Build liquidity for $BSN & $dETH on Velodrome
Summary:
Currently, Blockswap’s liquid staked token $dETH is only available on Ethereum Mainnet. This proposal aims to bootstrap liquidity for $dETH as well as Blockswap’s native governance token $BSN on Velodrome to establish a meaningful presence for Blockswap in the growing L2 landscape and enable users to purchase and provide liquidity for $BSN & $dETH on Optimism.
Motivation:
Ethereum L2s have proven to be a clear product-market fit for the future of Ethereum scaling and on-chain data points towards the beacon chain becoming the base layer for consensus and L2s for execution. L2 majors (Optimism & Arbitrum) alone have seen a net inflow of ~$4.3B by over 983,000 wallets and L2 users represent ~30% of all Ethereum users (compared to ~4.5% in July 2022). Users also benefit from a better experience on L2s, saving about 95% in transaction fees compared to Ethereum mainnet with the average number of daily transactions on L2 majors having increased by about 7x since July 2022.
It is not surprising that a wide variety of liquid staking protocols including Lido, RocketPool, Swell, Stafi, pStake, MetronomeDAO and more have either already deployed on L2 or plan to do so very soon. Many LSTfi protocols such as Pendle, Alchemix, Flashstake, unshETH etc. have also deployed onto L2s, further expanding the use case for LSTs and represent the first wave of protocols building for the future of liquid staking on Ethereum.
Specification & Implementation:
Velodrome is the leading DEX on Optimism with ~$200M TVL and the most capital-efficient platform for protocols to build liquidity. Protocols can deposit incentives (bribes) for veVELO voters or lock $VELO (veVELO) to direct $VELO emissions to their pools. Protocols bribing on Velodrome currently attract $3 in $VELO to their pools for every $1 they deposit. Liquidity Providers receive 100% of $VELO emissions while veVELO voters receive 100% of trading fees and bribes from the pools they vote for, ensuring the most productive pools receive the most VELO. Lido, Inverse and Stargate are among 50+ protocols leveraging Velodrome’s mechanics to maintain deep liquidity on Optimism and do so for little to no net cost.
Blockswap will commence a 20 week program using 10,000,000 $BSN tokens. The protocol will bribe the dETH/ETH & BSN/USDC liquidity pools on Velodrome at a rate of 250K $BSN per pool per week. Velodrome offers to match 5% of Blockswap’s bribes each week with $OP tokens. Once an epoch is completed every Wednesday at 23:59 UTC, $VELO emissions will begin to flow to Blockswap LP’s. LST pools with bribes of this size typically attract 2-3x as much value in $VELO emissions and yield upwards of $3M in TVL at 15% APR.
Protocol Owned Liquidity (POL)
Blockswap DAO will also utilize Protocol Owned Liquidity (POL) to capture a share of the $VELO emissions directed to their pools by their bribes. Blockswap will lock all $VELO farmed as veVELO, allowing it to build a voting position that will direct additional emissions in perpetuity, while generating fee rewards, bribe rebates, and bonuses for locking. Any rewards generated by these locks will be compounded further into veVELO. Locking veVELO will automatically qualify Blockswap for a Lock Bonus, usually worth 25%-40% of the $VELO locked, paid in $OP as well as ensure Blockswap is eligible for an upcoming veAERO airdrop allocation (more on this below).
One program; two chains
To enable the interoperability, scalability and seamless user experience needed to unlock mass adoption of onchain services, Optimism has embarked on a journey to create the Superchain, a network of Layer 2 environments sharing security, communication, and infrastructure development to enable global-level scale. Two foundational building blocks of the Superchain are Optimism Mainnet and Coinbase’s Base, a secure, low-cost, developer-friendly Ethereum L2 built on the OP Stack.
Protocols with a veVELO voting position will be able to attract liquidity on Base via an airdrop of veAERO. This airdrop represents the largest allocation of the initial veAERO distribution (40%) and will be distributed to veVELO lockers after a pre-launch snapshot. This means that Blockswap’s expansion to Optimism will also provide the option to direct $AERO emissions to its liquidity pool/s on Base and unlock direct access to Coinbase’s 110m+ user base and $80bn TVL. To learn more about this opportunity see this Aerodrome medium article here.