[READY] [GF: Phase 1] Revert Finance Compoundor

ARCHIVED & OLD Missions Governance Fund: Phase 1
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First thank you @OPUser @Prometheus and @Dicaso for the help in bringing us back to topic.

This is where I think there are some scope of improvement, three distribution with 100K each might bring the liquidity but there is nothing to hold them long term.

I believe this is the crucial question.

I think we agree that attracting liquidity by distributing money is easy enough, as has been proven by multiple liquidy mining programs, keeping at least a very significant portion of it is really the problem to solve.

So what makes liquidity stay or leave? Phrases like “mercenary liquidity” are often used. If we drill down to it, the issue starts from what type of liquidity you are attracting with the incentives.

As example, if you were to do a liquidity mining program on a hypothetical WBTC/WETH pool on Optimism that resulted in people getting +100% APR improvement, that pool will attract A LOT of liquidity fast. It will migrate liquidity from mainnet for sure, but It will also attract liquidity that was not previously LPing on that pair at all, it will even attract liquidity that might not even hold one or both of these tokens. The last two cases are liquidity that will very likely leave as soon as incentives stop.

An an example on the other end, if you do a liquidity mining program on that same pool that results in a modest, say 6%, increase in APR over the pair on mainnet. I believe that it would be an attractive enough proposition for a lot of existing LPs on mainnet to migrate. It is much less attractive for people that did not previously think LPing on that pair was attractive, or those who might not even own some of the assets. So by keeping the extra incentives APR to a reasonable level, you select for liquidity that is more likely to be sticky. Granted, this would be the first liquidity mining program we run, so this thesis is to be validated.

You also mention in this thread that this distribution might last for 1 year, so which one we should consider ? 3 month or one year ?

So the timeframe of the distribution could be extended with the intention of not allowing the extra APR to get too high. However, by directly and clearly explaining the APR improvement to existing LPs on mainnet that use our app, I believe we can migrate the 20m in a 3 month time frame without problems

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Chatted some more with @OPUser via discord about the proposal (thank you!),

  • Encouraged us to explain a bit about the distribution happening in tranches and iterating over the parameters that will be used for the merkle airdrop at the end of each period. The point is of doing this is to learn in each iteration with the goal of maximizing sticky liquidity. If possible it might be even ideal to shorten the periods to 2-3 weeks to have more iterations.

Worth mentioning also that while the rules for the distribution will be fair, transparent, and with a clearly defined goal, the parameters might not be made public until after each iteration to minimize possible gaming if required.

Also including a summary of previously requested and incorporated changes.

  1. Reduced requested amount
  2. Explanation on how we arrived at the requested amount of OP.
  3. Provided a more detailed explanation of the intended promotions to our users.
  4. Provided a more detailed explanation of eligible accounts
  5. Addition of KPIs
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I am an Optimism delegate [Delegate Commitments - #18 by katie] with sufficient voting power and I believe this proposal is ready to move to a vote.

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Voted :- For

Reward is going towards V3 liquidity, value proposition is aligned with long term sustainable growth. Amount of token request is reasonable, distribution is based on trenches and not including team wallet from reward is a welcome move.

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Thanks very much also for you feedback in shaping up this proposal

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Defi Committee A Recommendation

Voting recommendation: Yes

Rationale: We are aware of the debate in the comments, however, we are focusing on the merits of the proposal itself. The amount requested is reasonable, the funds ultimately go to Uniswap v3 LPs on Optimism which we support, and we believe the proposal would drive Optimism ecosystem growth.

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Recommendation from the defi shadow committee – which is not an official committee – is yes.

We support this proposal as a measured bet on a specific type of active user migrating to Optimism from Mainnet as a result of granted OP. We would appreciate more presentation of data supporting the likelihood of this bet panning out but are optimistic the Revert team will provide it.

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Voting yes following the Defi Commitee A recommendation.

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Repasting a response by @mariorz to a review in this thread so readers can have context and to keep info in one place

Hi @jackanorak,
First appreciate the recommendation on our proposal.

Adding more background to give context to your feedback. As mentioned in our proposal, we believe there are clear aligned incentives between the Compoundor and Optimism in that the lower gas prices mean that some positions that are too small to compound profitably on mainnet can be profitably compounded on Optimism. So migrating this liquidity from mainnet to optimism effectively increases the addressable market for the compoundor protocol.

We think that KPIs tracking the migration of the ‘sticky’ marginal capital would cover this better than the simple TVL measure proposed.

I have to disagree though with the suggestion of changing the KPI to this specific type of liquidity. The rewards will be distributed in a way that does not exclude larger positions, so we should expect these positions to also contribute to the growth in TVL and Uniswap liquidity on Optimism (which we consider a good in itself).

We do look forward to keep building on Optimism, and sharing the results of the proposed liquidity mining program in the context of our proposed KPI, though I also think doing analysis by different forms of cohorts, as the one proposed by the shadow committee is certainly worth looking into, and we will.

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thanks for the color on this, @mariorz .

Just speaking for myself here but definitely see where you’re coming from re needing to cover all types of capital, so TVL could be in play.

But I do also appreciate your openness to tracking different cohorts to see whether there are meaningful divergences in behavior. Think it’d be interesting to see - and not just for revert.

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Vote: Yes

Rationale: Following the recommendation we made in DeFi committee A. Ultimately, the proposal was strong and will add value to the OP ecosystem. Regardless of the drama within the proposal comments, we base our vote on the merits of the proposal itself.

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The PoolCollective voted yes, following the recommendation of DeFi Committee A.

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Snapshot vote - passed

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@mariorz can you provide a Telegram handle or other contact method so the Optimism team can get in touch about paying out this grant! Feel free to comment on this thread, DM, or email palash@optimism.io