[READY] [GF: Phase1] Homora V2 on Optimism

Project Name: Homora V2 on Optimism

Author Name and Contact Info:

L2 Recipient Address: 0xCDE30CC7502290a6B8827254810F4C852f5f3EE6

I understand that I will be required to provide additional KYC information to the Optimism Foundation to receive this grant: [Yes/No]

Which Voting Cycle are you applying for? : Voting cycle #6

Grant category: Optimism Governance Fund (Phase 1)

Is this proposal applicable to a specific committee?
This proposal may fall under the revision of DeFi committees

Project Description:

Homora is the world’s first multi-chain leveraged yield farming and lending protocol, and is also the first and flagship product from Alpha Venture DAO’s build arm. Homora V1 was first launched on Ethereum in October, 2020. To offer a more disruptive value proposition, Homora V2 was introduced on Ethereum in April, 2021, with enhanced technology and functionalities such as single asset liquidity providing and flexible borrowing of multiple assets for leveraged yield farming. After the Homora V2 launch, the product has reached significant usage and adoption with a record high Total Value Locked (TVL) of 2 billion USD in May 2021. Homora V2 continuously expanded across other L-1 chains, including Avalanche and Fantom, to bring high yield opportunities to mass users at lower transaction expenses. To continue lowering the barrier of entry for users, Homora V2 scaled to L2s, starting with Optimism and launching as the first leveraged yield farming protocol to integrate with Uniswap V3.

Project links:

Additional team member info:

Relevant Usage Metrics: (TVL, transactions, volume, unique addresses, etc.)

Since the launch, Homora has witnessed explosive growth on the platform, which rides along with Optimism’s growth. At the moment of submitting the proposal (September 8th, 2022), Homora V2 ranks #1 in the leveraged yield farming and lending category and #11 among protocols within Optimism ecosystem

Public dashboard: Grafana

Total Value Locked:
Total Value Locked (all chains): ~67.5M
Total Value Locked on Optimism: ~20M

No. of opened positions:
No. of opened positions (all chains): 17,231 positions
No. of opened positions on Optimism: 433 positions

Unique address: Homora: TVL and Stats - DefiLlama
Total unique address (all chains): 4,966 addresses
Unique address on Optimism: 211 addresses

Competitors, peers, or similar projects (please link):

Is/will this project be open-sourced? Yes/No/In Future

Optimism native?: Yes/No

Date of deployment/expected deployment on Optimism: 18th August, 2022 10AM UTC

Ecosystem Value Proposition:
Optimism is the first L-2 chain that Homora launched since we believe in the growing ecosystem and the vision of decentralized governance. With our growth strategies to integrate and build partnerships with more DeFi projects on Optimism, we believe that our launch will further drive DeFi activities and liquidity locked on chain, supporting Optimism to grow into a leading L2 chain. Moreover, we believe that our launch will benefit the whole ecosystem stakeholders, including

  1. Users on Optimism to get access to high boosted yields on high-quality pools from top DEXes with enhanced protocol security through leveraged yield farming and lending on Homora V2.
  2. Builders on Optimism, including
  • DEXes we integrate on top will gain higher TVL and deeper liquidity added to their pools, facilitating higher efficiency and lower slippage on AMM swaps.
  • Other protocols that integrate on top of Homora can leverage this partnership to expand more use cases of leveraged yield farming, such as yield strategies and vaults.

Additionally, we have strengthened the Optimism ecosystem by co-launching with ecosystem partners, including Iron Bank, Yearn Finance, and Perpetual Protocol and gained impressive traction of ~$20M in TVL, > 30k impressions and >900 engagement.

Has your project previously applied for an OP grant?: No

Number of OP tokens requested: 800,000 $OP

Did the project apply for or receive OP tokens through the Foundation Partner Fund?: Yes/No/In Process

How much will your project match in co-incentives?
It’s unlikely that Homora v2 would be able to match incentives.

Proposal for token distribution:
How will the OP tokens be distributed?

As a builder on Optimism, Homora V2 is requesting 800,000 $OP tokens where

  • Type1: ~80% of granted OP tokens (~640,000 $OP) will be allocated to users as promotional liquidity mining rewards to help bootstrap liquidity at launch in addition to the organic usage. We plan to prioritize listing the pools with OP tokens to ensure that the distributed rewards benefit back to the ecosystem. The tokens will be allocated to leveraged yield farmers and liquidity providers on Homora V2 on Optimism. Currently, Homora V2 on Optimism offers four liquidity pools from Uniswap V3, including USDC-DAI 0.05%, WETH-USDC 0.05%, WETH-DAI 0.3%, and WETH-OP 0.3%. Therefore, the requested OP tokens will be distributed among selected pools at a fixed rate of a 40,000 OP tokens per week with the distribution at start as follow
    • WETH-OP 0.3% (50%) = 20,000 OP tokens distributed among OP borrowers
    • WETH-USDC 0.05% (25%) = 10,000 OP tokens distributed among WETH borrowers
    • WETH-DAI 0.3% (25%) = 10,000 OP tokens distributed among WETH borrowers
  • Type2: ~20% of granted OP tokens (~160,000 $OP) will be allocated as builder’s grant for protocols looking to integrate on top of Homora. For example, building yield strategy vaults on top of Homora’s leveraged yield farming pools. This will allow Homora to leverage the synergies with integrated protocols and further increase liquidity and leveraged yield farming and lending activities on Optimism. See example of previous integration here

Below is an outline of our approach to calculate the proposed amount of OP token allocations Type 1 for Homora.

However, we lower the requested tokens amount according to the delegate feedback (See more details in the comment section below)

Key Assumptions:

  1. Homora V2 on Optimism launched with four Uniswap V3 pools [USDC-DAI 0.05%, ETH-USDC 0.05%, ETH-DAI 0.3%, ETH-OP 0.3%] and four lending assets [ETH, DAI,USDC, and OP]
  2. Homora V2 contributes to ~50% of the liquidity locked on the underlying Uniswap V3 pools from organic usage without LM
  3. Homora V2 aims to target around 70% TVL of the underlying pools with around 10% as additional incentives for users

Calculation of the requested amount of OP tokens
Requested OP Tokens = Target increase in TVL * Target APY$OP price

Note:

  1. TVL is estimated from 3-month average TVL of each pools
  2. $OP price is estimated from OP token price EMA(50)

How will this distribution incentivize usage and liquidity on Optimism?

As a leveraged yield farming protocol, Homora aims to help bring large TVL and liquidity to the underlying DEXes and become the majority contributor of underlying liquidity pools that it integrates with. (e.g.Homora V2 aims to contribute over 70% to Uniswap V3’s liquidity for the pools that are integrated with Homora)

Since many of Homora’s users are degens and advanced investors looking for opportunities to boost their yields, distributing OP tokens as promotional liquidity mining rewards will help incentivize protocol usage and bootstrap the liquidity on Optimism after deployment. As a result, higher farming yields will attract more liquidity providers, while higher borrowing demand will lead to higher yields for lenders. In overall, this will help shape a positive feedback loop, leading to more lending and borrowing activities.

Over what period of time will the tokens be distributed?

The liquidity mining incentives of $OP token will be distributed over 16 weeks, with 8 active liquidity mining period (2-week each)

Key milestones/KPIs you expect to achieve

  • Launch on Optimism (18 Aug 2022) with 3 leveraged yield farming + 3 lending pool listing
  • Target 1-week after launch (with IB tokens LM rewards on lending pools)
    • Gain an average of 20% organic traction on leveraged yield farming pools: 5M (exceed, actual TVL = 10M, contribution = 50%)
    • Bootstrap 20% of the target liquidity on lending pools: 7M (exceed)
  • List ETH-OP pool and OP lending pools (07 Aug 2022)
  • Target 1-month after launch
    • Gain an average of 50% organic traction on leveraged yield farming pools (meet, actual TVL = 12M, contribution = 50%)
    • Bootstrap 30% of the target liquidity on lending pools (exceed, contribution = 57.5%)
  • Target 2-month after launch (with OP tokens LM rewards on leveraged yield farming pools)
    • Gain an average of 70% on leveraged yield farming pools after the LM rewards are distributed
    • Bootstrap 50% of the target liquidity on lending pools
  • Continue new DEXes, asset listing, and explore integratation with other protocols to increase protocol use cases
  • Target 4-month after launch
    • Maintain a TVL share of 2% across Optimism DeFi landscape

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

After incentives dry up, there are three key factors that can help sustain the liquidity on Homora V2, including organic traction, a strong track record of usage from Uniswap V2’s liquidity pools, and the first-mover advantage from integrating with Uniswap V3. First, by launching without distributing additional liquidity mining rewards on liquidity providing pools, we can organically bring in a total of $20M in TVL at its peak since launching on Optimism, with ~80% liquidity locked on Uniswap v3 ETH-DAI 0.03% pools from Homora. Secondly, with proven track records on other chains that Homora is currently live on, such as Ethereum, ~50% of Homora’s TVL on Ethereum comes from Uniswap V2 even after incentives dry up. This proves that integrating leveraged yield farming protocol on top of a large DEX like Uniswap can bring sticky organic usage without extra incentives. We aim to replicate a similar impact to Homora on Optimism after integrating with Uniswap V3. Finally, Homora is the first leveraged yield farming protocol to integrate with Uniswap V3, which gives it a first-mover advantage to offer a more unique value proposition towards the Optimism community.

4 Likes

Thanks for the proposal! Under the ‘Grant category:’ field, please specify which committee should review your proposal (NFTs and Gaming, Tooling, or DeFi).

1 Like

Thanks for the feedback! We already revised the proposal to include the committee specific section.

14 Sep 2022

Summary of incorporated feedback
After the first week [DRAFT] of submitting our governance fund proposal for community review, we have constantly been gathering feedback from discord, Optimism team discussion, and the community. Here is the summary of the feedback and how we act In response to them accordingly.

1. Add the specification on which committee type Homora proposal will fall under: Homora is the DeFi’s first leveraged yield farming and lending protocol

2. Reduce the number of requested OP tokens: We benchmarked our protocol organic traction (TVL) to similar protocols and their granted OP tokens from previous voting cycles and decided to lower the number of requested tokens by 20% to reflect our best interest to grow along other protocols on Optimism

3. Adjust allocation of OP tokens: We pushed back the allocation % for contingency usage to only 3% and decided to add that to allocation for builder’s grants instead. The reason is that we agree with the feedback to focus more on allocating the requested tokens to acquire new integration partners in order to leverage synergies between protocols rather than using the granted tokens on operation costs. Also, we refined this section to be more aligned with the previous distribution reflection from the last cycle retrospective.

1 Like

21 Sep 2022

On this second week [REVIEW] of proposal submission, we have been actively reaching out to the delegates on both discord and telegram to gather more feedback on our proposal. Here is the summary of the delegate feedback and how we act in response to them accordingly.

1. Reduce the number of total requested OP tokens from 1M to 800k: We received feedback from the delegates regarding the too many OP tokens being requested in one round. Therefore, we decided to break down the requested amount into different requests to reflect different milestones acheived.

As a result, we lowered the requested tokens in this 6th voting cycle by another 20% (to 800k OP) to kickstart the first phase of using requested tokens to drive usage on the Optimism ecosystem to show our fairness and sincere intention to grow alongside the Optimism community.

2. Adjust allocation of OP tokens: We cut off the allocation % for contingency usage and distributed the allocation to 80% (640k OP) to be used as Liquidity Mining Incentives on the pools with OP tokens instead to ensure that the OP requested tokens used will be circulating and benefiting back to OP community, delegators, and holders. Another remaining 20% (160k OP) will be used to support new integrations on top of Homora, emphasizing the usage growth even more.

3. Update all the statistics and relevant metrics (ie. Public Grafana dashboard, no. of positions, etc …) to be up to date on a daily basis and include the link to public dashboard ie. DeFillama and DeBank for more transparency

4. Extend the distribution period from 8 weeks to 10 weeks to encourage a more sustainable usage and tractions from requested tokens

Thank you @OPUser @ScaleWeb3 @katie @Netrim @MinimalGravitas for your support and useful feedback.

2 Likes

I see two section from the Template is missing in this proposal.
Please include them :- Grant Proposal Template

could you also update the excel screenshot too, correct me if i am wrong but 3.40TVL increase was possible when 1.12M OP token was requested. How much you expect now ?

I would suggest to reduce the weekly distribution significantly. It seems liquidity on protocol is sticky which is a plus point but you are burning token too fast for my taste.

Not being open source is also a point to consider here, I am more aligned towards OSS. This is my personal view and not of committee, committee is reviewing your proposal and once you have approval from 2 delegate and included in snapshot, we will share our recommendation.

@Dhannte

1 Like

Hi, thank you for the feedback. As per the proposal improvement, we have
1. Include the missing section: Voting cycle & Co-incentives matching

2. Update the sheet to reflect the current market condition and our expectations: gaining 5.4M TVL increase with 640k OP usage (~10x impact)

3. Extend the distribution period to lower incentives burning rate: the rewards will be distributed over 16 weeks (from the previous 10 weeks) at a rate of 40k OP per week

4. To clarify why we do not open source our code, the main reason is that we see it as another security buffer layer for our users.

If you have any further questions, please do not hesitate to let us know!

1 Like

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.

2 Likes

I am an Optimism delegate [Delegate Commitments - #65 by mastermojo ] with sufficient voting power, and I believe this proposal is ready to move to a vote.

As mentioned earlier, really appreciate your engagement.

Liquidity is sticky, new innovative approach, focused on V3, good tvl in short time after your launch along with liqduity on main net.

I dont like that the protocol is not OSS and high weekly distribution. I assume, we cant do anything about OSS but token distribution still need improvement and I am talking about 5-7K/weekly. Adjust accordingly and focus on 6 month distribution period or even shorter, you can always submit another proposal in future once current incentives are over.

Homora has potential to grow OP ecosystem but not being OSS is against my personal opinion so I will most likely abstain from voting but only if token distribution is adjusted.

Most important, remember that I am really small delegate so making change according to my suggestion does not necessary mean bigger delegate will share the same thought. Check with them too and decide.


From committee stand point, if you feel that your proposal need to be reviewed by DeFi committee A please let me know and I will talk to them.

1 Like