SMARDEX wUSDN / BOLD Liquidity Initiative

Initiatives
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About the Protocol

Smardex built USDN, a new kind of yield-bearing synthetic dollar. The yield is generated by users going long ETH on a proprietary decentralized perp dex, ensuring USDN is fully delta-neutral.

Proposal Overview

This Liquidity Initiative aims to efficiently utilize funds to optimize both immediate and long-term returns for BOLD holders, SMARDEX and the Liquity v2 protocol.

As commitment, SMARDEX will make a strategic purchase on the open market of $150k BOLD to seed a new v3 BOLD / wUSDN pool on Balancer, concentrated around true price, and will opportunistically acquire 0.02% of the LQTY staked in order to obtain sufficient voting power to permissionlessly propose this initiative (2x the current minimum). wUSDN is the compounding version of USDN, a decentralized, yield-bearing token benefitting from the cash-carry trade, currently yielding above 20% APR.

By pioneering this approach, SMARDEX intends to demonstrate the versatility and value of LQTY as a key component in cross-protocol treasury management and liquidity provision. This initiative not only benefits BOLD and its holders but also paves the way for innovative inter-protocol collaborations.

Usage of Funds Received

  • 100% of the BOLD received will be used as bribes on Paladin for the wUSD/BOLD Balancer V3 pool.
  • veBAL and vlAURA voters will vote for the BOLD/wUSDN Balancer gauge and receive BOLD bribes.
  • The gauge system will allocate BAL rewards to the pool based on how many votes it receives.

In addition:

  • SMARDEX will seed the pool with $300,000 (150,000 BOLD / $150,000 worth of wUSDN).

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Impact for BOLD

This approach will improve the overall BOLD liquidity and create a dual yield opportunity for BOLD holders:

  1. Liquidity pool rewards from gauge mechanism (BAL emission)
  2. Balancer pool Native yield from wUSDN
  3. Incentives from Smardex’s team

Liquidity Provision Strategy

SMARDEX will purchase $150,000 worth of BOLD and pair it with an equal amount of wUSDN in a Balancer V3 pool. The liquidity will be concentrated around the optimal price point (to be determined, precise to 5 decimal places) to mitigate toxic flow.

USDN Protocol and Oracle Integration

The USDN Protocol relies on accurate and up-to-date prices for proper functioning. Two types of oracles are utilized:

  1. Pyth (Pull-Based): is the primary oracle, offering frequent updates (every 400ms) with neutral prices adjusted by 40% of the confidence interval to manage risk. For instance, a $1,000 price with a ±$10 interval is adjusted to $996 for minting and $1,004 for redeeming.
  2. Chainlink (Push-Based): serves as a backup, providing regular on-chain prices triggered by market changes (0.5%-1%) or hourly updates. The Protocol defaults to Chainlink if Pyth fails, ensuring uninterrupted operation.

The wUSDN oracle calculates the amount of wstETH in the system to determine the USDN price, considering the rebase mechanism that activates above $1.005.

Governance can modify oracle use to adopt new technologies or address issues.

Additional Initiatives

SMARDEX plans to acquire 0.02% of LQTY staked supply to gain sufficient voting power. This move aims to position SMARDEX as a pioneer in the LQTY v2 bribe and governance system PoL utility for Diversified defi-participating projects.

SMARDEX also intends to utilize their native $SDEX tokens to support this initiative. These tokens can be used either as LP incentives and/or bribes, with the specific allocation to be determined based on the success and participation of the community to this initiative. The preference is to maintain flexibility in the allocation of these incentives, this approach allows SMARDEX to adapt to changing market conditions and optimize the impact of their $SDEX tokens in supporting the BOLD liquidity pool. But we’re always open to your ideas and suggestions.

Threshold & Target

There is no minimum amount of BOLD required for this proposal to be delivered. All BOLD received will be allocated to bribes on Paladin for the wUSD/BOLD pool.

Impact Measurement and Key Metrics

  • More liquidity
  • Yield of the pool

Parts in [Brackets] will be filled as progress is made on the described setup.
[Balancer LP address] TBA

  • Bribes
    [Paladin Quest address] TBA

Parameters we can change on Quest:

  • the reward/vote amount (minimum and maximum) (amount is in $TOKEN/veBAL)

  • the CloseType : what to do with the unused Quest budget every week : send it as LM on the Balancer gauge, rool it over to the next week, or set it as withdrawable

  • the Vote Type & VoterList : Vote Type is either nothing, Blacklist or Whitelist, and the VoterList is the list of address either not counted for votes and rewards when distributing in the case of a Blacklist, or the only ones counted and rewarded in the case of a Whitelist.

Reporting

  • TVL, Yield : [Balancer LP address]
  • Bribes utilization: [Paladin Quest address]
  • (Later) Dune Dashboard to track TVL / users in the Pool

Practical Information

Recipient: [Paladin Quest address] TBA

Nature: Smart Contract TBA

Recently, SMARDEX introduced USDN, a synthetic stablecoin that utilizes a decentralized delta-neutral strategy. Unlike other stablecoins of the same type, USDN will be decentralized, and will operate by using SMARDEX’s perpetual DEX for cash/carry trade operations. wUSDN wrapped version and an ERC-20 value-accruing token wrapper for USDN.

To broaden its appeal and user base, SMARDEX is expanding its ecosystem by integrating gaming elements, particularly through SMARDEX Poker Pro and a strategic partnership with Stake, an online gaming and sports betting platform. This fusion of DeFi, poker, and online gaming uses USDN as the stable currency, offering a unique advantage to players: their balances grow automatically through USDN’s built-in yield. This innovative approach aims to attract both DeFi enthusiasts and online gaming communities, creating a seamless experience where players can enjoy their favorite games while their funds generate passive income.

Authors: Telos Consilium SA - MajeStyle, Starny, commissioned by SMARDEX. Telos Consilium is a web3 service provider based in Switzerland.

We invite the Liquity community to support this initiative, promoting deeper liquidity, broader adoption for BOLD, and collaborative governance development for Liquity and SMARDEX.

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Appendix 1

Following the above proposal, we would like to add, for transparency, that SMARDEX is also planning to leverage the LQTY bribing mechanism for the future BOLD/wUSDN Balancer gauge. Current intentions are the following:

  • Small-Scale Test Bribe First: We’ll start with a modest bribe to gauge community response and overall effectiveness.
  • No Long-Term Commitment Yet: We’d like to observe how this initial bribe performs before deciding on a larger or long-term approach. However, we aim to remain fully transparent in our communication and on-chain transactions.
  • Visibility & Tracking: For now, we’ll rely on a Dune dashboard to track and showcase the bribe’s impact. Liquity has noted they intend to develop a dedicated bribe interface, but that’s still pending. In the meantime, any help promoting our bribe is welcome, since it will not be immediately visible in the frontend.
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Update: First Week Results of the BOLD/wUSDN Liquity Initiative

We’re sharing the first week’s results from the BOLD/wUSDN initiative, a collaboration between Telos Consilium, SmarDex, Liquity, Balancer, and Paladin. This update covers the outcome of the $LQTY holder bribes and our next steps.

First Week Bribe Results

We distributed $1,000 worth of SDEX as incentives for $LQTY stakers who voted in favor of the SmarDex x Liquity proposal.

In exchange, we received 1,760 $BOLD, which gives an efficiency ratio of x1.76.

As planned, the full 1,760 $BOLD will be allocated as bribes on Paladin Quest to support the BOLD/wUSDN Balancer pool.

With an efficiency of x1.76 on Liquity, and an efficiency of around x1.2 on Balancer, this would bring the total efficiency for the BOLD/wUSDN pool to x2.11..

This makes the initiative a strong driver for BOLD and wUSDN liquidity, as each new round of incentives continues to multiply the impact on the pool’s depth and stability.

Key Takeaways

  • Higher TOTAL efficiency: By taking all the BOLD received by the initaitive and using them as Bribes on Quest for the Balancer BOLD/wUSDN pool, we can potentially push the total efficiency up to x2.11, making the initaitive extremely interesting!

  • Voting Simplicity: After casting your vote, you do not need to vote again each week. Your initial vote remains active for the initiative, making participation straightforward for $LQTY holders.

  • Increased Incentives Ahead: Based on the results, we are considering raising the bribe amounts for $LQTY voters. This could help generate more $BOLD, which will be reinvested to improve yields and liquidity for the BOLD/wUSDN pool.

  • Community Engagement: We appreciate the participation from $LQTY stakers and the broader community. The collaboration is off to a solid start.

  • Future Updates: Progress reports and next steps will be posted on the Liquity Governance Forum. Further updates will follow in the coming weeks.

Next Steps

The 1,760 $BOLD will be used as bribes to help strengthen the BOLD/wUSDN pool, with the goal of improving both liquidity and yields. We encourage $LQTY stakers to stay involved and share feedback as the initiative develops.

Thank you for your ongoing participation.

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Quick-hit follow-ups you can drop straight into the governance thread

  1. Next-epoch economics – What reward budget (in $ terms) are you allocating for following Epochs, and how does that compare to round-one spend? Is it still 1k for the next round? I am asking because I think the previous round was not very representative as there were no other competing proposals that directly lined the pockets of the voters.
  2. Bribe cadence – Will bribes be weekly again or move to a bi-weekly/monthly schedule?
  3. ROI guardrails – At what bribe-to-liquidity efficiency ratio would you pause or resize incentives?
  4. wUSDN yield outlook – What APR do you expect if perp funding flat-lines, and how does that affect pool attractiveness?
  5. LQTY stake strategy – Do you plan to grow, delegate, or recycle your 0.02 % staked LQTY after proposal power is secured?

Are there good dashboards around to track some of the metrics?

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