Hover Labs proposes three farms on the Tezos blockchain using Quipuswap:
- Deposit wXTZ / XTZ and yield STKR
- Deposit kUSD / XTZ and yield STKR
- Deposit STKR / XTZ and yield STKR
The Tezos network has a budding decentralized finance (“DeFi”) ecosystem. While there have been many recent developments, there are still many rough edges:
- There isn’t much to do with assets: Basic primitives for DeFi have been built but actual use cases remain rare, which means most DeFi primitives don’t get much use. There is little reason for users to buy and hold an asset.
- Decentralized Exchanges (“DEXes”) suffer from low volume and liquidity: As a result of (1) there isn’t much enthusiasm to provide liquidity or trade on DEXes, even if legitimate arbitrage opportunities exist.
As a result, DeFi primitives like kUSD and wXTZ are rarely held and primarily used as an instrument to provide leveraged exposure to XTZ.
- Deposit wXTZ/XTZ LP Tokens, Receive STKR
- Deposit kUSD/XTZ LP Tokens, Receive STKR
- Deposit STKR/XTZ LP Tokens, Receive STKR
StakerDAO will allocate 750k worth of STKR to the project in total, over a time period of 12 weeks. This is equivalent to 62,500 USD worth of STKR per week. The percentage of STKR emissions allocated to each of the three farms will be adjusted weekly based on their total liquidity, as taken in a snapshot the prior week.
The price of STKR will be determined by the 7 day VWAP closing price on Coin Market Cap on the day the initiative begins.
This proposal benefits StakerDAO in a few ways.
StakerDAO wants to distribute STKR to a diverse set of holders who are engaged. Users who mint or buy assets like kUSD and wXTZ on Tezos are likely to be early adopters, and participation in farming signals they are actively following developments in the ecosystem. These are exactly the users who StakerDAO should try to engage in the governance process.
StakerDAO wants to see multi-chain DeFi bloom and Tezos is part of that vision. StakerDAO should therefore want to engage in activities that drive value, use cases and liquidity on Tezos. Providing a farm for these assets provides several tangible benefits:
- Increase Trading on DEXes: Users will want to acquire assets to farm, and some portion of these users will choose to buy the assets directly on DEXes, increasing trade volume and DEX usage. This will make it easier and more profitable for users to arbitrage on DEXes and encourage price discovery.
- Increase Liquidity on DEXes: As a result of increased yield from supplying liquidity, providing liquidity will become more profitable and attract more providers
- Provide a (Temporary) Use Case for Users to Hold Assets: Until actual use cases are developed for kUSD and wXTZ, a farm provides a temporary way to stabilize trading markets and drive buy side demand for the assets.
Combined, these benefits serve to bootstrap Tezos DeFi and increase value and usage of the chain and ecosystem as a whole.
Lastly, StakerDAO has the opportunity to show off the first farms on Tezos, a good faith effort to collaborate with other projects in the ecosystem and demonstrates the StakerDAO governance process to various stakeholders on the Tezos chain. Combined, StakerDAO ends up as a visible, trusted and recognized provider of DeFi products on Tezos. This provides intangible benefits to StakerDAO as it increases community goodwill, brand recognition, user retention and ability to partner with other projects on Tezos in the longer term.