Last updated a year ago
Milkomeda Djed Liquidity Provision Incentives
Problem
The Djed Osiris stablecoin on Milkomeda has a low TVL. A major reason for this is a lack of liquidity provision incentives. By incentivizing users to provide liquidity, Djed Osiris will become known.
Total to date
This is the total amount allocated to Milkomeda Djed Liquidity Provision Incentives.
About this idea
[GENERAL] Name and surname of main applicant
Dr. Bruno Woltzenlogel Paleo (a.k.a. Zahnentferner) -- Djed Alliance -- The Stable Order[GENERAL] Are you delivering this project as an individual or as an entity (whether formally incorporated or not)
Entity (Not Incorporated)[GENERAL] Co-proposers and additional applicants
To know more about our organization as a whole, check the following links:
- https://docs.stability.nexus/
- https://medium.com/DjedAlliance
- https://news.stability.nexus/
- https://x.com/DjedAlliance
- https://x.com/StabilityNexus
- https://linkedin.com/company/stability-nexus
- https://t.me/StabilityNexus
- https://discord.gg/YzDKeEfWtS
- https://github.com/StabilityNexus
- https://djed.one/
- https://github.com/DjedAlliance
- https://eprint.iacr.org/2021/1069
- https://hodlcoin.co.in/
- https://t.me/hodlCoinGame
[GENERAL] Requested funds in ada
42000[GENERAL] Please specify how many months you expect your project to last (from 2-12 months)
6[GENERAL] Please indicate if your proposal has been auto-translated into English from another language
No[GENERAL] Summarize your solution to the problem (200-character limit including spaces)
We will incentivize liquidity provision by creating a hodlcoin staking vault for Djed's reservecoin (MOR) and pay rewards aiming at a 10% APR. Users will stake MOR and receive more MOR.
[GENERAL] Does your project have any dependencies on other organizations, technical or otherwise?
No[GENERAL] If YES, please describe what the dependency is and why you believe it is essential for your project’s delivery. If NO, please write “No dependencies.”
No dependencies.
[GENERAL] Will your project’s output/s be fully open source?
Yes[GENERAL] Please provide here more information on the open source status of your project outputs
The main output of our project is the distribution of liquidity provision rewards. This outcome is simply not subject to copyright laws.
Eventual secondary outputs such as articles explaining the liquidity provision incentive mechanism to the public will be licensed under CC-BY-NC-SA.
[SOLUTION] Please describe your proposed solution
A key reason why Djed is stable is that it is backed by an independent asset that has it own utility, its own intrinsic value and its own monetary policy. In the case of Djed on Milkomeda, this asset is ADA (in its bridged form, mADA).
The challenge with this approach however is that, in contrast to many other (un)stablecoin protocols, which print their own tokens out of thin air to "back" their stablecoins and thus can incentivize liquidity provision with these tokens, Djed cannot do this.
Between a reliable stablecoin backed by a solid asset and an unstablecoin backed by thin air but offering exorbitant APRs, what do users prefer? Unfortunately, many prefer the latter. And then reliable stablecoins remain unknown.
But, with your help, with the help of Catalyst, we can provide a decent APR for liquidity provision, by distributing Catalyst funding as rewards for users who provide liquidity to Djed.
Here is what we will do:
1 - We will create a staking vault for MOR (Milkomeda Djed Osiris's Reservecoin).
2 - We will use catalyst's funding to buy MOR using ADA. (This will immediately and directly boost TVL.)
3 - We will distribute the bought MOR as rewards to MOR stakers.
The distribution schedule will be such as to ensure a decent, though not exorbitant, APR, probably in the range from 10% to 20%.
As a staking vault mechanism, we will use hodlCoin (https://hodlcoin.co.in). This staking protocol has been invented by us and it is conjectured to have a stabilizing effect. Most importantly it imposes an unstaking fee that discourages unstaking. This will ensure that we will be incentivizing long-term liquidity providers and not just distributing rewards to short-term reward "farmers".
[IMPACT] Please define the positive impact your project will have on the wider Cardano community
We are hoping to increase the TVL of Milkomeda Djed Osiris from three to ten times (3x -- 10x), measured in ADA. Assuming that a significant part of this TVL would be coming from ADA that was idle and not from ADA that was locked in other protocols, this TVL increase would be TVL increase for the whole Cardano DeFi ecosystem as well.
With a greater TVL, users will be able to mint and burn stablecoins and reservercoins more easily, without reaching the reserve thresholds. This will facilitate adoption of these coins across the Cardano DeFi ecosystem, creating opportunities for users of other DeFi protocols as well.
[CAPABILITY & FEASIBILITY] What is your capability to deliver your project with high levels of trust and accountability? How do you intend to validate if your approach is feasible?
Dr. Bruno Woltzenlogel Paleo (a.k.a. Zahnentferner) is the founder of the Djed Alliance and of The Stable Order. He is the main author of the Djed paper and a member of Djed's original R&D team, which implemented both Agenor (deployed as SigmaUSD on Ergo) and Belus (deployed as Milkomeda Djed Osiris on Cardano's EVM Sidechain Cardano). He is also the inventor of hodlCoin, the staking protocol to be used in this project. Therefore, he has deep knowledge of both the project that is needing liquidity provision and of the project that will be used to offer liquidity provision incentives.
During his academic career, he has already received and managed more than 1 million USD in research grants in several countries and always achieved the goals of the proposed projects.
To know more about our organization as a whole, check the following links:
- https://docs.stability.nexus/
- https://medium.com/DjedAlliance
- https://news.stability.nexus/
- https://x.com/DjedAlliance
- https://x.com/StabilityNexus
- https://linkedin.com/company/stability-nexus
- https://t.me/StabilityNexus
- https://discord.gg/YzDKeEfWtS
- https://github.com/StabilityNexus
- https://djed.one/
- https://github.com/DjedAlliance
- https://eprint.iacr.org/2021/1069
- https://hodlcoin.co.in/
- https://t.me/hodlCoinGame
[PROJECT MILESTONES] What are the key milestones you need to achieve in order to complete your project successfully?
Milestone output: setup of the staking vault
Acceptance criteria: users should be able to stake and unstake MOR into/from the vault through a Web UI.
Evidence of milestone completion: we will provide a link to the web UI.
Milestone output: Distribution of 33% of Rewards.
Acceptance criteria: 33% of rewards distributed.
Evidence of milestone completion: we will provide links to the ADA->MOR conversion transactions and to the MOR distribution transactions.
Milestone output: Distribution of 33% of Rewards.
Acceptance criteria: 33% of rewards distributed.
Evidence of milestone completion: we will provide links to the ADA->MOR conversion transactions and to the MOR distribution transactions.
Milestone output: Distribution of 34% of Rewards.
Acceptance criteria: 34% of rewards distributed.
Evidence of milestone completion: we will provide links to the ADA->MOR conversion transactions and to the MOR distribution transactions.
Milestone output: final report discussing the effects of the liquidity provision incentive program.
Acceptance criteria: the report should contain a spreadsheet analyzing the evolution of TVL.
Evidence of milestone completion: we will provide a link to the report.
[RESOURCES] Who is in the project team and what are their roles?
Dr. Bruno Woltzenlogel Paleo will set up the staking vault and handle the conversions and reward distributions.
[BUDGET & COSTS] Please provide a cost breakdown of the proposed work and resources
40000 ADA will be converted to MOR and distributed as rewards for Djed liquidity providers.
2000 ADA will be used to fund the administrative work involved (setting up the vault and making regular distribution transactions and informing the Cardano community about the vault and the distribution transactions).
[VALUE FOR MONEY] How does the cost of the project represent value for money for the Cardano ecosystem?
The current TVL of Milkomeda Djed Osiris is approximately 40000 TVL. Therefore, in the least case, the requested funds will double the TVL. But, since, the MOR minted by locking the funding's ADA will be redistributed to MOR stakers and this will incentivize further minting of MOR by locking more ADA, the TVL can be expected to grow by more than two times. Therefore, for the Cardano community, this is a good opportunity to increase the ecosystem's TVL with high efficiency. More concretely, for teh sake of example, suppose that users end up locking 320000 ADA to mint and stake MOR to receive the staking rewards funded by the requested 40000 ADA. These users would be receiving a 12.5% return on investment. The TVL of Milkomeda Djed Osiris will have grown 10x, from 40000 ADA to 400000 ADA. Catalyst will have contributed to an absolute increase of 360000 ADA in TVL within Cardano by spending only 40000 ADA.
If we assume that:
- setting up the vault will take 3h
- each bridging transaction will take 10 minutes
- each conversion transaction will take 5 minutes
- each reward distribution transaction will take 5 minutes
- there will be 5 bridging transaction, 5 conversion transactions and 40 reward distribution transactions
- informing the Cardano community in social media about the vault and reward mechanics will take 4h
- writing the final report will take 8h
Then the estimated total number of hours for the administrative work is approximately 20h. The amount requested for the administrative work is only 100 ADA per hour.
