This is a proposal for HOP protocol to offer fast bridging support for sUSD between Optimism and ETH Mainnet.
The Synthetix Treasury Council has committed to incentivizing liquidity growth in the sUSD/hsUSD LPs on Optimism with $OP rewards partly reallocated from $SNX pool.
Request HOP Protocol to do a matching co-incentive by moving $HOP incentive from SNX pool.
Rationale :
Synthetixâs ecosystem, including its sUSD, has been among the most utilized dapps on Optimism since its launch in 2021. This proposal requests sUSD fast bridging support between Optimism and ETH mainnet from the HOP protocol. The Synthetix Treasury Council intends to incentivize sUSD/hsUSD LPs with 5,000 $OP monthly by reallocating from SNX pool and requests a matching co-incentive from the HOP Protocol by moving 50,000 $HOP from SNX pool. The aim is to drive more utility for sUSD and facilitate onboarding new/existing users into/to the Synthetix ecosystem.
Specification :
Roll out bridging support for sUSD on Hop.
Incentivize liquidity for hsUSD/sUSD with 5000 $OP which will be moved from SNX pool.
Matching co-incentive by moving 50,000$HOP from SNX pool.
10k OP + 100k HOP per month for the SNX pool on Optimism
This proposal would split these rewards across both the SNX and sUSD pools but would not change the overall rate of HOP incentives or OP incentives on the Synthetix side. The new split would be as follows:
5k $OP + 50k HOP per month for the SNX pool on Optimism
5k $OP + 50k HOP per month for the sUSD pool on Optimism
Hop clearly stands to gain from a broader set of offerings. More user choice benefits users which benefits Hop. Forming a closer relationship with Synthetix also stands to benefit Hop.
There are three costs that seem worth raising, however. The first two costs are fairly obvious: Hop must provide labor (writing and maintaining the frontend and backend code necessary to support sUSD) and HOP must pay co-incentives.
As much of the code necessary for this deployment has already been written, and this work is better thought of as retooling and an extension of existing work, the labor cost seems to be minimal. Still, the cost of ongoing maintenance shouldnât be discounted and an estimation of the actual cost of this work would be valuable for weighing these decisions in the future.
The value Hop gains from providing liquidity co-incentives seems a bit less clear. Would Synthetix not deploy to Hop without them? It seems like it would be in the best interest of Synthetix to provide these incentives even without Hop co-incentives as well. Furthermore, these rewards being provided to LPs rather than users seems like a potential missed opportunity for growing the Hop userbase. How much sUSD liquidity do we expect the average user to require? Is this not the only benefit to the Hop ecosystem these incentives provide? Still, given that this funding is already accounted for and simply being shifted over to the new sUSD pool, it seems like a sunk cost regardless and likely not worth debating.
The less obvious cost is the systemic risk of all stablecoins. My understanding is that sUSD is backed by â~$600M of SNX, ~$40M of ETH, and ~$40M of DAI,â overcollateralized 400%. This distribution seems massively skewed towards Synthetixâs token, SNX. In the event of a sudden crash in price, the stablecoin will almost certainly depeg. While a depeg would hurt sUSD LPs, given Hopâs design, it wouldnât pose any systemic risk for other pairs. It does pose reputational risk, however. This reputational risk extends beyond that of other supported stablecoins given the co-incentives which may be interpreted by users as an extra level of confidence and sign-off by Hop.
Even with these considerations, the benefits seem to outweigh the costs, and this proposal will be supported. The Synthetix team is highly-regarded in the space and Hop will benefit by growing with them. Concerns are only raised in the best interest of Hop DAO and feedback from the Synthetix team is more than welcome if this analysis is incomplete in any areas.