Velodrome Liquidity Reward Program on Optimism

Summary:

Within the next month or two, the BarnBridge DAO will be moving governance from Ethereum mainnet to Optimism. As part of this transition, it will be important to start working toward establishing deep liquidity on Optimism.

Specification:

It is important for everyone to keep their BOND on mainnet for the final BarnBridge DAO votes that will approve the transition to Optimism as well as a few other important governance matters. If these votes are successful, we can then begin incentivizing our liquidity to bridge over to Velodrome on Optimism.

If this proposal is successful, the BarnBridge treasury will be send BOND to the multi-sig for the purpose of distributing voting rewards (also called “bribes”) in BOND in order to maximize the VELO rewards emitted to the BOND/ETH pool. This means LPs will be earning VELO instead of BOND. If the BarnBridge DAO agrees to incentivize a pool with at least $4,000 weekly, Velodrome will match 50% of our rewards resulting in a bribe of approximately $6,000 USD per week, effectively maximizing the emissions of VELO for the BOND/ETH pool. Additionally, Velodrome will vote for the BOND/ETH pool with a pro rata share of 10m veVELO split amongst program participants.

If awarded a Phase 1 grant from the Optimism community in the future, we may reduce our BOND emissions even further by matching $2,000 worth of BOND with $2,000 worth of OP tokens.

At the conclusion of this 6 week period we will evaluate our liquidity position on Optimism and will vote whether to continue this program as is or with modifications to achieve proper liquidity.

Rationale:

For: Currently Velodrome is the largest AMM on Optimism and is offering incentives to projects who use them which will allow us to emit significantly less BOND to get reasonable liquidity on Optimism. This proposal is suggesting using approximately 400 BOND on Optimism per week to incentivize liquidity on Optimism. This represents a 98% reduction compared to the weekly emission of BOND for Pool 2 on mainnet. Further, pool 2 rewards are in place for approximately 7 more epochs (140,000 BOND remaining to be emitted) so any LPs that move to Optimism will then increase the amount of BOND earned by our protocol owned liquidity during the remaining epochs.

Additionally BarnBridge is evaluating ways in which we can work with Velodrome from a SMART Yield v2 perspective so it would be beneficial to strengthen our relationship with a potential integration partner. Ultimately, it will be important for BOND to eventually move to the network where our governance resides so offering yield will provide an additional incentive for many to bridge over.

Against: If successfully implemented, there will be reduced liquidity on mainnet and there will be increased BOND emissions in the short term although this will result in a significant reduction in long term emissions.

Vote:

This Snapshot vote is to incentivize a BOND/ ETH pool on Velodrome for 6 weeks at a rate of $4,000 USD per week (approximately 400-600 bond at current prices) which will conservatively require 4,000 BOND to account for potential price movement so an additional DAO vote is unlikely to be required before the 6 weeks expires. Any unused BOND will be retained in the multi-sig to incentivize liquidity in the future through this or a similar program.

Note: The Velodrome 50% rewards program will run until their Phase 0 OP grant runs out.

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This is great news and a nice opportunity for Barnbridge. Been using Velodrome with another LP for a few weeks now and been very happy with the results so far. Getting people comfortable with and excited about moving to Optimism is an important part of the future of Barnbridge, and this is a great way to help move toward that goal.

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Big fan of this btw. I followed along in internal chats but Link did the leg work here.

Velodrome is blowing up on Optimism because of how capital efficient they are.

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Would not hesitate to support this! Velodrome has been growing at a remarkable rate outpacing Uniswap. Given the success of project have had with an incentivized pairing we should expedite this. https://twitter.com/VelodromeFi/status/1554136820996362242?s=20&t=2Xyv5cWr-DRFlL0wFz3z6A

Yeah. Our POL is on that community multisig so we can move it as soon as the vote on main net passes or a snapshot but we still have 7 weeks of rewards rn on main net.

This is a great start for BB liquidity on OP.

However I would like to see ongoing discussions about LT liquidity strategy after VELO programs dry up.
Something like bonding VELO to have some voting power in the house…?

Super important development for BarnBridge to secure good liquidity on OP. We should leverage all opportunities we have like this on a new L2. Personally I think these types of partnerships will be key for the longevity of this new set up.

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