddleā€™s $SDL emissions based on the mechanics of the $veSDL tokenomic design. It is quite clever in this regard because in order to vote for emissions you must hold and lock $SDL (and thus obtain governance voting power of thing such as emissions) - If there happened to be some freshly launched pools on Optimism that had appealing $OP incentives attached to them; if I put myself in a userā€™s shoes, and I have the ability to vote for an LP for more emissions of $SDL on any of the chains Saddle is deployed on and the pools availableā€¦would $OP incentives impact my decision? 100%; Iā€™d likely come to Optimism.

#3

I hear you in this regard - again could be a long answer :slight_smile: but to try and be brief: I believe we will see teams with massive OP allocations end up bringing virtually zero long-term value to Optimism, and many with less end up bringing substantial value.

That being said; What I would say to get to the heart of the matter here is that the team at Saddle is quite nimble and this is what is most important; an example for instance: Arbitrum Odyssey is suddenly halted - probably makes sense to come together as a community and redirect incentives/new game plan. With the partnership in place with Frax. By consistently reviewing the effectiveness of the incentives and iterating on their distribution, as well as keeping a close eye to what is happening across the crypto ecosystem, I believe Saddle is as well equipped as any protocol to responsibly and effectively deploy incentives.

I hope these answers are helpful to you; and thank you for the questions!

Weston

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Yes, I hear you completely here!

I would agree with you that indeed ā€œseems reasonableā€ ā€¦ even that could open up more rabbit holes as wellā€¦although I would prefer it didnā€™t!

I really donā€™t know the perfect answer here; itā€™s one I think about quite a bit though - gray areas can be so difficult to think through I feel. Regardless; to me this type of dialogue is a net-positive in my mind already. :red_circle: :pray: :sparkles:

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As I am going through this proposal, I saw that we didnt get any comment on stats for OP chain.

Second, on co-incentives, would you consider matching the number of token requested with $ value of $SDL

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this was answered also before since another proposal had this question in the previous round :wink:

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Thank you for your comments on opensource!

I am not sure I fully follow here.

What is Arbitrum Odyssey? Why is it halted and how is that relevant to your proposal? You probably assume I know something I donā€™t :sweat_smile:

Does that mean you can consider increasing the duration of the emission of incentives? To say 12 months?

1 Like