Recommendation from DeFi committee C
Details
Detailed proposal focused on liquidity mining and protocol integration. Homora (Prima) was active throughout the cycle, indulging community by answering their query and adjusting their proposal on the basis of suggestion and feedback.
Value-Add
Protocol was deployed in August and has attracted 23MTVL according to Defillama. Comparing Uniswap V3 TVL for the last month shows it has been steadily in the 49 to 55 M range. Nevertheless the protocol has attracted TVL which seems to have migrated from UniV3 but with no obvious increase on either side. Initial pool selection shows a good understanding of UniV3 volume drivers, already accounting for half of USDC/wETH (0.05%) total TVL on UniV3. They outline in their proposal that new pool/assets will be added and looking at their past performance they tend to go for the best return pools.
Traction
Not native to Optimism but the integration with UniV3 is new and unique. Activity on other chains has shown a consistent pattern of integration and resilience in the face of a downturn market movement. Their track record for Liquidity Mining shows a TVL expansion to accompany them.
Amount
Divided into 2 groups: Increased numbers on 6/OCT to 1M but also increased the time frame for distribution to 50 weeks
a) Type 1 / Liquidity Mining to incentivize borrowing (800K OP). Weekly 20K Distribution.
Lending pools (15% of Type1)
- OP (15%) = 3,000 OP tokens distributed among OP lenders
Liquidity providing pools (85% of Type1)
- Uniswap v3 WETH-OP 0.3% (45%) = 9,000 OP tokens distributed equally among OP and WETH borrowers
- Uniswap v3 WETH-USDC 0.05% (20%) = 4,000 OP tokens distributed among USDC borrowers
- Uniswap v3 WETH-DAI 0.3% (20%) = 4,000 OP tokens distributed among DAI borrowers.
b) Type 2 / Builder grant for protocols on top of Homora (200K OP)
Amount is a flat 200K to be distributed at the Alpha’s discretion with no specific milestones nor KPIs, the idea of building blocks on top of Homora or Iron Bank. Both seem appealing for Value added and Traction. As Homora is not a DAO, team will decide who to give this incentive which could be gamed easily. Their track record does not suggest such a path as probable. No Governance provision is included in the proposal. Additional information would help.
OP Distribution
Heavily increased from the revised 16 weeks to 50 weeks.
Track record shows this kind of programs if applied to borrowers can have a short/medium term impact. Sustainability should not be an issue considering Homora has already attracted a sizable chunk of TVL without incentives, same as Iron Bank. Suggestion is to focus on short duration.
Co-incentives
Co-Incentives are going to be run by Iron Bank using IB Tokens, around 111K IB tokens, ~340k USD at the moment of review. They represent around 40% of total ask which seems low when compared to other co incentives approved in the past.
Alignment
Alpha seems to be very aligned with the Ethereum ecosystem as a whole and Homora implementation is a building block on top of Dexes (Curve, Balancer, Sushi, UniV2, UniV3, PancakeSwap, Trader Joe, Pangolin, SpookySwap, Beethoveen X, SpiritSwap) AND on Iron Bank, Chainlink, Band Protocol.
General comment regarding Open Source, Homora has stated they will not open source on the short term, as a measure of security with its users.
Recommendation
No
Liquidity Mining was reduced 2 times from their original ask but then increased back to 1M. As was the distribution period to 50 weeks.
Furthermore the ask should be reduced at least to 500k, with a heavy emphasis on building composability on top and less on LM.Time-frame for distribution should be 4 to 6 months. Then can re apply if needed.
Note :- This committee acknowledge that the proposal was significantly changed after receiving the two-delegate endorsement. Which could mean that the original endorsement should not be considered binding. But this is an edge case as such scenario has not happened in the past and we can not make a rule change mid-cycle.
In case this proposal is included on Snapshot for voting, our recommendation should be consider as official committee decision.
cc @prima
Our past recommendation is available on committee recommendation thread.