[REVIEW] [GF: Phase1] Homora V2 x Ironbank on Optimism

ARCHIVED & OLD Missions Governance Fund: Phase 1
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This update shows significant changes in the proposal:

  • Ironbank as co-proposer has already meaningfully contributed to (TVL) growth on Optimism incl. the liquidity mining campaign financed with IB tokens
  • Overall distribution of tokens will still be 80% towards liquidity and 20% for builders. Of the 80%, 15% go to OP lenders on IB which “might” cause less selling pressure than the 85% (680K Op) for liquidity mining of popular Uni V3 pairs.
  • IB offers co-incentives of 111K IB (current price 3$). Price of IB is trending down though and the marketcap is only $500K USD - hence the effective co-incentives might be much lower.
  • Distribution of LM rewards over 50 weeks instead of 16 weeks.
  • Ask increased again from 800K to 1M Op in total.

To summarize our thinking:

  1. Alpha + IB demonstrated already value-add and potential to move significant TVL to Optimism.
  2. 6 months distribution of LM rewards would make more sense. (Follow-up proposal possible)
  3. 20% (200K Op) Builder incentives can spur additional, sustainable growth.
  4. It’s great to have another place to take out a loan against Op on Optimism. (15% of 80% = 120K Op)
  5. 85% of 80% = 680K Op for liquidity mining incentives is still a huge ask.
  6. 111K IB as co-incentives on top of leveraged yield farms & lending pools show good will but there is a ? how much that will actually contribute.

→ Maybe reduce Ask by 50%+, stick to distribution over 6 months & create a new proposal when this co-growth program ends, success was demonstrated - incorporating lessons learnt.

Overall, this co-proposal looks stronger than the proposal before. Thank you for bringing in Ironbank. We appreciate the hustle for co-incentives though we are not confident they will be significant due to illiquidity and low floating supply.

Echoing @jackanorak’s comment, we don’t see a good reason for changing the distribution schedule towards 1 year and raising the Ask to 1M - still lacking significant co-incentives.

@prima You mention TVL contribution (see below): Liquidity is very important for protocols to enable traders and other protocols to build on. That said, we should look more at effective liquidity, marginal value added to the Op ecosystem and sustainable incentives, which also means that tokens should not be temporary APY boosters which are instantly sold & less Op incentives are left for the rest of the ecosystem. Some earlier proposals (xToken, Gamma, Uni Staker; all grants) might have gotten a larger amount but it’s important for Optimism to spend Op more wisely going forward to not waste resources, grow the overall ecosystem & not add risk without reward.

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Hi @prima and @katie @mastermojo.

We’re seeing that this proposal received approval of these last two delegates. But in the last two days the proposal suffered a lot of changes (even in the title), so I think that its fair that at least @katie @mastermojo can review it again and ratify its approvals. This makes sense to avoid any type of gaming governance process. We know that these approvals doesn´t represent any sponsorship, but anyways this isn’t the proposal that the governance marked as ready to move to snapshot.

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Thank you @OPUser

  1. We allocate to the WTH-OP 0.3% pair as it is an OP pair with the highest liquidity and trading volume on Uniswap v3 which aligns with Homora V2 pool listing requirements
  2. We have looked through the gov. fund excel sheet Optimism GovFund: Public Distribution Tracking - Google Sheets
  3. We are iterating based on feedback and working to bringing the request back to 800k before voting begins with duration period reduced to 6 months. Would love to have your feedback on those too.
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Thank you for flagging this. I have not reviewed the recent changes and I am withdrawing my approval. I do not agree with significant changes being made to a proposal after receiving delegate support.

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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.

1 Like
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I am voting no. The amount requested is way too high and the proposal was edited to reduce the amount, then edited again to increase it to 1M.

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Has this been updated for Cycle 8?

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Minor updates have been made but we are also discussing on allocating more % to builder’s grant which we will include once we get alignment from all parties (Homora & Ironbank). Will make sure to keep you posted on the updates. Thank you.

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Hi, thank you all for feedback (the delegates, OP community, etc.) over the past 2 months after we first submitted our proposal for the governance fund cycle #6. Here is a quick recap on what we have been through as there are lots of both iterations on feedback for improvement and significant changes to the proposal after submission

  • Submited the proposal for governance fund cycle #6 by creating a thread and submitting in gov-temp-check in discord
    • Received the feedback, majorly on 1) Too much number of token requests and allocation period 2) No existence of co-incentives matching 3) Homora V2 being non-open-sourced
  • Actively reached out for >=2 delegates’ approval for cycle #6 but managed to get the approvals (from @katie and @mastermojo) during cycle #7
  • Revised the proposal structure to apply as a joint-proposal with our partner; Ironbank, a protocol-to-protocol lending platform which provide liquidity for Homora users to enable leverage
    • Added Ironbank information
    • Included co-incentives matching in $IB tokens
    • Increased number of tokens request to 1M, extended the period to 1-year
  • [Current] Re-submitted the proposal for cycle #8 as there are substantial changes in proposal structure
    • Actively reach out to integration partners and set up a solid process on what are the requirements and how our builder’s grant will be allocated

Below is the list of some feedback we received so far on cycle #8 and how we incorporated that into our latest proposal in order to move the proposal forward from [DRAFT] to [REVIEW] phase as per the operating manual.

  1. From @jackanorak on no. of tokens requested and distribution period, suggesting that a longer term of allocation should not be the solution for too much number of request.

“I don’t believe that anyone here has suggested a longer term and yet you’ve gone from 8 to 10 to 16 to now 50 weeks in response to feedback that the weekly ask is too large.”

We are looking to shorten the distribution period to 6 months

  1. From @OPUser on pool listing suggestions and LM rewards, suggesting that the different OP pools should be considered for LM rewards

“One suggestion would you consider replacing WETH-OP 0.3% to a different $OP pair. Gamma has a join proposal of 900K OP dedicated for this pair, so what do you think about using different pair ?”

We have thought about it but as now we are collaborating with Gamma protocol on integrating new pools (with auto-compound and rebalance features) on Homora V2 (Tentative pools are OP-ETH 0.3%, USDC-DAI 0.01%, DAI-ETH 0.3%, USDC-ETH 0.05%) which will be available around end of November, the full resources are allocated there to support this partnership. Therefore, we might revisit new OP pools again once we completed integration with Gamma.

  1. From @ScaleWeb3 on no. of tokens requested and distribution period, how the granted tokens are used, sustainability of apply rewards, suggesting lower no. of tokens requested and distribution period (to 6 months) and allocating more % as builder incentives, as well as looking into integrating with active manager protocol.

“6 months distribution of LM rewards would make more sense. (Follow-up proposal possible).”

“20% (200K Op) Builder incentives can spur additional, sustainable growth.”

“Liquidity is very important for protocols to enable traders and other protocols to build on. That said, we should look more at effective liquidity, marginal value added to the Op ecosystem and sustainable incentives, which also means that tokens should not be temporary APY boosters which are instantly sold & less Op incentives are left for the rest of the ecosystem.”

We are allocating more % to the builder’s grant, lower the distribution period, and explored integration with Univ3 active liquidity manager protocols.

  1. From @Netrim on open-sourced concerns and potential workarounds to push the proposal forward

“Not being open source subtracts support but it will not be a hard NO. Also you hinted there was a way to having a workaround for open sourced code.”

“For instance moving things from LM to the builder grant amounts was very well recieved”

We are cutting off LM rewards allocation to the borrowers and focusing on builder’s grant instead.

  1. From DeFi committee C cycle #7 recommendation, majorly suggesting on more allocation % to builders with provision of more transparency on builder’s grant (ie. how it will be distributed and key milestones)

We have included details of what are the key criteria of getting the builder’s grant, how the grant will be allocated, and add integration milestones.

To sum up, we responded to the above feedback by proposing these changes

  1. Total no. of token requests – The overall ask is reduced from 800k to 684k by cutting off entire LM allocation (Type1) to borrowers and allocating some to builders (Type2) instead.
  2. Distribution period – Shorten to 6 months from previously 12 months
  3. Add milestones and details on builders’ grant – The builder’s grant will be allocated to the integrations partner on FCFS basis with more allocation ratio given to the protocols committing to integrate with us before the grant is approved. We target at total of 3 integration partners within 6 months with 2 protocols now committed to integrate with Homora V2 on Optimism.
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From the above update Homora V2 x Ironbank Cycle #8 proposal revision

We’d appreciate @mastermojo revision on changes and we are looking for a total of 2 delegates approval to proceed on [REVIEW] stage of cycle #8 @linda @katie @ScaleWeb3 @fig @ScaleWeb3 @GFXlabs @MoneyManDoug @david @MinimalGravitas @Gonna.eth

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Thanks for incorporating feedback.

The selected supply pools (Op & ETH) are key pools for Optimism. The 20K distribution per week matched with IB incentives are a reasonable amount and could lead to a meaningful boost of TVL & activity. 300K Op for 3 integrations seems a bit large but proposal looks much better than last time.

Unfortunately, we don’t have 0.5% of voting power to approve.

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From the sound of it the committees are taking this on, but for completion I’ll say as a delegate with >0.5% votepower that this is ready for a vote.

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I am one of the Synthetix Ambassadors, and a member of the Defi Shadow Committee.

I am an Optimism delegate [Delegate Commitments - #65 by mastermojo ] with sufficient voting power, and I believe this proposal is ready to move to a vote.

1 Like
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Putting this here for more visibility.

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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
Homora attracts significant liquidity (17MTVL according to Defillama) and can improve liquidity on key pairs for Optimism. They outline clearly in their proposal which pool/assets will be added and how liquidity will improve. The builder incentives are rather large but focused with a direct impact on Optimism.

Traction
Not native to Optimism but the integration with UniV3 is new and unique. Initial pool selection shows a good understanding of UniV3 volume drivers, already accounting for half of USDC/wETH (0.05%) total TVL on UniV3. Activity on other chains has shown a consistent pattern of integration and resilience in the face of a downturn market movement. Comparing Uniswap V3 TVL for the last months shows it has been steadily in the 49 to 55 M range. Their track record for Liquidity Mining shows a TVL expansion to accompany them.

Amount
Incorporated feedback and reduced the amount to 684K OP - which is reasonable for the size of Alpha & impact of this proposal.

a) Type 1 (56%): Liquidity Mining to incentivize borrowing (384k OP)

  • OP = 11,000 OP/week
  • ETH = 5,000 OP/week

b) Type 2 (44%): Builder grant for protocols on top of Homora (300K OP)

Intention to forward 3 large grants to 3 affiliated projects (Sharpe AI, Blue Swap Labs, x) which build yield strategies on top. They will use Op to incentivize growth which seems beneficial to Optimism & Homora.

OP Distribution
Good time-frame and reasonable weekly distribution

  • Liquidity incentives: 16K Op per week for 6 months
  • Builder grant will also be distributed over min 3 months

Co-incentives
Iron Bank will offer 45K IB Tokens ~154k USD at the moment of review. They represent around 40% of total liquidity ask which is rather low compared to others.

Alignment
Alpha seems to be very aligned with the Ethereum ecosystem as a whole and Homora implementation is a building block on top of many DEXs AND Iron Bank for additional yield strategy protocols.

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.

KPIs
Clearly defined

  • Liquidity gains & TVL share
  • Support of key assets/pairs
  • Ecosystem integrations

Recommendation :- Yes
This proposal is focused on increasing liquidity along with protocol integration.

Our past recommendation is available on committee recommendation thread

1 Like
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The Synthetix Ambassadors voted NO on this proposal despite the Committee recommendation, reasoning as such:

  • Closed sourced DeFi protocol, siting security risks as justification, is a red flag for us

  • It’s not clear how 56% of the incentives will be used. The proposal references incentivizing Iron Bank lending and Homora leveraged yield farms but isn’t clear how much will go to either. The current description suggests it will be used to reward the folding of ETH and OP on Iron Bank, which in our opinion doesn’t bring any sustainable value to Optimism.

  • The builders allocation doesn’t make much sense if Homora is closed source and building on Iron Bank is not a tremendous achievement since IB is a generic Compound v2 fork.

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Is the code completely closed, or is it source available? At a brief read, I didn’t really understand what this protocol (Homora V2) does - which is why I was deferring to committee recommendation.

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Alpha is building a DeFi suite and incubating various projects.

  • Homora is their core product: Leveraged yield farming incl. integration with Uni V3 as well lending incl. integration with Iron Bank (protocol to protocol lending where IronBank provides excess liquidity for leveraging on Homora V2)
  • The 56% go to the specified lending pools (optional to adjust based on demand). Alpha has asked Iron Bank (their exclusive partner) to add co-incentivizes to the OP received.
  • Benefits incl. a top protocol moving liquidity and users to Optimism (#1 for leveraged farming in the past with their v1), Op token sink, a potentially more sustainable adoption due to protocol to protocol use case moving to Optimism, as well as Homora de facto becoming a building block and onboarding at least 3 more innovative projects to Optimism (focus on uni v3 liquidity optimization).

Closed source issue was mentioned a couple times also by @OPUser. @prima pls clarify once again.

Edit: Only some part is closed source to our knowledge. See docs for lending integration & special whitelist/integration requirements for leveraged yield farming: “v2 lending can be integrated straight away” but leveraged yield farming requires some requirements for additional safety considerations". Github

2 Likes