No, we never threatened at all. Just trying to deliver facts. It is worse if a grantee hides the risks, right? I just delivered facts on the previous experience at Hubble Protocol and Hedge in their early stages.
I totally agree that most DeFi protocols on Solana are unsustainable, just look at the price action of the governance tokens.
For liquidity provider incentives, it would be purely given in zSOL interest paid by borrowers, which would not create any unsustainability and would allow to scale linearly.
However, my point was that MNDE grant would allow LP Finance to “soft land”. This is not a threat but facts. For Hubble Protocol or Hedge, there were losses as USDH and USH had insufficient liquidity to absorb all demands. Users bought USDH and USH at high premium and experienced losses. This is common when the protocol is not mature and users were not able to understand it fully.
As you mentioned, from this, we should learn that we need to sacrifice funds to prevent this, and I believe MNDE, as a stakeholder of LP Finance could support this process with the grant which would be beneficiary for all parties.
I respect all criticisms of the idea, but I believe you are using the wrong language for it, not us.
Wait, you forgot the MNDE incentives that would be given out in perpetuity with the help of the chef nft?!
Both traded a bit above peg due to the attractive yields on them. IMO no biggie, but drawn to it’s logical conclusion, it seems like a cautionary tail against MNDE emissions: If the LP prints attractively, people will ape in nazar (thereby buying zSOL on the market, potentially at a premium)…
For the scenario you envision (looping causing depegging), you can mitigate it quite well with minting caps based on the peg. (pSOL did “no caps” back in the day, and it ended horribly, with LPs rekt despite liquidity incentives.)
Nice point on LPs. First, perpetual MNDE incentives would not be in scope for initial LP attraction. But I do understand that this would help us long term.
As you said, if LP prints attractively, liquidity will flow in. But what causes LPs to process more volume? The best scenario is that high buying and selling demand balances out.
We do have a PSM to stabilize the market price, however, as there are a lot of new features LP Finance is introducing, users might not be able to utilize this fully.
Minting cap is a good idea (not deposit cap), which can prevent the whole problem. But now, we have a problem scaling. If minting cap is reached, zSOL trading activity would decrease immensely, causing LP yields to hit the floor.
Now, once we increase the minting cap and the demand flows in, the same scenario would happen. This is why minting cap is not the proper solution.
The best and simple solution is incentivizing LPs at initial launch, prevent crazy volatility for a few days/weeks and after this, allow zSOL demand and liquidity to naturally scale and balance as the protocol is designed.
Additionally, buying at a premium is not preventable under our hands. The biggest issue is when everyone starts looping when zSOL is below peg. We do have a condition on program, where zSOL cannot be minted if 5% depeg, but still when looped at 1% depeg, it is a huge loss.
since the mSOL-zSOL loop launches on day 1 I strongly doubt this will happen. Imagine Hedge launched cUSDC vaults on day 1. The MNDE rewards given out will help with keeping enough demand for zSOL so more people can use the mSOL-zSOL loop.
that’s true, but putting minting caps will limit how much mSOL TVL can be built up with the strategy. The proposal is basically saying that it is mDAOs interest to incentivize it for additional mSOL TVL.
The same way cUSDC TVL on Hedge rises and falls with USH peg & liquidity, mSOL TVL from LP Finance will rise and fall with zSOL peg & liquidity. Thus helping to build it up is in mDAOs interest.
Neither Nazare nor LP finance want to launch a token to incentivize liquidity. That’s their discretionary decision. But please don’t come to other protocols begging for handouts so you guys have sufficient liquidity
Nazare does not, LP Finance does have governance tokens. Here are the parties that play out in this game.
Nazare: Sets up zSOL-mSOL nLP strategy to make MM more efficient for LP Finance users.
LP Finance: Designs a protocol to allow users to create leveraged strategies using LSDs and UXD.
Marinade: In order to improve UX and take dominance on LSDs, sets up grant for LP Finance. Growth of LP Finance would be directly correlated with mSOL growth.
And I think the word “begging” is not appropriate for logical discussion.
I want to ask you. What do you think Marinade Finance grant is for? Are all grantees “beggers”?
LP Finance gives accrued interest from the mSOL loop directly to zSOL/mSOL LPs, and puts protocol resources as incentivizes this way.
Hedge decided to put HDG in between, giving out a token or the revenue directly doesn’t make a difference though.
If you think Marinade has no vested interest in zSOL/mSOL liquidity, curious to hear if you believe the same is true for Solend and USH/cUSDC liquidity?
Marinade can’t pass a grant for any protocol that plans to use mSOL in some capacity (high cost/ admin/ unfair to existing holder). There already seems to be a sense of entitlement that might not be healthy long-term
Passing a grant pre-mainnet is particularly risky & sets the precedent that all defi projects that are about to launch ask for a grant
mDAO shouldn’t blindly subsidize any incremental liquidity, and should be cautions not to trap in the Serum/Atrix trap of parasitic subisidies. (nazare & lp finance are not very good looks here.) I would suggest to the DAO to try to avoid grants where parters take more than they contribute.
I think it is fair to expect from protocols that they have launched on mainnet, and shown some traction before handing out grants. Otherwise it is unclear if the protocols have even PMF! As a rule of thumb, if they can’t launch without a grant, they probably can’t run without a grant either tbh
The conversation over the past hours did not make me more confident. Good news for you: I’m just a regular pleb, it is up to the prospective grant committee to suggest something. Let’s give them some time to hear their side
(For the sake of the other member, I would suggest to not continue these 100s of forum posts. Feel free to shoot me a DM for any potential clarifications.)
Looks like you’ve missed every single point here and contains no logic or proof at all. Let me respond to each point.
LP Finance does not make it unfair to existing holders or require high cost. PLEASE, mention at least one single point that supports your idea.
Checkout the Grant Committee post, and make sure you read through it. If you thought grants for pre-mainnet protocol is a bad idea, you should’ve mentioned it in the original post.
Again, no proof at all.
Read below quote. Again, I’ve clearly mentioned that LP Finance can launch without it. Please read and fully understand before any comments.
To make the discussion more valuable, please provide one single logical proof so that we can understand what you are trying to criticize.
Just wanted to add that Solend recently created a new switchboard oracle that relies on taking the mSOL:SOL ratio from Marinade (sol staked / mSOL in circulation) and multiply it by the Pyth SOL/USD price.
The oracle can be found here:
As Solend uses Pyth’s SOL/USD price for SOL, this oracle should absolutely minimize the liquidation events that comes with leveraged staking.
Additionally, fellow defi protocols can utilize this oracle as well when they are comfortable to do so.
Copy pasting some of my responses from the Discord for the record
the grant program was introduced for this or not? dont know if i would call applying for to be part of a grant program set up by the dao entitlement.
If costco offers me free samples, you can’t really blame me for going there and taking them. But hey at least the free samples made me show up to costco in the first place and now I might buy there instead of walmart.
why is that bad? More work for the committee but better to get more projects in and weed out bad ones than miss out on something that brings good value. You don’t want strong projects to go to directly to Lido just because they are happier to spend on them.
Question for @LPFinance:
Are there any partnerships with Lido that you have already announced and to what extent will stSOL be used in LP Finance? The graphics list both mSOL and stSOL
No, we do not have an existing partnership with Lido. We provide options for users on choosing liquid staking derivatives to use.
mSOL and stSOL can be both used for
Collateral
Typeless Repayment
Peg-stability Module
However, mSOL would be the only option for our liquidation engine, where in the step, collateral is swapped to mSOL and deposited to PDV. This is because mSOL has richer liquidity compared to stSOL. From users’ perspective, there is not much of a big difference between using mSOL and stSOL.
To make a healthy protocol, I believe restricting or excluding one protocol to be more attractive as a grantee does not make sense. I believe mDAO and LP Finance could set up a period-determined contract in order to incentivize mSOL over stSOL for a certain period.
Might be out of scope, but to talk about the reality of LSD competition, we can take a look at Friktion.fi. On Sept.20th, Lido decided to provide 5k LDO/month for the stSOL vault. Since then, stSOL vault gained huge volume as the APY was super high as you can see on the graph below.
To be honest, most users do not care about which protocol they are using. The yields are the one that matters. In this case, if Lido, a much bigger and centralized company starts distributing LM rewards aggressively, Marinade Finance does not have huge competition against them.
And also for LP Finance, if bigger incentives come from Lido or other companies, mDAO would lose stake in LP Finance.
This would not only be the case for us but for all other grantees advancing mSOL in some way.
I do want mDAO to clearly address the terms for grantees regarding this. Basically, Lido (stSOL) offers the exact same experience as mSOL.
Obviously, if a protocol grows with Marinade grants, Lido would approach and spend LDO to take away the liquidity that mSOL had on the protocol. If this happens, Marinade is basically getting played by Lido. We can view this as a “Vampire Attack”.
I would like to ask as a MNDE holder, not a grantee. Is there a proper strategy set out to prevent this?
For what it’s worth, I proposed that we needed a grant committee in order to be nimbler instead of having to send everything through governance, but I will not be part of it - I’m leaving someone else to deal with that problem.
Having said that…
It’s a fair point, but that’s also one of the reasons why in the discussion I separated grants for things that would be under community control from applications that are directly investable.
I personally think applications and protocols are better suited for partnership conversations than grants, so that details like exclusivity or potential token exchanges to align incentives can be hashed out. In a scenario involving a token exchange instead of a straight-up no-strings-attached grant, if a protocol were to later switch to Lido then at least Marinade would still have some upside.
It’s up to the committee to choose where to draw the line, though.
That is a good point. I believe there should be at least a collateral (not token exchange) provided from the grantee in form of a governance token so that Marinade can take over power for a certain period. Of course, this should be diluted over time.
As per your explanation, I can see that the grantees would be restricted in data analysis/dashboard (ex. solrank) or MNDE usage. Any protocols that utilize mSOL to allow growth would be out of this category.
I think we should have a much clear idea of the grantee requirements after the committee is set.
Not necessarily - those were just two examples. It’s really up to the committee if they feel something qualifies and can help either grow mSOL usefulness or MNDE value, and where to draw the partnership vs. grant line.
I’d also imagine that it very much depends on the grant amount being requested - chances are the community will evaluate differently a one-time 50K MNDE grant versus a project where the grantee plans to request 4x 250M MNDE tranches before it’s done.
Indeed! I plan to activate the community member election proposals tomorrow, so assuming that at least one passes, we will know a week from Monday!
15% of your token’s max supply is allocated to liquidity incentives, none go to the core LP of the protocol. Thank god there is the “third party amm engagement for incentivized LPs”.
Liquidity incentives are basically given to staked LPs on top of zSOL interest. Details might be mentioned on the whitepaper, but the top two pools are voted for incentives every epoch. In this case, even if zSOL-token pool exists on Lifinity, Nazare, and Raydium, only the top two selected pairs would be eligible.
It does go to the LPs directly, and brings AMM engagement to purchase and vote if it is profitable.
Hi Eric, first off thanks for providing an outline of your project and for responding to all the questions and to those who asked questions and engaged.
However at this time the Grant Committee has decided to pass on this proposal. We agree with several of the posters here about questioning Marinade’s place in supplying initial liquidity for a new protocol and the likelihood of mSOL TVL growth thru this. Best of luck on the launch.
