Optimism Deployment to PSP- Next steps

Optimism Deployment to PSP- Next steps

Following the official launch of ParaSwap on the Optimism L2, it is now time to begin considering how to implement the points outlined for the first ParaSwap proposal that was passed in the Optimism governance forums. For those that missed the proposal, it can be summarised in roughly three points:

  • 225,000 OP: Introduction of a dApp developer grant for Optimism
  • 157, 500 OP: Establishment of OP-PSP, a protocol-owned liquidity pool
  • 67, 500 OP: Encouragement of DexLib integrations through ParaSwap with special grants

Although these three steps are roughly easy to understand, there are many different ways to deploy these directives. This proposal aims to explore not only how to approach each of these three points, but also discuss the amount of PSP that should be matched for each one of these proposals. It will be important to refine each of these points to make them proposal ready!

Selecting a Source of liquidity

Of the OP requested, 157 500 OP are devoted to providing a permanent source of liquidity for a PSP-OP. This allows for a solution that is more sustainable in the long run, while also minimising the impact of this grant on the price action of $OP. However, what kind of liquidity pool will be the best long-term option for this OP-PSP pool?

Personally, the only requirement we should consider is to not go with a simple 50/50 asset pool. As we are dealing with two assets that are not correlated with one another, any form of decoupling on either side will result in a large amount of Impermanent Loss on the assets.

Due to this, the current proposed LP will be in Beethoven X, with its Balancer-style skewed pools. Of all the possible ratios, I believe a pool where 70 to 80% of the assets is OP is the best option for this grant. By adding more OP to the pool, we would:

  • Minimise the risk of impermanent loss for the OP granted : This way, we are safely taking care of the OP provided on this first phase.
  • OP might become a boosted asset in Beethoven X in the future, allowing for the earning of yield of these assets long-term were this to happen.

Another potential option is to deploy a Uni V3 pool, however, that would require creating a special strategy from scratch, and depending on flexibility of this strategy it might require more micromanagement. However, if anyone has an idea for this (or even other DEXes), feel free to bring it up!

PSP Vote Tl;dr: Match OP with PSP at a ratio that gives us a skewed pool.

Grant Selection Process

The main purpose of the grants provided are to allow growth of the Optimism ecosystem while also encouraging the use of ParaSwap to encourage dApp developers to best access all DeFi services. For that reason, it is important to determine that the grants are used correctly. Here’s a rough idea of potential categories that we could use:

  1. Optimism deployment for existing dApps - Encouraging onboarding to the Optimism ecosystem - I don’t think there’s more to explain :slight_smile:
  2. Novel applications of ParaSwap - New uses of ParaSwap (even on apps that are using ParaSwap for something else already), so instead of a porting it’s a new integration
  3. ParaSwap-Optimism synergistic apps - Uses that are directly related to improving the experience in Optimism of either the ParaSwap protocol or the DAO. Some examples could be an alternative frontend or a batch bridging transaction. These , in my opinion, should be incentivised the most.

However, how should we split the grants between each of these categories? What will we request of grantees to make sure the proposal is honest? Should we implement a system similar to the OP grant system?


Thanks to the DexLib grants, developers will be encouraged to integrate new DEXes into ParaSwap , even if it is not their own DEX!

This part of the proposal is pretty straightforward, we reward people with a bounty for successful integrations. However, I wanted to also make sure that the higher quality submissions received more reward, and that there is a quality control to avoid sub-par submissions. For this reason, I’d suggest:

  • 3-strike system: Sometimes, an integration does not go as expected. For that reason, we can allow people to try a couple of times to do a successful integration and receive feedback from the team. Anything more than that and we’d be awarding bounties to a job mostly done by others!
  • Volume specific targets: The bigger the catch, the greater the rewards. Integrations that have a higher volume and TVL at the time of integration should receive appropriate rewards! Additionally, if the DEX receives a surge in volume after a ParaSwap integration, we should also reward that appropriately. Important point to discuss: What scale should we establish: What specific scales do we want for rewards? A logarithmic scale?
  • PSP Matching: Finally, as promised in the previous proposal I think we should match the PSP to OP 1:1

Let’s discuss these ideas, be optimistic, and get them ready for a proposal!


We look forward to seeing your liquidity go live on Balancer/BeethovenX on Optimism! With any luck we’ll have the new weighted pool factory completed by Balancer Labs in another two weeks or so. Then we can create a boosted OP/PSP weighted pool that deposits the OP somewhere to earn a yield. I believe Aave is adding OP as a collateral option soon but there are also alternatives already live like https://granary.finance/


I think the BeethovenX and Velodrome are the obvious choices to partner with for liquidity I’m sure they would have the best suggestions for optimal liquidity. Personally I think an 80/20 PSP/ETH pair on BeethovenX would be good but if that will be deep enough liquidity is above my pay grade. Might be good to see if there are any stablecoin partners such as FRAX, MAI or LUSD that would make sense for a pool of maybe 60/20/20 of PSP/OP/STABLE would be good if a PSP/OP pool is required for the incentives.


Great proposal guys. For the grants, I think there are two options:

  1. Ask projects to create a proposal (Similar to Optimism): This way we can take opinions from the Paraswap DAO members about which project fits in the alignment. Let the project put the grant amount. This process will be more time-consuming. Also, this needs active participation from the DAO members.

  2. Create a Grants Committee (Similar to Aave, Balancer): We can create a grants reviewer committee. They will evaluate the application (proposal) and, can readjust the grant size based on the value accrual. This process will be a bit fast but need to form a committee, which might increase some additional costs. Also, the Paraswap DAO team can review the proposal if they have time, this way there will be no additional cost.

I think we should give priority to all the protocols that are using Paraswap on other chains and have provided some value to Paraswap.


Agreed with Beethoven X. Would stick to Uniswap for any additional pool (velodrome lately has lost an avg of 30% transactions from last 7 days compared to 30 days while UNI has actually been steady with 3% gain).

Not sure if related to just Price of velo/op or the shady shit going on there: https://cointelegraph.com/news/velodrome-recovers-350k-stolen-funds-from-team-member-gabagool