Keywords
PSP LIquidity, Grants
Simple Summary
With PSP 2.0 now successfully designed and agreed on by the ParaSwap DAO, we now can focus on the deployment of PSP to Optimism following the Phase I grant by the Optimism Collective.
The following proposal seeks to introduce PSP to Optimism, as well as the Gas Refund Program that comes with it. Following that, this proposal will provide PSP to match the liquidity needed for the PSP-OP pool, as well as matching the OP grants with PSP as needed.
Finally, with the deployment of PSP 2.0, this proposal also urges the prioritization of the Optimism network for Social Escrow PSP in the future, as thanks to the Protocol Owned Liquidity grant, it will be possible to have enough initial liquidity to bootstrap a healthy staking ecosystem.
In addition to the aforementioned points, an addendum has been added to self-nominate ParaSwap as one of the Protocol Delegates for Optimism Governance.
Context
As part of the Phase 1 grants, the Optimism Collective approved an initial grant for the ParaSwap DAO. For those that missed the proposal, it can be summarised in three categories:
- 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
While this grant was being voted on in the Optimism Token House, the ParaSwap DAO was discussing some major reforms to the PSP tokenomics system in the form of PSP 2.0. Now that there are clear plans for what the reforms entail, we can align the funds given during Phase I to bootstrap the launch of Social Escrow while we go through the process of receiving the OP grants.
Goals
To be able to provide the $PSP needed for the matching, this proposal first suggests porting the PSP token to Optimism, as well as implementing the Gas Refund Program onto Optimism.
After PSP is deployed to this Optimistic Rollup, we will provide the necessary PSP to maximise the Phase I Optimism Funds and Protocol-Owned Liquidity, as well as prepare Optimism for a successful deployment of Social Escrowed PSP on that chain in the future.
Means
There are various aspects that have to be considered about how to best use the OP grants given. Below, we explore a few aspects that have to be considered, and how this proposal seeks to address them:
Selecting a Source of liquidity
Of the OP requested, approximately 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 compared to other liquidity providing methods like liquidity mining. 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, a pool where 80% of the assets is PSP is the best option for this grant if we choose to minimize impermanent loss. By adding more OP to the pool, we would:
- Minimize the risk of impermanent loss, maximizing asset efficiency
- This pool 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!
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 to determine the degree of PSP matching:
-
Optimism deployment for existing dApps - Encouraging onboarding to the Optimism ecosystem - Matching of PSP of up to 10 PSP/OP
-
Novel applications of ParaSwap - New uses of ParaSwap (even on apps that are using ParaSwap for something else already). Matching of up to 15 PSP/OP
-
Social Escrow Research - 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 clever use of the ParaSwap API. Matching of up to 20 PSP/OP
-
DexLib Grant: The grantee wishes to integrate a DEX on Optimism, and is not directed affiliated with either ParaSwap or the relevant DEX. This grantaims to incentivise developers to assist integrations of protocols they love.
To apply for a grant, the best possible solution is to have grantees apply through the governance forum, explaining the amount of OP that they wish to use and more details about the project. The following template could be used for grant applications:
- Project Name
- Relevant Protocol Metrics
- Grant Category
- Optimism Alignment
- ParaSwap Alignment
- Amount of OP + PSP requested
- Success Metrics
Since the PSP needed for these grants would already be approved with this vote, the proposed quorum for these grants can be removed, though a reduced quorum is also possible if the community believes is more appropriate.
Metrics and Forward Thinking Considerations
While PSP liquidity is something difficult to measure, we can measure the effectiveness of the grants given by the quality and amount of projects benefiting from these grants. If any of these grants end up being underutilized, a future proposal could be made to the collective to re-allocate these funds.
In the future, if we ever consider making PSP multichain, we can consider Optimism one of our first places to deploy to if liquidity is deployed successfully
Addendum: Protocol Self-Nomination Approval
Following the introduction of Protocol Delegates to the Optimism Governance forums, we additionally propose that the ParaSwap DAO should self-nominate as a delegate for Optimism governance.
Due to the conflicting deadlines between this proposal and the applications, we propose that for now , the redactor of this proposal (Oxytocin) nominates for the position, but in a future vote we can add additional ParaSwap representatives onto our seat in the nomination table. Once again due to timing issues, this approval will have to be retroactive, but will still depend on the passing of this vote.
Implementation Overview
- Introduce the PSP token to Optimism
- Implement the Gas Refund Program Onto Optimism
- Establish the grants system
- Introduce the OP/PSP PoL , providing enough PSP to match an OP/PSP pool with 20/80 allocation
- Nominate a DAO member as a Protocol Delegate in Optimism Governance
Voting Options
- For
- Against
- Abstain
