[REVIEW] [GF: Phase 1 Proposal] Overnight.fi V2

As a delegate in the Optimism Collective, I endorse it :saluting_face:

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endorsement still stands.

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Hey guys I love this project I just have one concern about this.

As of today, you have 3 ETS distributing OP tokens. All 3 ETS have 33 users in total.

I’m concerned this ETS distribution will end up in a few addresses contrary to what I think it’s healthy.

Is asking for an APY % distribution where the user count is considered too much? Something like:

10 users 5% APY
20 uses 10% APY

If not (which is totally understandable) can we lower this to 2 months and come back with some metrics? It won’t look good if we finish this 6 months period and see all these OP tokens distributed to 33 addresses only.

I love the project and I want to see it thrive I’m just concerned about user/distribution ratio.

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thank you for the question. we are just launching ETSes on OP and expect the # of users in the 100s.

The biggest constraints to growth so far, have been, actually, the performance of USD+ itself, which has outperformed ETS in yield (which is not normal and will change as OP ecosystem matures) and depth of liquidity for relevant attractive underlying pairs.

we are solving both issues by launching today the ETS based on Uni V3 (via Arrakis) - “Night over arrakis”. It is delta-neutral strategy aimed at providing liquidity to ETH/USDC 0.05% pool with rewards by Arrakis/Uni/OP. It is quasi-stable strategy with target 15-20% yield, which people are already queuing for. it is deep and long enough for the ETS to acquire 100s of happy users. We have no doubt there will be major demand (enough to ask people in our discord). There is also a ‘waiting list’ of 40+ addresses. Next week, we will launch another Arrakis-based ETS for ETH/DAI liquidity provision.

We can guarantee that everyone will have access to this product and rewards: we have established a stable pool on Velo: USD+/ETS that will (1) use the yield to self-bribe (2) will be the only channel used to distribute grant rewards. So everyone will be guaranteed access and it wont become an ínsider deal’.

Responding to your questions more specifically: linking APY and # of users can be done, but incentives via pool on Velo would, imho, be more effective and natural way to balance supply and demand;

Regarding metrics, we have put in the proposal ‘Second KPI - exceeding 2M in TVL and 100 users for ETS products’. if we dont exceed 1M TVL and 100 users within 2 months, we would be happy to stop the grant program and return the remaining part of the grant related to ETS. But i am certain that wont happen. Hope i have addressed your questions. if not, please let me know

Can you add this condition to the proposal? you have my full support.

Nonrelated:
Have you considered ETH/OP pool as a quasi-stable strategy?

I think the committee has the power to integrate that in the decision. It would be horrible if we had to go to another voting cycle because of this modification

Eth/OP is actually not a quasi-stable. It is a very volatile pair. Also OP’s liquidity (and consequently opportunity to hedge, cost of impermanent loss ) are not good, to put mildly. All this makes a delta-neutral product based on this pair uncompetitive.

I honestly think some of the grants should be put forward to improve OP’s liquidity: how could aave have received the grant and not accept OP as collateral… Or Uni V3 be incentivizing pools with ETH and not OP… This really escapes me.

Once the prerequisites are in place we would love to do the ETSes based on OP pairs

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This is fair. (I feel you on the horrible feeling about going to another cycle)

I assume you are considering this pair volatile against USD right?

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Against each other as well. There is certainly quite a bit of IL in that pair. It is correlated, but not closely enough.

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@OPUser For the sake of record:

  • The grant request is 300K OP
  • Co-incentives match - 300K USD
  • How will the OP tokens be distributed?
    175K for USD+ liquidity mining on Optimism (spread between Velodrome and Balancer).
    → This would grow USD+ liquidity on Optimism, but also increase liquidity for the protocols and pairs USD+ collateral is invested into (100% is invested on the same chain). Additional stablecoin yield maximizers with low risk appetite will join Optimism chain
    125K for ETS liquidity mining on Optimism (via Velodrome)
    → This would grow ETS liquidity on Optimism, but also increase liquidity trading pairs underlying our ETS products, in particular, ETH/USDC and OP/USDC (100% is invested on the same chain). Additional stablecoin yield maximizers with low risk appetite will join Optimism chain
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Given that two delegate(s) are on-board with updated token ask and distributed plan. We would like to consider this proposal in current cycle, please share your thoughts if you think otherwise.

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Recommendation from DeFi committee C

Details

The proposal describes Overnight’s yield-bearing stablecoin and yield strategies. The re-submitted proposal focuses more clearly on liquidity for the existing products.

Value-Add
The USD+ stablecoin is 100% collateralized with other stablecoins that are invested on-chain in “low-risk strategies” such as LPing on stables, lending & more. The integration of another yield-generating stable in the Optimism ecosystem can have benefits for Optimism users. With additional incentives, Overnight can add liquidity to key pairs on Optimism and improve efficiency - long-term effectivity & sustainability are yet to be seen for this relatively new project.

Traction
Overnight is an early stage project that initially attracted liquidity on Polygon and BSC but moved most liquidity to Optimism. It has gathered a total TVL of more than $8+ Mio since its launch on Optimism in early September.

The yield strategies have decent APYs but they are so far capped at 100K and have only a few users. Yields will likely go down with higher TVL amounts.

Overnight does not have all the contracts public, it has closed open source portfolio rebalancing algorithms behind ETS until at least the public sale of the OVN governance token.

Amount
300K OP : Okay for a relatively new project with value-add where long-term functionality & efficiency is yet to be proven:

  • 175K OP for liquidity mining of USD+ (stables)
  • 125K OP for liquidity mining of ETS+ (USDC-ETH, OP-USDC)

Co-incentives
300K USD+

Alignment
Overnight has moved towards Optimism and is integrating with Op projects.

KPIs
Reasonable KPIs but Optimism should also look at the value-added from the additional TVL

TVL = 15m USD
Users = 2000

Recommendation : YES

Our past recommendation is available on committee recommendation thread

2 Likes

Thank you for the review and recommendation

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Voted yes - I voted yes for this proposal in the previous round and I’m happy to support it again. Thank you to the Overnight team for resubmitting.

Thank you, Katie, for both votes!

Afterwards, I will try to structure my feedback on the process. As with any process there are many ways to improve, but one thing I must stress: it has been way more transparent and predictable than anything we had experienced across many other chains so far

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Voting YES following committee recommendation. Happy to see the updated proposal and happy to finally vote YES here!

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Snapshot vote - passed

@_Max_plus 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