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

[StrategicReserve]

I think the issue is not whether Velodrome has “earned” the additional incentives but rather pondering whether extensions (particularly liquidity incentives) should be granted at all.

When we discussed the total OP incentives Velodrome had received compared to its competitors (Uniswap, Curve, etc.), you stated:

@alexcutlerdoteth

However if they do, we’d expect them to do exactly what we are doing upon the conclusion of their programs: come back with results and ask for support in continuing the programs if there is still an ecosystem growth case to be made.

I am not sure anyone in the liquidity incentives class would be approved for another grant, even with outstanding performance. It’s really up to the whims of governance.

I think you deserve credit for “going there” and asking for another round, particularly with the amount of data you’ve provided. But I’m not surprised such an ask brings up existential issues regarding OP governance. It’s impossible to detangle the issues.

[polynya]

At the very least, I would expect the Governance Fund to lead to greater activity on Optimism vs. Arbitrum One - given Arbitrum doesn’t have any incentives. The obvious conclusion, as mentioned above, is that we have to try something different - throwing incentives chasing liquidity isn’t significantly growing Optimism’s userbase and transaction activity. Of course, this is subjective, and some may argue TVLs, staked amounts and trading volumes are more important, but I disagree - it’s all about growing a dedicated userbase with diverse activity at this stage - we have already achieved sufficient liquidity.

So, my opinion is the bottleneck now is no longer liquidity, but onboarding users. So, we should focus on different forms of incentives and proposals across a diverse set of usecases and see how that develops before considering returning back to traditional DeFi incentives.

The ultimate goal would be to surpass BSC - which is #2 to Ethereum L1 - with XM DAUs and 50M+ tx/day, but of course that’s a long term goal.

[nickbtts]

Hello! nickbtts here, I know a number of the delegates and teams from various DAOs, conferences and projects and I was part of the original conception, design and deployment of Velodrome. I’m not a core team member these days, but know the team very well.

Thank you @polynya for this response; I agree wholeheartedly with the sentiment around grant performance; reporting has been sparse and comms around post-grant activity barely exist. Accountability is hugely important, and Velodrome are the the first project to document, analyse and share performance data demonstrating the success of their grant programme, which is something that should really be a requirement of grant recipients.

However, this is a tactical focus and it is far more difficult to measure the exponential strategic impact of outreach, business development, relationship building and friction reduction. I’d like to re-amplify a comment from @bebis of Byte Masons below:

@bebis

There’s a lot of technical analysis going on here which I think distracts a bit from the value being added by the Velodrome team.

1. They’re on-boarding a ton of people the hard way - with actual customer/client services.
2. They’re getting teams and users invested long-term in the ecosystem’s success.
3. They’re the main Optimism point of contact if you’re a builder/developer.
4. Their bribing system makes operations much lighter for small teams and startups.

They’re doing the hard, high-effort stuff that most aren’t willing to. I’d consider any proposal they put forth extremely seriously.

It’s important to note that Velodrome has had zero fundraising, private investment or token raise. The entire project has been bootstrapped on a small $150k grant and has been running lean (extremely lean) ever since. It takes an inordinate amount of time and effort to simply manage the current project relationships, never mind nurturing and building new ones as an increasingly important first engagement point for Optimism, all while continuing to develop the product itself (and engage heavily in governance!). I myself have been approached by a number of protocols looking to deploy on Optimism (redirected to Optimism bizdev), despite not being Velodrome core team; Velodrome is seen as a portal to the ecosystem due to the ability to quickly deploy deep accessible liquidity, a quick response time, support from a team with a great network, easy composability and willingness to work with fellow builders (example: Velodrome Sugar).

This is an exponential multiplier; Velodrome are not only onboarding users of the platform, but a range of protocols, who bring their own communities, users, TVL and expertise. Competition between L2s (and alt-L1s) is fierce and margins razor thin; this grant can be seen as allowing Velodrome to continue its growth and maintain an edge over other rollup competitors, continuing to onboard projects who may well do similar. Focusing on TVL and liquidity as the primary metrics is, to me, shortsighted, although those metrics also demonstrate the value of the project to the ecosystem.

Accessibility is super important; those of us here who are actually builders know the pain of getting a response from key ecosystem personnel, generating the ‘right kind’ of liquidity (retail accessible) without greatly affecting your economics, navigating bureaucratic governance, plugging into new tech infrastructure etc. The Velodrome team have demonstrated their ability to remove these frictions time and time again; this should, in my opinion, be an important factor for delegates to consider.

[polynya]

Appreciate the perspective, but we’ve already been through the bootstrapping phase via the first grant. As mentioned, I wish the Velodrome team the best regardless, and I’m sure the project will continue to thrive even without the subsidies; arguably also reach a self-sustainable state sooner.

[Smerdyakov]

Hi all, polynya in particular. I have an anecdote to share among all this data.

I am Smerdyakov of the OpenX Project, I speak about our project but I only speak for myself.

Two months ago we arrived on Optimism from a truly plundered blockchain, albeit not one plundered by excessive liquidity mining. Our project ran on Harmony for more than a year. We know too well what conditions create a functioning DeFi ecosystem, what inhibits their development, and what conditions can ultimately destroy it. We chose Optimism for its obvious dedication to builders who are dead-set on re-creating and inventing powerful but accessible blockchain-native financial instruments.

I want to briefly share with you some of the value we created that was destroyed. Our developers had just pushed a fractional-routing aggregator which, to this day, is used by Harmony traders to maximize the liquidity that remains on chain. We were busy working on governance-focused NFTs containing underlying LP tokens to automate away many of the “steps” between the initial onboarding of a new user to decentralized finance and their full participation in all of the benefits it has to offer. We needed a secure blockchain to recreate our vision, and we needed a capital efficient strategy to bootstrap. We had zero doubt our project’s innovations would generate revenue - but revenue isn’t liquidity.

My humble opinion: The importance of the veCRV / Solidly / Velodrome and similar models has simply not been understood. The importance of what Velodrome calls “white glove service” even more so.

We mentioned our “home” blockchain collapsed, but perhaps the reader is unfamiliar with the story of the Horizon Bridge. We encourage users investigate it, it is a very instructive case in securing interoperability among blockchains. The consequences for us were severe. The two audits we performed on Harmony buy us nothing here. We arrived with the initial liquidity we raised from an ad hoc pre-sale of our NFTs on Harmony and about 3 BTC in out-of-pocket value our Team provided. We needed a capital efficient strategy to bootstrap sticky liquidity as an unaudited, teensy-cap project.

Velodrome did their due diligence and onboarded us. They whitelisted our experimental SushiBar after we pitched it, the same is true for our optimization of cvxCRV. Having an established project with the ability to onboard and incentivize experimental projects is necessary for the further innovation of native-blockchain instruments. Half of this is due to the capital efficiency of what we’ll call an “initial value-proposition” - that is, a “bribe,” although this word makes granny cringe. This purchases more than a week of liquidity. It purchases a week of exposure by way of introduction to the ecosystem via a decentralized marketplace of deep core liquidity. A place where bigger wallets make trades. A place where users can learn of a new listing, a new financial concept or instrument even, and go from there.
(The importance of Core liquidity has not been discussed either from what I have read here.)

If there is to be a “Core” Liquidity market place the team behind it must bear great responsibilities - they must be excellent market-makers! Nevermind the difficulties of managing partnerships across dozens of projects from every imaginable timezone and background. This leads me to Velodrome’s team. They describe themselves as white glove. Our experience has been more than that. They embraced our project, true, but it was their constructive criticism that allowed us to re-imagine some of our ideas. This facilitated innovation. Our SushiBar will now be used as the vote-escrowed foundation for solving the rebase and equitable tx fee distribution issues inherent in veNFTs. Their critiques of our cvxCRV fork forced us to examine cvxCRV’s influence on Curve and re-imagine our offering as a perpetual bond built with mechanisms that offset the parasitic influences derivatives-without-programmed-parity introduce. This then inspired us to develop a reserve-and-peg-by-parity mechanism we believe will help re-introduce perpetual bonds as legitimate, blockchain-native financial tools that can tokenize locked value, serve as a bond, all while serving a perpetual function in our exchange.

Velodrome traded their white gloves for boxing mitts when it came to analyzing our ideas. They did this to protect the space they created while honoring the commitment made in their documentation to reward sophisticated Defi users, they did so with their feedback and patience. If there is to be a whitelisting process to protect and foster innovation before full decentralization is possible for an exchange such as this, it must be curated by a team committed to onboarding innovation.

Dozens of hours spent helping a teensy-cap maximize capital efficiency - has this been understood?

It is their passion for constructive blockchain-native development that allows Velodrome’s team to function as a Hospitality Tent for the Optimism Ecosystem. The fact of our being here to share our success is proof-of-onboarding enough for us. We have numbers to share concerning our capital efficiency upon request, especially as it relates to our liquidity-balancing strategies. These will only further substantiate the success of Velodrome and the capital efficient onboarding options it presents.

(As a project:)

We believe Velodrome has come closer than anyone to perfecting the models that have produced sustainable decentralized market-making strategies and potential. We support their proposal 100%.

[BarryLime]

Chiming in with my 2 cents as a very active user across the entire Optimism ecosystem. Velodrome was my “gateway drug” into Optimism several months ago – it was one of my first dapps on the network and has helped to cement Optimism as my L2 of choice.

I was initially intrigued by the idea of this all-in-one liquidity hub. I kicked the tires on the protocol both as a liquidity provider and as a VELO locker. The experience was buttery smooth, and delivered a fantastic liquidity marketplace all under one roof (which requires at least 3 roofs to accomplish on mainnet between Curve/Convex/Votium).

But the real magic is that my experience with Velodrome has strongly encouraged me to continue interacting with the broader Optimism ecosystem. Every financial activity (swapping, bribing, LP’ing, collecting rewards) can be done right here on Optimism without bridging anywhere else. Every week Velodrome is highlighting and onboarding a new project that I can explore. I can say that SEVERAL of the projects that have bribed me through Velodrome have also gained me as a user.

This protocol is a net win for everyone – protocols, users, and Optimism as a whole. And the OP incentives are critical to continue pushing the flywheel and incentivizing growth across the ecosystem. I strongly support this proposal.

[alexcutlerdoteth]

@polynya

At the very least, I would expect the Governance Fund to lead to greater activity on Optimism vs. Arbitrum One - given Arbitrum doesn’t have any incentives.

I think we’re in total alignment on the overarching objective as well as failure of the Governance Fund (at large) to achieve it thus far.

@polynya

The obvious conclusion, as mentioned above, is that we have to try something different

Yes, at a meta level, we have to “try something different.”

On a proposal level though, especially in the context of extending programs with demonstrated data on the efficacy, we have assess whether or not trying something different makes sense in this specific case.

Velodrome could’ve been a contributor to the broader failure or could’ve helped to mitigate its impact. If it is the former, a call for shift in strategy will likely lead to better outcomes. If it is the latter, it’s abandonment could actually drive even worse outcomes.

That is why I hope you’ll indulge us pushing on this just a little more.

@polynya

I personally don’t like to see incentives that are aimed at mining liquidity and growing TVL … there’s… a heavy cost in misallocating $OP tokens to mercenary liquidity farmers.

I think this is fair critique of many proposals, but not ours.

Our objective isn’t aimed at increasing TVL or rewarding mercenary capital, it is to substantially lower the barriers of entry to Optimism for projects and protocols, making it easier for them to onboard to and grow within the ecosystem.

You can see this in the fact that we do not directly allocate any OP to mercenary liquidity farmers. The OP instead flows (via a variety of mechanisms) to veVELO lockers who by virtue of the required 4 year lock have (as @TokenBrice put it) entered into “a long-term commitment with Velodrome and Optimism.” Accessing each of these incentives likewise requires them to match the value at a 2x-9x level (either by virtue of locking capital or putting up the bulk of the bribe). These are mercenary resistant incentives.

Liquidity mining of VELO tokens (which take pressure off of OP) and the resulting TVL growth are really just second order effects of attracting and retaining projects that will (in your words) drive “user acquisition, more activity across other use-cases, a more mature Optimism.”

Arbitrum’s greatest strength is really in the fact that it has strong ecosystem of apps (with lets be honest, significant funding) that people actively want to use. Our goal on Optimism needs to be to attract support the next wave of apps and builders so that they can do the same for Optimism, building the thriving and self-sustaining economy powered by retroactive public goods envisioned by the Foundation.

Velodrome is helping to do just that.

@polynya

My impression of this proposal … is this approximately maintains status quo

So what is Velodrome’s status quo?

I would argue that it is currently the single biggest engine of ecosystem growth at the moment. You can see that in the fact that it has onboarded 32 new projects to the ecosystem, with most of them having not needed to rely on grants from the Governance Fund to do so.

And it is doing this at a fraction of the cost of other protocols. According to the Foundations analysis of grants to date, the 42.6M OP granted thus far has earned:

• A 100% increase in transactions at a cost of 676 OP per incremental transaction
• A 74% increase in TVL (60M) at a cost of about .3 OP per incremental dollar

In contrast, Velodrome’s grant of 3M OP from OPLabs has thus far earned:

• A 100% increase in transactions, at a cost of 40 OP per incremental transaction
• A 400% increase in TVL ($65M), at a cost of .03 OP per incremental dollar

That is still too much to be paying in perpetuity and isn’t a complete picture of impact, but it is a 16x better ROI on Velodrome per transaction and at 10x better ROI per dollar in liquidity. And it doesn’t even take into account the downstream effects of the 32 project’s we’ve onboarded and the users, transactions, and activity that they are driving.

We need to remember that is in part because Velodrome is offering Optimism 31x the level of co-incentives as other DEXs and 1.6x the value of the underlying grant request: $6.5M versus the projected $360k offered collectively by protocols worth billions of dollars. It is nearly half the entire value of Governance Fund grants slated to be approved over the same period and is real tangible ecosystem stimulus that doesn’t need to come out of Optimism’s pockets.

This reinforces to me the idea when it comes to evaluating Velodrome’s grant performance to date, we’ve been the exception and not rule. Playing a huge role in mitigating the worst effects of the suboptimal grant allocations to date. An argument for extending what is working, especially while taking a step back to reevaluate what hasn’t.

@polynya

So, we should focus on different forms of incentives and proposals across a diverse set of usecases and see how that develops before considering returning back to traditional DeFi incentives.

I think broadly speaking we in agreement about the outcome that we want to create. We need a rich ecosystem of applications that can attract the kind of users and activity that can sustain the ecosystem, especially once the market comes roaring back.

I know you see us in the context of broader failures of grants to date, but I hope that maybe we’ve made the case that in this specific case doubling down on a proven strategy would be more impactful than abandoning it (especially knowing that it will be up again for reevaluation in just 3 months).

In either case, appreciate the consideration.

[polynya]

Thanks - but everything you say here is what I already know from reading the proposal and comments above, and fail to address my issue with liquidity no longer being the bottleneck on Optimism - particularly for Velodrome that has been successfully bootstrapped by the first round (as mentioned, to qualify for a second round bigger than the first, a project must offer a significantly advanced value proposition, but I see status quo here) - diversity of useful applications people will use being it. Particularly tooling & UX needs to be a stronger focus.

One of the “minor qualms” I alluded to above is using $OP as a vehicle to increase demand for locked $VELO tokens - something OPUser and others have pointed out. Personally, I think this is a less egregious use of that strategy than some other projects have proposed, but nevertheless, it certainly is status quo.

I’ll be following the comments, and open to reconsider - I’ll leave my vote till the last day or so as this is a contentious & important proposal.

[Mingyue]

Why arbitrum leads L2s?Obviously,because of GMX.GMX now is actually arbitrum “native”.GMX leads arbitrum’s prosperity,and others add flowers to embroidery―embellish what is already beautiful.

Times go by,multichain’s protocol will also move to new chain,not only the builder’s main attention,but also the main incentives and liquity.

I’m not saying multichain’s protocol is not important. I’m just want to express the significance of native protocol,which represent a chain’s core competitiveness.

We need just a little more supports of native protocol,that’s the way i think to keep optimism’s long term prosperity. I’m not Point out Velodrome in particular,all competitive native protocol should be paid more attention to support it’s growth.And Velodrome’s data shows it probably could be the person who open the gate for attracting users,that why I support and believe in Velodrome.

[Samoajoe]

I feel like this is an extremely good proposal, and in my opinion, anything but stays quo.

I am new to crypto over the last 2 years, and in that time have come to very much espouse the general ethos of ethereum and its various L2’s.

In the last bull run Main net was essentially unusable for users such as myself, and I was hearing all about the various L2’s and very hopeful for their release.

I ended up bridging over to OP very early, and I hate to use this phrase. But at the time, there was nothing to do here but hope for an airdrop.

The first protocol that changed my attitude about OP and it really having some lifeblood and exciting innovation, was velodrome.

I was in their initial twitter spaces with them and the op team. They committed to build alongside OP for the good of the ecosystem from the very start. I recently became involved and interested in a second OP protocol, Sonne finance, that launched directly on top of velodrome, and has been aided greatly by their relationship with velodrome.

In discord I have even asked the velo team about their plans to operate across other L2’s as well, and imo, you will not find a team more focused and dedicated to OP as they passionately make the case for why OP is the only place they want to be.

I believe some of the proliferation on arbitrum is simply a prelude to them offering similar liquidity incentives to what op has done. I do believe op incentives are performing exactly as designed, in attracting and exciting users, such as myself as well as protocols like Sonne finance, and open x, mentioned above directly through the partnership with velodrome.

I understand the desire to see organic growth without the added stimulus of op liquidity incentives, however I believe at this early stage, bootstrapping of users, protocols, and liquidity are still very much pertinent goals for OP.

As OP tokens must eventually be distributed anyway, what better way, than bootstrapping new users and protocols, and building general excitement around OP through partnering with one of the biggest proponents of the long term OP vision velodrome.

[FilterBySpam]

This demonstration demonstrates a lack of understanding of project token economics. GMX has a very strong token model, which makes them an advantage over other platforms. There was an arbitrary wallet check that resulted in the loss of 10,000 $OP in two months.Total OP received 13, 1480, 1638, 3699, 3195, or 10K $OP in two months, and all of them were discarded for another token the next week after being received.This explains why some people might agree with the proposal while others might not.

[daoism]

It seems the project is paying said team with protocol revenue. The grant allows continued growth, facilitating an over-performing team to continue to deliver a high level of service to new protocols either building on Optimism, currently on-boarding or actively looking to.

One could argue that some projects may not have chosen Optimism if it weren’t for the Velodrome team’s outreach, pitch and onboarding assistance; by not accelerating the current trajectory we may well stymie Opti protocol growth (of which any one could be “our GMX”).

This grant, I think, directly affects Optimism’s competitiveness, not just Velodrome’s. I agree liquidity isn’t the current bottleneck; what is currently missing is a (or more than one) native ecosystem that necessitates adjacent builders to move to Optimism (Lens is a great example on Polygon; if you’re utilising a Social Graph, you have to build there). This is a business development problem; we’ve seen time and time again that dev grants alone can’t necessarily solve this, you need evangelistic, committed ecosystem-centric builders aggressively bringing in partners who they think may become foundational elements.

One could argue greater funding of bizdev at Foundation level would possibly have a similar outcome, but in this case we see user on-boarding (friction reduction through bridge/infra familiarity), higher liquidity plus greater composability on top of on-the-ground focused outreach.

[polynya]

I’d very much like to see proposals focused on bizdev & marketing rather than liquidity mining.

[alexcutlerdoteth]

@FilterBySpam

There was an arbitrary wallet check that resulted in the loss of 10,000 $OP in two months.Total OP received 13 , 1480 , 1638 , 3699 , 3195 , or 10K $OP in two months, and all of them were discarded for another token the next week after being received.

Great example.

You are pointing to the wallet of Inverse Finance, one of the protocols that we’ve successfully onboarded to the Optimism Ecosystem from mainnet. They had no presence on Optimism prior to their granting of a veNFT, have not applied for or received a direct grant from Optimism’s Governance Fund, and are currently in the process of expanding their presence on the network.

The Governance Fund to date has granted about 46,600,000 OP to 41 project at an average cost of ~1,130,000 per project attracted. You appear to trying to cast aspersions over a net-new project incentivized with about 10,000 OP over two months? That is a 113x better ROI than governance is currently getting.

Did you notice what they did with the funds after swapping them? They locked their investment for 4 years in Optimism Ecosystem in the form of veVELO. This veVELO will allow them to create revenue positive liquidity programs without needing to rely on external incentives or OP grants.

So we appreciate you brining it up as we think it perfect demonstrates the incredible ROI we’re delivering when it comes to onboarding new protocols to the ecosystem. If it is still something that concerns you, perhaps you could produce an example of a 10,000 OP grant producing a better value in return?

[SonneFinance]

There are too many valuable comments here, but as Sonne Finance, we want to add what we think about the proposal and Velodrome in general. While it’s very important to investigate as deep as possible, it sometimes might lead to missing the bigger picture.

Firstly, Velodrome is the point of contact for new projects. There is no better place to launch a project, while incentivizing liquidity. One of the main reasons of our launch on Optimism was Velodrome.

@Mingyue

It is of great significance to grant more op to native optimism protocols(i.e.Velodrome) rather than those mutichain projects such as uniswap and curve.Uniswap and curve’s boom will do very little help to optimism’s prosperous,and,their TVL is also not steady,that is to say when op grants over,those TVL would more probably move to other chains(Arbitrum,Zksync,and many other new chains) in lack of enough incentives.Only native protocol can help optimism’s big prosperous in bull market and grow up in bear market.

Secondly, Velodrome is one of the few native projects out there having success on Optimism. We saw what happened when OP incentives are gone from non-native protocol:

People simply farmed OP rewards, dumped them and leave. Total market size of AAVE dropped from $1.4B to $400m in just under a week.

But anything Velodrome spends, is almost guaranteed to stay in the ecosystem:

• Lock bonus: Users have to lock veVELO for 4 years in order to get an OP bonus. They have to stay 4 years in Optimism ecosystem.
• Bribe matches: Another project have to put skin in the game in order to have this boost. And for that, that project needs to focus and compete with others in Optimism ecosystem, which creates a positive feedback loop for whole ecosystem. It incentivizes both project launches on Optimism and having deeper liquidity.
• Key Pairs: That’s where we are skeptical at, we don’t believe further incentivization of key pairs should be there. And it creates unfair advantage to some projects. Or we can argue that Sonne should be a key pair too, but it would create unfair advantage for us as well.

We believe that the success of Velodrome, will lead to success of Optimism ecosystem in general.

Though we have some suggestions:

• Decrease 1.5M Locking incentives to 750k. While it might be helpful for new users to explore Optimism ecosystem through Velodrome, spending 1.5M OP to incentivize locking VELO is a bit too much.
• Key ecosystem pairs incentivization might not be fair for all. OP/USDC and wETH/USDC deep liquidity is important to have on-chain, but we believe other incentivizations are not necessary. Competition is what keeps action alive, and that suggestion is against fair competition. We believe that wBTC/USDC pair for example is far more important than other pairs right now. It might be decreased to 500k OP, and only for wETH, OP and wBTC against USDC or in between.

Other than that, as Sonne Finance, we hope that the proposal passes. Velodrome is playing a huge part on Optimism’s success, and we believe that it will continue to do so in the future as well.

[Smerdyakov]

I’d like to speak on this “Core Liquidity” concept a bit more, I believe it needs clarification. I am no expert in Game Theory and I am not concerned with traditional applications of these terms as much as I am in making this point as I understand it: In a decentralized marketplace there needs to be some situation that no individual project - or collection of projects - could improve upon by branching off and trying it themselves. This would simply split liquidity and, while that can have its advantages, it defeats the purpose of consolidating deep liquidity to remove unnecessary PI that deters larger swaps.

But why should Velodrome be the place for this? It’s not really a matter of why, it’s a matter of because. It is because they have already taken the risks and achieved it in a capital efficient manner. They are the Core Liquidity for Optimism because they developed the best model to retain sticky liquidity. This is a proof of past performance, and regarding future developments I’m not sure what else there is to go by.

I’d like to add regarding liquidity and bringing new users to Optimism: It took us about three days to review the opportunities offered by Velodrome to understand what it meant for us. The 3 BTC in value we bribed is value we brought to this chain because of Velodrome. The locking airdrops for users allow new entrants to catch up. We say this without the added benefit of receiving the airdrops as a project because we are an aggregator of veVELO and are thus not eligible. Dozens (or more) users followed us from Harmony. Some bribed out-of-pocket once they understood the capital efficiency of the opportunity. We are proud of our results but projects like OATH and SONNE have performed similar strategies to great success as well. Why emit a token with limited liquidity when you can create a speculative value proposition for it that also acts as an equitable distribution of emissions.

More generally, my thoughts on the progression from veCRV → veNFT (Solidly) → Velodrome is that a large step has been taken in the formation of sustainable decentralized market-making. This growth will not produce its ripest fruit until its possibilities have been comprehended and exhausted. It will take months, perhaps years, of experimentation to bear this out. Velodrome has been wildly successful already by every measure of capital efficiency. Speaking of positive feedback loops, I know of none better than entrusting a proven good steward of their talents with more capital to exercise them.

How users choose to use their bribe rewards and airdrops is of course their business. I’d only like to point out the VELO is one of the few tokens on chain that has chosen huge price exposure to the OP token itself via their highly incentivized VELO-OP pool. We may fear mercenary liquidity miners but users capable of thinking more than two weeks ahead understand the liquidity looping possibilities created by these incentives and will maximize their liquidity provision and return possibilities. Velodrome has taken the riskier proposition of betting on Optimism by exposing the value of their project to it. The very success of the VELO token is thereby inextricably linked to the good stewardship of their incentive packages.

[alexcutlerdoteth]

@polynya

I’ll be following the comments, and open to reconsider - I’ll leave my vote till the last day or so as this is a contentious & important proposal.

Deeply appreciate your open mindedness, ser.

@polynya

I’d very much like to see proposals focused on bizdev & marketing rather than liquidity mining.

This is an interesting point-of-view I hadn’t really considered as an implication of your thoughts so far.

For whatever it is worth, as someone who has spent most of their career working in those domains I think the Governance Fund would be wise to avoid directly subsidizing business development or marketing activities. It is a squishy space that is difficult to assess objectively and that can lead to ineffective (or abusive) allocations of funds.

That said, I agree that they can play an incredibly important role to ecosystem growth, so the question is what is the best way to enable them?

I submit that you do that by supporting and removing the barriers the projects demonstrating the most competency in doing that business development and marketing work successfully. This thread is full of projects and protocols (and users) attesting to the Velodrome Team doing just that. Indeed, Velodrome has actually onboarded more net-new protocols (20 for 3M OP) than the Governance Fund itself (18 for 7.4M OP) and did so at a fraction of the cost.

That is why I think it should carry some weight when we the functional SMEs in this area say that we don’t need grants to pay us to do or subsidize the costs of the work. We need grants that have demonstrated an ability to lower the barriers of entry to the ecosystem so we can continue facilitating the growth of new protocols. As long as the ecosystem continues to grow, we can continue to self-fund the ecosystem leading marketing / biz dev efforts we’re leading while keeping the millions of dollars in incentives we’re generating focused exclusively on Optimism’s growth.

That is what this grant is enabling, not liquidity mining for its own sake.

[AxlVaz]

@SonneFinance

People simply farmed OP rewards, dumped them and leave. Total market size of AAVE dropped from $1.4B to $400m in just under a week.

I believe this information you are providing is incorrect. Aave had TVL’s ATH of $600M at the beginning of August second Defillama. or am I wrong?

DefiLlama

[SonneFinance]

That’s TVL, not Total Market Size.

Just to add to this:

• $1.4B total market size with $1B borrows
• $400M total market size with $0 borrows
  are equal in $400M TVL.

We believe that TVL alone is not the best metric to evaluate liquidity markets.

But it’s velodrome’s proposal, so let’s leave the discussion to another time sir.

[AxlVaz]

I got carried away by the image tag “TVL Chart”. It was a quick response.