[Request for Comment] Incentivize Hop AMMs on Supported and Upcoming Chains

šŸ°Hop Ecosystem
1

Summary

Hop V1 is on track to be deployed on a number of new chains in the Ethereum ecosystem that have already gone through Hop governance. This includes:

It is likely that the ETH and HOP bridges will be deployed on each of these chains. Given that, the ETH bridges would benefit from having AMM incentives applied to them to help for a seamless Hop experience. The HOP bridges do not use AMMs and will not be considered for these incentives.

This proposal suggests allocating HOP to the ETH AMMs of the new chains to be supported by Hop. If accepted, there will not be a new post/vote for the addition of incentives on the new chains since this is meant to account for all of them.

This post is meant to open up the discussion about the addition of incentives on these chains and their respective amounts.

Proposed Amounts

This proposal seeks to set up an incentive program for the ETH AMM on Linea, Polygon zkEVM, Scroll, zkSync, and PGN. The incentive values below were calculated by looking at the TVL of each chain and comparing it to the TVL of Optimism and multiplying that ratio with the HOP incentives on the ETH bridge on Optimism to derive a value. A multiplier of 3x was added to account for the potential growth of these chains given that they have been live for far shorter than the reference chain, Optimism. The exact formula used is:

HOP Incentive Amount = (Chain TVL / Optimism TVL) * Optimism ETH Bridge HOP Incentives * 3

Using the TVL data from L2Beat on December 5th, 2023 and applying that calculation to each chain, we get:

Chain TVL (Million) HOP Incentives / Month
Optimism $4,130.00 346,800
Linea $175.00 44,085
Polygon zkEVM* $114.00 28,718
Scroll $42.90 10,807
zkSync $536.00 135,025
PGN** $1.53 385

*The original Polygon zkEVM proposal asked to reallocate 15% of the current Polygon PoS chainā€™s incentives to the Polygon zkEVM chain. This will be applied automatically, as it has already been voted on, but is not counted in the numbers from this proposal. With these additional 15%, the number of HOP incentives distributed on Polygon zkEVM becomes 60,968 per month.

**It is expected that the TVL of PGN will drastically increase prior to Hop support so that the effort/time/cost of supporting the chain makes sense for the entire Hop ecosystem. The support of the chain must also pass a Snapshot vote.

These values should give the AMM on each network the ability to build up liquidity for an awesome Hop experience. Summing all the new incentives results in 219,021 additional HOP distributed per month, or 2,628,252 per year (0.263% of the total supply). However, it is expected that (1) some of these chains will not be live for a few weeks or months, and (2) when they are live, these will only be live for a few a short distribution cycles until the release of V2.

It is important to note that Hop V2 is coming soon. The system is set up in such a way that direct incentives will be far less important to the health of the system and thus this current incentive system will not apply for Hop V2. These proposed Hop V1 incentives will only be in place until V2 is fully live, meaning that these incentives will only be distributed a small handful of times.

Timeline/Next Steps

  • This RFC will last a few days in order to gather any appropriate discussion or feedback.
  • After discussion and feedback, a delegate will post this proposal to Snapshot.
  • If the Snapshot vote passes, AMM incentives for the ETH bridge on these chains will be automatically applied when the chain is supported.
3 Likes
2

This seems like a good idea till Hop v2 rolls out

3

Really excited to see this proposal go through! While TVL on Polygon zkEVM remains in its early days, we have a number of really exciting initiatives coming out in the next ~6 weeks that should meaningfully boost activity and new dApp launches on the chain, so this proposal is coming at a great time.

Iā€™ll also take a second to quickly summarize what weā€™ve been up to, and what the Hop ecosystem has to look forward to!

To date, Polygon zkEVM has been focused on infrastructure launches and product improvements. As one cycle ends, another begins. 2024 will be the year of DeFi growth on zkEVM. Differentiating on a chain level is important, as it establishes a culture and identity for an ecosystem, so letā€™s dive into some of the key narratives weā€™re focused on:

Capital Efficiency:
Increased capital efficiency on-chain is an important narrative around zkEVM, that will be concentrated into three major categories:

  1. LST/LRTs
  2. Yield-Bearing Stablecoins
  3. Concentrated Liquidity Pools

The more that we can focus on this as a narrative, the higher the baseline yield is in ecosystem, and the lower the opportunity cost of providing capital becomes (e.g. an ETH-USDC LP has a higher opportunity cost of capital than a stETH-sDAI pool does)

Rehypothecation: As an extension of the capital efficiency narrative, another major focus on zkEVM is asset rehypothecation . The more utility you have with assets, the greater the opportunity set is for an end-user in DeFi. Around this, there are a few major things weā€™re focused on: - Money Market supply for LP tokens. A stETH-sDAI pool is more capital efficient than an ETH-USDC pool, but a stETH-sDAI pool that you can use to collateralize a borrow position is EVEN more efficient. Ensuring that LP token collateral has sufficient use cases as either supply assets in a money market, or as collateral on a margin (trading) platform, leads to outsized results.

zkEVM Native & Polygon-ecosystem assets. Ensuring that there is leverage available for classic trades, like LST loops, is important, but undifferentiated on an ecosystem level (you can put that exact trade on across every L2). As such, thereā€™s an added focus around assets that will exist exclusively either on Polygon or on zkEVM- Gaming, RWA, and zkEVM native projects will be the major areas of focus here. DeFi Primitives & Native Product: A key portion of the initial zkEVM rollout will focus around some of the big names that will have a presence on the network. These platforms offer trusted risk profiles, and access to users that arenā€™t active in the Polygon ecosystem today. Over time, I expect more and more of our focus to center on zkEVM native primitives and their intersection with multi-chain dApps. This achieves a few crucial things: - Dedicated resources for Polygon - cross-chain applications are forced to split attention across multiple ecosystems. - Brings users on to the network for product and dApp content that they canā€™t get anywhere else. - Allows for unique products around multi-chain dApps - Creating meaningful and differentiated use-case around multi-chain dApps. - User Experience & Sticky Liquidity through Integrations

dApp Integrations: The final major narrative for zkEVM centers on dApp integrations. A ā€˜vanillaā€™ dApp is one that is a standalone product, with no integrations into other dApps. While they can be successful, their growth is predicated on their ability to onboard users directly onto their platform. On the other hand, dApps that are integrated into other dApps have the ability to grow if any of their integrations sees success. This expands the surface area of attack, and ensures that the entire ecosystem benefits from any projectā€™s success.

Overall, our mission for 2024 is clear: Make Polygon DeFi more robust and successful than itā€™s ever been before, and weā€™re excited to support a fantastic group of builders alongside this journey. Stay tuned, more coming very soon.

4

This is now up for vote on snapshot: Snapshot

Iā€™m voting in favor. Makes a ton of sense to extend this to new chains. Calculation for distribution also seems reasonable.

5

This is an easy FOR vote in my opinion.

As the incentivization makes sense to be rolled out in the new chains and the amounts are sensible.

6

Vote For. Seems reasonable to continue incentives on v1 for new chains until v2 is in place.

7

Voting for this proposal on the assumption that these incentives will be sunset once V2 is released.

8

The below response reflects the views of L2BEATā€™s governance team, composed of @kaereste and @Sinkas, and itā€™s based on the combined research, fact-checking and ideation of the two.

Weā€™re voting in favour of the proposal as the extension of HOP incentives to ETH bridges makes sense, the amounts are reasonable, and the duration is only until the release of V2.

9

I have voted yes, really nothing profound to add other then I agree with everyone else that the proposal is reasonable given the current state of the project.

10

@shanefontaine

It is important to note that Hop V2 is coming soon. The system is set up in such a way that direct incentives will be far less important to the health of the system and thus this current incentive system will not apply for Hop V2. These proposed Hop V1 incentives will only be in place until V2 is fully live, meaning that these incentives will only be distributed a small handful of times.

Kind of unrelated to the proposal itself and mostly a curiosity thingā€¦ but can you expand on why v2 doesnā€™t need direct incentives as much as v1?

11

Hi, sorry for bringing a question out of the topic.

Is there any active Hop community for live interactions? Seems the Discord server dead for a while.

12

Voted for: Incentives are needed to stay competitive, especially since there is increasingly more bridge competition, but I also echo Bobā€™s question to @shanefontaine as to why v2ā€™s incentives would be far less important

13

I voted in favor because adding EVM chains and supporting AMMs is a necessary action for the bridge to continue growing its market share and presence throughout the Ethereum ecosystem