Okay actual last question: without a grant, how much of your roadmap could be completed with your current runway assuming little user growth from here
It would be a bit difficult to add new features without any additional funds. So, a grant will help us to achieve that. As we believe in regular innovation & improvement so, we think community-requested features should be taken on priority.
My impression is that your product has yet to meaningful adoption even on busier chain. I have trouble understanding how it will support meaningful growth on Optimism.
Why should Governance to fund yet another product that combines some combination of DEX aggergation with stop/limit orders? How many of these products do we need to subsidize or have a successful ecosystem?
I was also confused why governance approved a similar proposal from Kromaika before they had demonstrated that there was actually some demand for their product.
We need to be much more discerning for grants.
My suggestion would be that the team takes time to fully integrate into the ecosystem and demonstrate a ability to attract meaningful users and volume. Then come back to governance with a request that shows us how we can accelerate your growth for a big return on investment, not subsidize it.
I find myself in agreement with some of @OPGovWatch conclusions.
Although I believe in the potential of this project, but the Optimism grant seek the growth of the ecosystem, and not what seems like a seed round, I will go by points:
I agree with your comments that development should happen, but not with Optimism funding; Symphony was released a little over a year ago (September 2021), being able to have your own development is key to demonstrating a healthy roadmap; I do not agree that Optimism subsidizes these types of initiatives, their funds should go where they have the highest risk/reward, the seed investment is a risk factor, and the development of a protocol does not directly impact Optimism.
It seems that you come from the field of communication, you are very good in your answers and you have also brought us innovation in terms of where to communicate; I don’t know if it can be a success but I support innovation; although this does not change my earlier comment about not allocating more than $15k OP to this initiative, and this is based on what is supported within these initiatives
I consider the objective of the funds and the distribution to be correct: gas subsidy - airdrop to order limit users
This distribution would bring 70% more $OP, available to users; which can bring flow of operations encouraged for much longer than projected, relying on this to enhance its development projection can be organic and sustainable.
I can’t support this proposal as it stands because I don’t believe Symphony Finance has an abundant user constituency, nor do I think any of the grant proposals have a real shot at increasing the economic sustainability of the protocol or of growth layerwide. I’m saying this early in this cycle and laying things out without too much structure because the Symphony team have been unbelievably accommodating in answering my many questions, and I want them to be able to respond to this and prove me wrong before I present my thoughts to the Shadow Committee.
The fundamental economic model doesn’t work for how the product is most often used.
The claim here is that setting a limit order earns users yield and thus presents an advantageous value proposition to users relative to competing products like 1inch. The problem, though, is that the vast majority of limit orders aren’t held for long enough for users to even break even on the limit order fees, much less earn enough yield for it to be worth their while. The protocol earns money on these unit economics, but because users evidently haven’t seen a lot of value, there also aren’t enough users to lift Symphony out of cash-burning mode.
The vast majority of limit orders are placed for under 12 hours.
There is negligible yield earned on these orders in that amount of time, and it’s uneconomic for Symphony users relative to 1inch limit orders on Optimism.
Assuming a 5k order at 5% APY, users need to leave their orders up for over a day – over 2x the modal amount of time – to break even with 1inch. So something like 80% of people who’d placed orders with Symphony were worse off than had they placed with 1inch.
You would need to place a 10k limit order at a bull-market stables rate of 14% APY for Symphony to be worth the while of people in the middle of that under 12 hour bracket.
Setting aside a comparison with 1inch, it takes almost 4 days to break even on a 5k limit order charge at 5% APY:
And how much would they make from yield on that 10k order? $1.30. A rounding error for somebody trying to make money on, say, a directional ETH bet.
Bottom line, for their yield-bearing limit model to beat 1inch’s or other examples on the market since at least early 2021, Symphony must either 1) dramatically increase yields, which seems like a nonstarter as a low-risk yield instrument in today’s market, or 2) court longer-term limit orders, which appear in short supply/interest. Otherwise, as a user I care much more about placing the order and making money on whatever the order is intended for do than earning yield while the order’s waiting to fill.
And it’s not obvious to me that there’s a real constituency of people who need to have some amount of money up for long amounts of time. My thinking is that in most cases of long-term limit buys, people are more likely to farm how they want to and follow the desired asset in question, buying when the time comes – unless we’re talking about setting stink bids, which seem more of a phenomenon with CLOBs, where the amount of liquidity provided by market making is more variable and fat fingers more common than what you see in AMMs. Happy to be wrong here – maybe MEV/frontrunning leaves open some opportunities.
One note, though: I think stop loss orders do make sense, and perhaps there’s something there (could imagine people leaving orders up on their USDT sells for months, for which there could actually be a pretty cool integration with other protocols), but there’s not much evidence of uptake to date. Would love to see some data from Symphony suggesting otherwise.
It’s late and I’m tired, so maybe my math here is wrong. I kind of hope it is.
There hasn’t been real evidence of PMF
Here’s their daily volume on Optimism Yolo since launch:
and daily amount of limit orders placed
Entire days have gone by with no orders placed.
Even on Polygon, Symphony’s home eco, there were few days above 30 DAUs on Yolo v2 one year after the protocol’s launch.
I haven’t done a ton of research into 1inch limit orders, i.e., whether they enjoy a ton of use, but anecdotally I haven’t seen much use, and I don’t anticipate much relative to, say, order book dApps like dxdy.
But fundamentally, it’s not like these limit orders are expensive in low-gas ecos. This tells me that fees aren’t really a bottleneck; I just see a general lack of interest in this niche instrument. The concept is cool, but does the market care? I’m not sure it has.
The user grants as structured aren’t going to drive growth.
The grant currently offers users rebates on their gas/limit order fees. That’s 0.05% money back on a limit order that’s been placed. Assuming an average limit order of $100 (consistent with the graph below), that’s 5c per order. And assuming 2-3 trades per person, that’s still not very much.
It’s not clear to me where the gas rebates really come in for users unless they’re looking to court programmatic traders, in which case there should be some discussion of that route.
I’m trying to game out how much of an incentive really would get people to place limit orders on their profile on a continuous basis after the fact, and even then I look to the example of Polygon incentives and see a large dropoff in use – which makes me wonder how providing incentives in this way on Optimism would lead to any different of an outcome.
Regarding marketing distribution, I’ll just put it quickly. The high-LTV users are likely to be the long-term limit order players, programmatic traders, ponzistable hedgers, niche players interested in a niche instrument. I’m pretty bullish on TikTok as a marketing channel, but I’m not sure this product is the kind of thing that resonates with the kind of audience I imagine coming in high volumes from TikTok.
I’m actually sympathetic in principle to the idea that subsidizing integrations of high-potential products are the right kind of investment in that they catalyze broader growth: but to my view, the potential for PMF has to come first, and there’s still not evidence of this.
I’m going to stop short of suggesting outright that Symphony Finance consider pivoting their model given their hitting something of a wall in runway, as the team seem highly skilled, and their UI really stands out in defi, but there’s a user gap here that I’m not sure is obviously overcome by a governance grant or bootstrapped by artificial activity. There are some potentially interesting avenues that take real advantage of defi composability (e.g., i could imagine an end ‘trader’ being not an individual but an org using this for one side of a broader strategy), but if they’re working those leads or use cases, this information needs to be highlighted more clearly so people like me can pick up on it.
It’s tough for me to have to say this, as it’s been a pleasure speaking with @kakashi and seeing the great care with which the information’s been provided, but I think there just needs to be a clear path I’m not seeing.
Agree with the general sentiment stated above that
- the feature of yield-generation while waiting for limit orders to fill doesn’t have good unit economics;
- Symphony is still a small, innovative project searching for product market fit.
That said, we believe Symphony does fit into the second category and this proposal can help onboarding and educating new users to Optimism. @kakashi, a smaller Ask may help convince delegates as it would limit the risk to Op and give your team an opportunity to showcase what you can contribute to Optimism.
I like symphony because of its easy-to-use interface, low transaction fees, and most excitingly, the ability to make money while waiting for execution
I think “Symphony Finance” will be more successful among decentralized exchanges. One of these reasons is the possibility of limited transactions. And another important point is that they give profit to the traders before the trade is opened. And this feature will make them unique.
See, I don’t think that this proposal merits any grant without a clearly presented path to growth. The application is no longer novel; it was tested and failed in two different ecosystems in two different broader market circumstances. I don’t see how the product with its current go-to-market strategy or development path attracts the kind of use that benefits Optimism (e.g., funding ecosystem integrations to what end?), and it’s not at all obvious to me that marketing on TikTok (rip) does much to help (the question at hand is not one of market exposure; it’s about market fit).
At risk of sounding overly didactic, I think @ScaleWeb3 would do well to reconsider his inclination to “fund less and risk less” – that’s not the right way to think about things. You fund the right projects and initiatives for growth on Optimism and choose not to fund the projects that don’t present a likely path. Granting this group 100k, for example, doesn’t make them any more likely to succeed with this route – unless there’s some data we’ve missed or misinterpreted (e.g., more description of the profile of long-term limit order placers), what Symphony Finance needs to do is come up with a different product strategy or evidence-based path to growth and come back to Governance once they have.
Thanks again Jack for going through our proposal and answers. Really appreciate your time, research, and effort.
The fundamental economic model doesn’t work for how the product is most often used.
The yield on trades might be not the biggest selling point of Symphony. Please compare the YOLO feature to competitors’ similar services and we can clearly see that we offer way better prices (because we aggregate liquidity across the chain) and execution.
I myself have used 1inch and Matcha for limit orders, I have observed that the order was not executed even after the market price surpassed the limit price. This is one of the major issues in DeFi limit order platforms. This is because of the lack of incentives for “Trade Executors”, so the limit orders are not executed on time. Hence users prefer to use CEX Limit Orders over DeFi limit orders. We have designed our protocol in a way that allows Symphony to integrate any DEX & DEX aggregators to provide the best prices which result in the best execution time. We also have sufficient incentives for Trade Executors so that the trades are executed on time & users don’t lose money.
We agree with you that the current limit order users don’t hold order too long and that result in paying more in fee than the competitive products. Hence, we are planning to get rid of the protocol fee for short-duration orders (eg: order duration less than 12 hours). That means, only for higher-duration orders, the protocol fee will be charged. So even for short-duration trades, the users won’t have to pay the fee. This makes sense because for trades that last less than 12 hours the yield won’t be significant. This way we can compete with competitors that charge less or no protocol fees without compromising our protocol’s economics.
I could imagine an end ‘trader’ being not an individual but an org using this for one side of a broader strategy
We are working on this too. Features like MEV protection would significantly help us compete as a treasury management tool. You can also see it on our website under the “Use-Cases” section. Symphony can be used as a treasury management tool but we need good BD to reach adoption from medium & large institutions, DAO & multi-sigs.
There hasn’t been real evidence of PMF
Many others have this concern so this answer will also apply there. I agree that there has been little adoption so far but is it due to the lack of value proposition for the users? I don’t think so (Why? I have highlighted above). Until now, we focused mostly on shipping useful features & smoothing out the UI. Although we launched the project on polygon more than a year ago our spending on marketing & educational initiatives has been negligible. DeFi has a lot of protocols & the noise-to-signal ratio is on the higher end so without marketing/educating/selling no product can achieve a PMF. I’m not saying that the product is not important. But without marketing, even the best products won’t reach PMF in the current competitive environment. Do you know why CEX companies spent billions of dollars on ads? Because once they acquired their customer and got them soaked into their ecosystem, they are less likely to use another CEX. So I think it would be a bit early to conclude that there can’t be a PMF.
The user grants as structured aren’t going to drive growth.
We never gave any gas rebates or incentives to the users on Polygon. The surge in DAU on polygon was all due to organic marketing. As a result, we were selected for Polygon LM2.0. I understand that the gas rebates are in order of cents but that is just an additional benefit on top of other incentives. We think the grant could help us to reach growth milestones in many ways. From the grant, we could start with marketing/education about protocol and the Optimism ecosystem. We could do collaborative marketing with good protocols. From the development budget, we can integrate more protocols to provide even better prices than now on Optimism. Currently, we have integrated Uniswap V3 but we will integrate Velodrome (leading DEX) and Paraswap DEX aggregator soon.
Also, Can you please back up your statement with supporting evidence? We would be curious about how projects like ours, in a market sentiment like this, came over similar difficulties.
Note: We offer an option to the OP board, to invest in us. Why? Because we can truly believe that with the seamless UX we have, the features we offer, and our community behind us - we can bring new users to the ecosystem. And at the end of the day, that’s what matters for you all and not how “technologically groundbreaking blockchain services” we offer.
For comparison, pls look at Notion. They are valued at $10B. Everything they offer could be done in Google Docs as well.
We would love to answer any further questions you do have.
Breaking up larger Asks in smaller parts, working with clear deliverables and milestone payments has been proven again and again to achieve better results and works especially well in an adversarial, experimental environment.
You definitely have a point with funding the right initiatives but r/r for Optimism differs from venture funding.
If we were not „bound“ to Optimism governance guidelines, we’d also advocate an extremely focused grant funding approach, for example on truly unique projects & top teams with tremendous network effects.
Thanks for the quick response. Will get something substantive back.
An acquihire is an interesting proposition tbh! I do think this team seems really impressive.
This is consistent with what I’m saying – unlike VC you’re not swinging for home runs as OP governance. You’re looking for stuff that’s clearly promising for an ecosystem and for which a grant is clearly catalytic. I’m saying that this proposal as presented offers neither.
I’m not sure what this is in response to or why you’re quoting me on Overnight’s proposal. Their product has shown exceptional PMF (i.e., it’s a product that should be accelerated), and what I was proposing was a clearer delineation of what was to be built. That’s not relevant to this discussion.
If your point is that it’s good to stage asks and match them to intended outcomes, yes. That’s exactly what we’ve done with Velodrome, for instance – we made a 6 month ask and are making another one now – with intended outcomes – and we’ve come back with an abundance of data. Tarot’s revised one did similarly, as have a number of other proposals. I think we’re getting better at this. But making a large ask that does nothing for governance smaller (which is what you suggested above) isn’t beneficial for anybody. What you need to do is make the path to growth credible.
EDIT: This was written before I’ve fully read Kakashi’s last post, so there well could be info I’ve missed that might make me completely reverse my position.
A. Optimism needs to build a full ecosystem. Onboarding top devs, projects, users (this proposal can help) is among the goals - even if not incredibly catalytic but with solid CACs etc.
B. Short-Term Experiments, milestone payments can limit risks, kick off a fruitful long-term partnership and enable us to evaluate and cut funding or doubledown on initiatives that prove themselves.
Please message me if you want to further discuss r/r or Op ecosystem building as discussion is going slightly off and we should fully focus on Symphony in this thread
Hey delegates, It would be great if you can read and approve our proposal.
@mastermojo @Exosphere @krzkaczor @linda @quix @katie @OPUser @solarcurve
Thanks for the kind words.
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.
As an Optimism delegate [Delegate Commitments - #29 by Exosphere ] with sufficient voting power I move that this proposal be transitioned to the voting stage.
We are an additional Optimism delegate with sufficient voting power (1.13% of the vote), and we believe this proposal is ready to move to a vote. Delegate Commitments - #69 by fig
@katie @Exosphere @fig We are deeply grateful for your support and thank you for helping Symphony progress to the next phase.
We are also grateful to all the delegates who have taken the time to review our proposal and provided some great feedback.
Looking forward to your support in later phases