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Hop Liquidity Mining: Proposal to add $STAKE rewards on the Hop Bridge

Background

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:

  1. 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.
  2. 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 ! :slight_smile:

-Lito

7 Likes

Thanks for the proposal, will read into your project. generally I agree that bridges are very important in the growing defi space. But one major issue I see and what I like to be overcome is the fragmentation of assets that’s result from too many different briding projects that easily result in confusion especially for the newcommers to that space. If I bridge a USDC form eth mainchain to xDAIChain , BSC, Polygon or wherever and than going on from there to another chain and maybe again to another it will always be a different contract as will it be if I do the same step using diffenent bridges. Do you see any solution for this, allowing users to bridge in circles without beeing trapped somewhere and left only to bridge all the way back selecting the appropriate networks and bridges one used before? Needs some kind of standarization between the different bridging projects I suppose?

2 Likes

Dear refri, if you bridge from L2 (or sidechain) to L2 (or sidechain) using the Hop protocol, you’ll always end up with the canonical token of the respective platform (the one defined by the canonical bridge of the respective platform, e.g. the Polygon PoS bridge or the ETH-xDai bridge). So this protocol already provides the solution you were wishing for in your reply. :slight_smile:

Regarding the proposal, as a medium size farmer and 1Hive community member I would love to see this liquidity mining proposal be supported as it allows people like me to hop to Optimism/Arbitrum/Polygon to farm there when opportunities show up whilst always having liquidity to hop back to my xDai home base. (My stack is large enough that I am not immune to bridge liquidity concerns whilst still being so small that always having to bridge to ETH on my travels hurts quite a bit.)

Thanks to the team for building this elegant protocol!

Best,
Madiba

1 Like

Thanks, sounds great. Will have a closer look for sure and support it too.

1 Like

Hey all! Co-founder of Hop here.

I would like to share some stats after our retweet of the @xdaichain Sushi liquidity mining program tweet.

We saw a decent amount of volume flow through the Hop bridge from Polygon to xDai, presumably to farm. As mentioned in our original tweet, it only took 1 transaction, less than 5 minutes, and ~$0.01 for people to go from Polygon to xDai when using Hop. We believe that most people would not have exited Polygon to L1, then went L1 to xDai, as the fees of doing so would have likely negated their Sushi liquidity mining rewards on xDai. We believe a Hop Liquidity Mining program would incentivize even more liquidity to move from Polygon to xDai.

Happy to provide any additional answers or information!

3 Likes

Very cool insights! Thanks for sharing it.

One more update. @DeFi_Dad made a video talking about Hop. During the video, he mentioned that he hasn’t used DeFi on xDai but that Hop is the missing piece that would let him start doing so.

2 Likes

Hi,

I use Matic and xDai to interact with protocols at lower prices than on mainnet. I keep paying gas fees on mainnet which often makes it much less appealing to move small amounts from mainnet and other L2’s. Having an option to bridge between L2’s on Hop without going through ethereum would not only save me gas fees but also bring value to the xDai community by lowering the barrier of entry significantly.

Incentivising the market for hUSDC/USDC (& upcoming tokens) lowers slippage for users bridging their assets and ensures an efficient onramp/offramp experience to and from xDai. With a cross-network “peg” established, Hop can continue building connections with further L2’s and integrate with partners like exchanges/onramps/dapps. I agree with this proposal to incentivise using $STAKE because having a user friendly bridge lowers the barrier to xDAI (and all L2’s) and drives capital inflow, new users and talent to this ecosystem.

Would love to see the Hop team tracking “onboarded” L2 users/wallets through their bridge (new to any L2 + new to xDai) for each L2 they work with for the xDai community to access openly. I think it could be a pretty good driver for new users/wallets

2 Likes