[mDAO proposal] MarinadeDAO <> Vyper Protocol (LP and new markets)

[crypto_notte]

Hello all, fellow Marinatooors. Crypto_notte here, fellow team member behind Vyper Protocol. I am also an early user (and researcher) of mSOL as you can see here:

• Gini coefficent of mSOL/MNDE distribution

What do you propose?

We propose MarinadeDAO to become a strategic - and sole - LP in Vyper new MNDE market and benefit by:

• adding use-cases for MNDE outside of governance
• adding a diversified source of revenues to Treasury

We also propose opening a new derivative market to offer synthetic leverage staking with a 1-click solution.

We ask for 100’000 MNDE to be used in the following ways (around 4’000$ as of writing):

• 80’000 MNDE to increase liquidity on the existing MNDE digital market.

• 20’000 MNDE as a grant to the Vyper team to become a strategic and active partner in MarinadeDAO and participate in governance decision.

What is the rationale behind the proposal?

As of today there are little use cases for MNDE outside of governance. As of yesterday, MNDE is accepted as valid collateral to trade on Vyper Protocol. Users are able to use MNDE to trade on the future price of mSOL.

We propose for MarinadeDAO to become the sole LP in this new market by deploying majority of the 80’000 MNDE into it. By being the sole LP, MarinadeDAO will become the counterparty to users’ trading. In this way MarinadeDAO earns trading fees, premiums and visibility.

We also want to create an innovative derivative called ‘Marinade fixed return note’. This product allows to get exposure to a levered mSOL staking position with 1-click. Right now if one user wants to to leverage stake there are no 1-click solution and they need to manually “lend mSOL - borrow SOL - stake to mSOL” multiple times, this is not straightforward for a retail user.

Vyper Protocol can be used to build a synthetic position that emulate the returns of the strategy above, in this way the user can replicate a levered staking return with 1-click only. Sophisticated users can replicate the strategy, charge a fee, and ‘pass’ the fixed return to the retail users.

What is the expected positive impact of this change?

Overall we believe new derivatives markets for MNDE and mSOL can increase the resilience of DeFi and are a positive addition to the ecosystem with a relatively small disburse. Derivatives allow to price and transfer risk between users.

In this case MNDE markets would allow users - who might otherwise sell the token - to use it as collateral to trade SOL. Plus, the ‘Marinade fixed return note’ would open complex staking strategies to a broader retail public, increasing the visibility and outreach of the MarinadeDAO.

Last but not least, the DAO would benefits from entrance in its governance of a well established DeFi protocol, a partnership that could lead to other new markets in the future.

Any other considerations? What else should people keep in mind?

We are hosting tomorrow a Twitter space with Marinade to discuss the proposal and gather feedbacks and opinions, we would love to take everyone’s input to better shape the proposal.

Twitter space and reminder can be found HERE → https://twitter.com/MarinadeFinance/status/1635727128313430019

[crypto_notte]

Some more color on what is Vyper Protocol for those who do not know or never tried it.

TLDR Vyper Protocol is a bespoke derivatives protocol built on Solana. With Vyper, every derivatives is abstracted as a set a of parameters:

• Payoff (vanilla option, forward, etc)
• Underlying asset (crypto, NFT, commodities, temperature in NYC, etc)
• Collateral (USDC, MNDE, BONK, etc)
• And more (strike, expirations. etc)

By changing the parameters above, you can create any new derivative, deploy it on-chain and trade it with someone else. We tried to make it as easy as ABC

Some interesting readings:

• DOCS

• MNDE Market on Vyper

• GITHUB

[dobby]

Thank you for the proposal @crypto_notte and congrats on building Vyper Protocol!

This seems like it could be an interesting use case for MNDE.

A few follow up questions for you here:

1. Can you tell us more about the fee structure of Vyper? If mDAO is the sole LP in this new MNDE market, what kind of projected return can the DAO reasonably expect to earn? Understand this is dependent upon trading volumes, but it would be nice to see a little scenario analysis if possible. Also, would Vyper earn any fees from this pool too? If so, what do those fees look like?
2. What has been the most popular market on Vyper to date? Can you tell us more about trading volumes and user growth since launch on mainnet?
3. Alberto mentioned on the Twitter space that you are in a holding pattern with respect to a code audit, which is totally understandable given the cost. Can you please tell us more about Vyper’s upgrade authority? Is the UA controlled by a multisig?
4. There was also a mention of a potential governance token for Vyper later down the road. How might that factor into this grant request?

[crypto_notte]

Hi @dobby thanks for your questions

1. As of today, no fees are charged on the protocol. This said, we support different derivatives and our long-term plan is to have different fee levels for different markets, order type (maker/taker) and assets. We have observed various level of returns for different assets, which vary in the range -5% to +20% depending on the volatility of the underlying.

2. Most popular markets as of today are BONK and USDC (BTC and BNB). The number of unique users since January is well above 1000 and the consolidated trading volume is north of 250k.

3. As of today we have “frozen” the smart contract on Solana and approached multiple security firms which will proceed to an audit of the code following completion of our seed round. The UA is controlled by a multi-sig inside the team and our long-term vision is to remove the upgrade authority.

4. IMHO this is a super interesting point but deserve more discussion from both parties, while we do not have a token trading today, we might have one in the future. Some preliminary conversation suggest that we might airdrop our token to early LP like mDAO and community supporters of the various markets we offer. The exact terms though are still TBD, and we appreciate any feedback on this (although the mDAO forum might not be the best place to discuss how we can best distribute our token)

I hope this answers

[luciotato]

We propose for MarinadeDAO to become the sole LP in this new market by deploying majority of the 80’000 MNDE into it.

Just to confirm: Marinade keeps the custody of that liquidity. We just deposit in your protocol as LP and we can remove the liquidity without obstacles if we wanted.

[defivan]

so many features on your protocol, comparing with other ones. appreciate to coming here for the MNDE spreading around various LPs on Solana. exactly such features as collateral, strike and expirations got my interest. congrats on developing another great DEX on Solana

[crypto_notte]

As of today, the LP process is not fully decentralized, that’s why we choose to go for one-LP per pair model. Possession of the liquidity goes to the smart contract controlled by the team multisig, ownership is 100% in your hands.

In the medium term, different LPs will be able to compete (by providing a better price) for each market in a fully decentralized setup, and will be able to retain both ownership and possess (à la AMM)

You can recall the liquidity at any point in time, but bear in mind that in this single LP setup it implies also winding down the market.

[crypto_notte]

Much appreciated! On that, we just put online our derivatives creator page where you can have fun building different kind of contracts. You can find it HERE

Here - just for fun - I created a CALL option on BTC, strike 28’320$ expiring in 10 days. Premium is 100 MNDE and max upside is 1’000 MNDE. If you wanna check this contract (and maybe trade) you can do it HERE

[defivan]

oh, so it`s like the PancakeSwap Win section, but on Solana. interesting. Here we have more open opportunity to create a pool to compete, not already made ones for just voting for one counterparty or another. wishing you a smooth development