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

This is the GF Phase 1 Proposal from the Overnight.fi Protocol. The goal is to help push the adoption of Overnight.fi innovative product line (yield generating stablecoin USD+ and delta-neutral ETS strategies) on the Optimism network.

Project name: Overnight.fi

Author name and contact info: Maxim Ermilov @wmermus, can be contacted through Telegram

I understand that I will be required to provide additional KYC information to the Optimism Foundation to receive this grant: Yes

L2 recipient address: 0xe497285e466227F4E8648209E34B465dAA1F90a0

Grant category: Governance Fund Phase 1

Is this proposal applicable to a specific committee? [y/n, link to committee] Yes, DeFi Committee

Project description (please explain how your project works):

Overnight.fi is the company behind stablecoin USD+. USD+ is USDC that pays you yield via daily rebase. It is 100% collaterized with high-quality stables (USDC, BUSD, USDT, DAI etc.) that are invested onchain into lowest risk no IL stable-to-stable strategies. The yield from farming is passed over to USD+ holders via rebase. The superpower of USD+ is its ability to pay yield in liquidity pools, thus maximizing capital efficiency of LP provision.

Core usecases:

  • Treasury management
  • Liquidity provision on Dexes (e.g. currently USDC/USD+ on Velodrome)
  • Maximizing yield on projects’ own liquidity on DEXes (e.g. Sphere, OtterClam, Tetu, Parrotly, MDB etc paired against USD+ to receive yield from liquidity they maintain at DEXes)

In addition to USD+, Overnight is offering ETS (“exchange traded strategies” product line). ETS is a quasi-stable (some call it ‘delta-neutral’ strategy packaged inside a rebase token) that accepts USD+, uses it as collateral to borrow (hedge) a crypto asset on AAVE (or Granary), then farms crypto-to-stable pool. Currently, on OP there is already ETS ETH/USDC via Velodrome/AAVE and ETS OP/USDC via Velodrome/Granary in process of release.

Overnight intends to make Optimism its ‘innovation hub’, i.e. the chain where all new products/approaches are developed, tried and launched ahead of other chains. The pipeline includes:

  • ‘Self-bribing’ LP on Velodrome: USD+ yield from Velodrome LP pools automatically directed towards bribes on Velo
  • Insurance: Users will be able to exchange risky asset, e.g. a Velodrome LP of two risky stables, for a combination of insured and uninsured tokens (tranches), with insured - redeemable for USD+ and uninsured - for OVN, Overnight’s governance token yet to be released
    -Additional ‘+’ products: DAI+, Eur+ (once agEur available on Aave), but also experimenting with BTC+ and a few others
  • Additional ETS, in particular, OP-to-stable ETSes as OP borrowing limits increase on Granary and appear on Aave

Project links:

Additional team member info (please link): Telegram: @wmermus LinkedIn: https://www.linkedin.com/in/maxim-ermilov/

Please link to any previous projects the team has meaningfully contributed to: N/A

Relevant usage metrics (TVL, transactions, volume, unique addresses, etc. Optimism metrics preferred; please link to public sources such as Dune Analytics, etc.):

Overnight went into open beta around May 1st, 2022 and, despite the timing coinciding with the UST crash, has been having great momentum, largely helped by increased risk aversion:

  1. TVL has exceeded 5.5 M USD, x11 growth since UST crash in May (USD+ finalized closed beta and launched open beta on May 1st)
  2. number of users has exceeded 2,8K, i.e. x6 growth since May
  3. USD+ daily trading volumes have fluctuated in the range of 0.5-1M per day depending on market volatility, on average exceeding 14.5% of TVL, putting USD+ b/w BUSD and USDC on this metric, far ahead of most CDP stablecoins

The growth has been driven by:

  • Partnerships with Dexes, in particular, Dystopia/Penrose and Cone/Unknown, Velodrome
  • Partnerships with other projects that chose to establish trading pairs with USD+: Lido (stMatic), Sphere, Tetu, OtterClam, MDB, Parrotly Finance etc.
  • Launch of highly attractive (and profitable) product - ETS, a quasi-stable high-yield strategy product on top of USD+/wMatic and USD+/wBNB pools (with hedged crypto price-risk)
  • Expansion to BSC and Optimism chains

Overnight entered Optimism about 2.5 weeks ago with the launch of USDC/USD+ pool on Velodrome. Since then TVL has exceeded 1.5M with 133 users. Total ‘bribing’ amount has been just 7K USD+, of which 4K from came from ‘self-bribing’ described above.

Is/will this project be open sourced? Yes, however, we intend the keep portfolio rebalancing algorithms behind ETS closed until at least public sale of OVN governance token

Optimism native?: Overnight looks to make OP its innovation hub, i.e. develop all its new innovative products and approaches first on OP, then deploy most successful ones to other chains. It is not our first chain, but will become native to most of our innovation

Date of deployment/expected deployment on Optimism: Technical deployment - August 2022, commercial launch - first week of September 2022

Ecosystem Value Proposition:

  • What is the problem statement this proposal hopes to solve for the Optimism ecosystem?
    Building ideal DeFi product suite for crypto-winter and beyond: trustworthy, low-risk, decentralised asset management solution for passive stablecoin investors with minimum risk appetite in a convenient ‘stablecoin’ form factor

  • How does your proposal offer a value proposition solving the above problem?
    Overnight’s vision is to build ‘Vanguard of DeFi’ with (1) USD+ as a lowest risk product (equivalent of traditional money-market funds) and (2) ETF as a medium risk product (equivalent of ETF). Insurance product being built will play the central role in de-risking Overnight’s ecosystem of the structural DeFi risks

  • Why will this solution be a source of growth for the Optimism ecosystem?
    Overnight is targeting risk-averse segment of DeFI (both individuals and treasuries), somewhat underserved segment, which, we believe, over time will overtake ‘degen’ segment of DeFI in volumes and revenue. Over time risk-consious investing always wins. This will be even more pronounced through crypto-winter

Has your project previously applied for an OP grant? Yes

Number of OP tokens requested: 400,000 OP

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

If OP tokens were requested from the Foundation Partner Fund, what was the amount?: NA

How much will your project match in co-incentives? (not required but recommended, when applicable): USD+ will match 100% of the liquidity mining incentives by (1) channelling USD+ yield from liquidity pools with USD+ on Velodrome and Balancer to self-bribing and (2) allocating 50K USD worth of BAL received from Balancer for building boosted pool with USD+ on an L2 towards Beethoven’s USDC/DAI boosted pool.

Proposal for token distribution:

  • How will the OP tokens be distributed?
    50% for Overnight products liquidity mining on Optimism (spread between Velodrome and Balancer).
    → This would grow USD+ and ETS liquidity on Optimism, but also increase liquidity for the protocols and pairs USD+ and ETS collateral is invested into (100% is invested on the same chain)
    25% for expansion of "+"and ETS product lines: ETS based on OP/USDC in particular, as well as DAI+, potentially, BTC+ and/or Eur+ etc.
    → This would attract users with corresponding risk appetite
    25% for building insurance product
    → This would derisk entire Overnight ecosystem: both USD+ and ETS
  • Over what period of time will the tokens be distributed for each initiative?
    3-6 months
  • Please list the milestones/KPIs you expect to achieve for each initiative, considering how each relates to incentivizing sustainable usage and liquidity on Optimism.
    First KPI will be exceeding 10M in TVL and 2000 users for Overnight overall
    Second KPI - exceeding 1M in TVL and 100 users for ETS products
    Third KPI - the launch of Insurance

Stablecoins like USD+ have considerable network effects. By reaching critical mass of TVL and users, powered by low risk, USD+ and Overnight will realize network effects and make Overnight sustainable on Optimism

  • Why will incentivized users and liquidity on Optimism remain after incentives dry up?
    Our overall approach is that Overnight products should be attractive without rewards (with rewards used essentially for promotion/marketing only):
  • USD+ relies on natural yield on the chain to generate yield for its users
  • USD+ model we are deploying on Optimisme is ‘self-bribing’, i.e. natural yield from USD+ in Velodrome and Beets core pools will be support bribes beyond incentives
  • ETS also has a ‘natural source of yield’; we will use part of the funds allocated to developing ETS product line on Optimism, towards developing ETS based on Uni-V3 non-incentivized pools, ultimately sustainable source of natural yield

Please provide any additional information that will facilitate accountability:(smart contracts addresses relevant to the proposal, relevant organizational wallet addresses, etc.)
All Overnight smart contract addresses on Optimism can be found here: Contract Addresses - Overnight Finance Docs (Beta))

We hope the Optimism community will help Overnight not just grow TVL, but push DeFI innovation forward and beyond. Optimism is ideal chain for building things that had not been tried before. Let us know if you have any feedback on the proposal!


I read through the contracts, docs, and dug into the yield strategies and position sizes before commenting. Correct me if I’m wrong on this summary:

What Optimism stands to gain:

  • Liquidity and support for the USD+ stablecoin token
  • Some cross-polination of defi users from your dapps on other chains
  • Verbal promise to use Optimism as a test bed for new features before other chains

What Optimism must give up:

  • 400,000 OP, most of which will be liquidated for other stables behind the scenes for funding and yield rewards

On the face of it, this is a critical comment. I’m still not a fan of mercenary incentives, but it DOES bring users. I’m just not convinced it’s users that anyone actually wants or gets to keep in the long-term.

I always prefer incentives that bring in users who are doing something. This does look like a repackaging of existing value – but you’re hardly alone in that!

A money market fund is actually somewhat useful. I would be more receptive to this proposal if USD+ innovated more on the backing / stability side. We really need stablecoin innovators

If this were just a safe play to get people into your ecosystem so that you can later convert them into your really exciting product ideas, that would also be more enticing. Could you share some of the experiments you’re considering trying on optimism?

Thanks for submitting and deploying on Optimism. Congratulations on the launch. This network is special. I just want to see our dapps mirroring that ethos too


I would point to ETS, a delta neutral quasi stable strategy, as a truly innovative product - we deployed it already on OP, in particular, OP/USDC ETS (it is live on our dapp and you can try investing in it). The vision is to build ETS that’s sustainable long term, independent of rewards. That can only be accomplished on Uni V3. We have deployed 4 prototypes on OP and are collecting performance data - contrasting various liquidity mining strategies. So it is not just a promise, but proper R&D. Surely, getting both Gamma and Arrakis very nervous:)

What we look to do is to bring from prototype to production the quasi-stable ETS based on UNI-V3, then build insurance for it, then have insured parts of ETS underlie USD+. This way we would arrive to a stablecoin that has sustainable, native source of yield, low-risk and insured. That’s what we have been building on Polygon, but could be much more exciting to accomplish on OP.

Last but not least: once OP is available on Aave, we will build a truly scalable ETS based on OP/USDC (we are currently limited by Granary’s very shallow liquidity) and potentially OP+ in case there is demand for it. So that certainly would create more demand for OP than we ever dump.

Ah. I didn’t really look into ETS. That’s on me. I’ll go back through the docs in a bit

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I like that this will attract users to OP that are looking for high yield on stable coins and then the collateral will be invested in other protocols on OP like Pika and Rubicon. Win-Win-Win

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.

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I am an Optimism delegate [Delegate Commitments - #136 by jackanorak ] with sufficient voting power. I believe this proposal is ready to be reviewed and voted on.

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@jackanorak @solarcurve thank you so much for supporting!

An update on Overnight metrics since proposal submission:

  • USD+ has reached 3,83M in TVL, 281 users
  • ETS OP/USDC has reached its maximum cap of 100K, provoking the OP borrowing rates on Granary to exceed 52% APY, attracting meaningful deposits into granary
  • Overnight has provided close to 4M of Liquidity to various OP protocols: Pika, Rubicon, Beethoven, Velodrome (most in OP/USDC pool), Granary

@OPUser @jackanorak @solarcurve @StevenSchrembeck

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Hi @_Max_plus , Thank you for tag tag and update. I just notice that your proposal is there on the roundup thread. Did you add it after the deadline ? When I collected all proposal assigned to DeFi committee, your proposal was not there hence its not assigned to any defi committee.

I published the proposal more than a week prior to the deadline, also submitted it via discord. I added the proposal to the thread Maybe, 1-2 hours after deadline - the process has changed vs. what was there before so there is some confusion with how to move it forward. Is it possible to assign it please?

Given this is a new / confusing process and DeFi Committee B has 1-2 open slots it does not feel unreasonable to extend a grace period to projects like Overnight and Abracadabra.

Thank you so much. Really appreciate it.

The process is totally fine - I got confused as I had not clarified the changes to the previous one upfront

I totally understand your position but rules and process should apply to each proposal equally and including a proposal now will not be a good idea.

My suggestion is to wait for next cycle which will start in just 2 weeks.

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I submitted proposal 2 weeks ago, submitted to discord 10 days ago, wrote to multiple committee members 1 week ago asking what I was doing wrong - I was pointed to cycle 7 thread only 1 hour after deadline, and submitted it 1 hour after… I know it is my fault, but maybe, some moderator on the forum, or in discord could have commented that I had been following the old process, as well as point to this critical deadline

You can send in the next cycle. We must understand as governance that we must be orderly and fair to all equally. I understand that some delegates have an interest in moving some projects to cycle 7, but this can bring disorder to governance. As we move forward the processes will be more fluid.

Changes or exceptions should be for everyone equally, we should not mix our own interests whether delegate or protocol with governance.

I am not the proposer. I am an advocate for effective OP governance.

Everyone who has weighed in on Discord so far does not see an issue in allowing them to proceed. Please join the conversation there.

We are here to support builders and grow Optimism, not recreate a rigid bureaucratic state.

I am in discord and follow the conversations.

I always support the builders so I think it has to be equal for everyone at all times.

I think if you think order and neatness is bureaucracy you are wrong.

You can check that not everyone has given their opinion yet.

this was posted on the 22nd of september, on the 26th i asked for feedback, when noone answered - i followed up with 4 different delegates in direct messages, including @OPUser, asking what i was doing wrong and why discussion of our proposal was not taking place. i was not aware the process changed so much

but indeed, rules are rules and we will wait 2 more weeks - thank you