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

I’m a delegate w sufficient voting power Delegate Commitments - #136 by jackanorak and i think this is ready for a vote. My endorsement remains valid in the case of any sort of change (esp refinement) concerning dev costs.

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I am an Optimism delegate [Delegate Commitments - #42 by solarcurve ] with sufficient voting power and I believe this proposal is ready to move to a vote. :saluting_face:

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Proposal looks solid to me. Overnight has incorporated their prior feedback and they have already launched and been operating smoothly on Optimism. Their contracts are transparent on chain for how funds are used and have a sustainable bribing mechanism on velodrome for multiple weeks already.

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The Ask looks still quite large with 400K Op for a rather new project - ofc matched with good co-incentives. Distribution is much better w/ more specific liquidity incentives instead of funding internal development.

i know what you mean. we sized it the request to be 1:1 grant : co-incentives - which i believe is fair. OP has pumped since very nicely. i don’t know how to request it in a way that we achieve 1:1 match given our rewards are in stables and OP is volatile. Open to suggestions

Ultimately agree and def would be more supportive of a 1:1 grant → 300K Op Ask.

Generally been thinking about OP price & mcap in the following way (napkin math, very simplified)

  • Large sell pressure from all the incentives and potential future airdrops given out
  • Growth of ecosystem, OP usage & investor mindshare will offset some-most of the sell pressure
  • There is a bottom price that larger investors may pick up based on interesting FDV (0.5$?)
  • Tech expansion & economics advances, overall move to l2, short-term narratives can lead to (deserved?) price breakouts to 2-5$ but will be sold off by Op recipients so that price fluctuates around ≈1$ while marketcap grows towards FDV.

For proposals, we’d expect to follow more or less the following template

  • Current Price
    • 30-day TWAP should be pretty fair, updated when it moves to voting
    • 7-day TWAP at payout day would be better; but would require Ask in USD & Foundation input
  • Comparable Proposals / Project Size / Return for the Optimism ecosystem
    • -10K USD: Instant grants for small tools, bounty work, etc.
    • 10K-50K USD: Small grants for teams/startups/dev funding
    • 50-300K USD: Growth program for early-stage, smallcap project with significant value-add
    • 300K-1M USD: Onboarding top teams/projects, co-initiatives w/ significant growth expectations
    • 1M+ USD: Exceptional growth opportunities

Obv would be great to judge proposals purely by outcomes but many are early stage, public goods, nice-to-have tools and outcomes will be multi-dimensional (team, liquidity, user, building block onboarding, etc.).

Really looking forward to more data like this, this and this for learnings from past initiatives but you’d need to control again for all the projects (Galxe’s temporary OP Quest boost, Internal Settlement TXs, etc.)

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@OPUser @ScaleWeb3 We were targeting the 300K USD as amount of grant with 1:1 co-incentives. With the recent OP pump we would be willing to bring the grant amount down to 300K OP and keep the same co-incentives. % allocation b/w initiatives would stay the same.

It is a 1 minor change caused by the market. it would be great for the proposal still be considered in this cycle. From recent gov-channel discussions, I think the committee has the power to act of its own accord in such a matter.

@solarcurve @jackanorak Gentlemen, would you be willing to endorse the change? thank you

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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

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Thank you for the review and recommendation

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