It is increasingly becoming clear that we’re heading into a multi-chain world with Ethereum being the central hub of activity. Our belief is that chains that are well connected and integrated with other ecosystems will have a significant advantage over chains that aren’t.
One can see this phenomenon at play when observing chains featuring direct centralized exchange on & off-ramps having more traction than chains that don’t (BSC vs. Polygon) or how EVM chains with functioning bridges to Ethereum can plug into quality tokens and projects whereas non-EVM chains are struggling to bootstrap activity.
In the years ahead the ease with which assets can flow between different ecosystems will become more important than ever. Being connected to the Hop highway will bring economic activity to an ecosystem in a similar way to how being connected to a car highway brings people and economic activity to a remote village.
Hop is building a multi-network bridge that connects different scaling solutions (xDai, Polygon, Arbitrum, Optimism at launch) to facilitate instant asset transfers between them (see here). Not only that, it allows for cross-chain calls between different smart contracts, enabling some degree of composability between projects of different chains.
In order to guarantee liquidity on the xDai Hop bridge, we would like to propose $STAKE rewards for liquidity providers on the Hop AMM on xDAI chain.
Motivation for $STAKE rewards
To make instant transfers possible Hop uses a two-pronged approach:
- Create a special intermediary asset called an hToken (e.g., hETH, hDAI, etc.) that can be quickly and economically moved from one network to the next.
- Use Automated Market Makers (AMMs) to swap between the hTokens and their corresponding assets on each layer-2 network.
The end result allows users to seamlessly transfer tokens from one network to the next.
In a nutshell, to work efficiently and guarantee good rates to users wishing to send assets cross-chain Hop necessitates liquidity in its AMM’s of each respective chain.
We would therefore like to suggest to the xDai community to use $STAKE liquidity mining incentives to help bootstrap the Hop bridge and thereby create an ultra-fast bridge connecting xDai to all the L2 solutions and Ethereum.
While the Omni bridge is truly amazing it falls short of connecting xDAI to emergent ecosystems such as Optimism and Arbitrum (and zk-Rollups once they launch). Once a lot of activity has shifted to Optimism and Arbitrum, a direct and instant bridge to and from these L2’s will become increasingly important.
With more funds in the Hop AMM on xDai even large sums can be moved from Polygon and other L2’s to xDai in a matter of minutes.
We suggest half the total amount that the Polygon team granted Hop, a total of $500k in $STAKE to be distributed on Hop in 3 months. Hop will split the $STAKE rewards in four tranches. The first will be allocated to the hUSDC - USDC pool at launch and others will go towards ETH, DAI, USDT etc. as they are added to the Hop bridge. We’re looking forward to cooperate with the xDAI team and the community to allocate liquidity rewards based on xDai’s needs and priorities.
In terms of practicalities, the $STAKE rewards can be sent to a Hop multi-sig or directly into the staking contracts.
We’re looking for feedback on the above proposal and look forward to working with the xDai community.
Feel free to ask any questions, and thanks in advance for the feedback !