Section 1 - Applicant Information
Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.
Applicant Name: Emzod, Jonas Klemm & jj3ib
Project Name: Gyroscope Finance
Project Description: Gyroscope Protocol offers a fully collateralized, redeemable, non-custodial and algorithmic decentralized stablecoin (GYD) that builds out several extensive infrastructure advancements for automated risk control and liquidity management. GYD was built with a deep attention to risk management and is composed of layers of risk controls and a strong grounding mission for the stablecoin to be all-weather, offering an extremely stable store of value to GYD users irrespective of the market context.
Team Members and Roles:
The founding team has a deep academic background, with 4 having PhDs in relevant disciplines. Each founder has either analyzed DeFi and Web3 in an academic capacity for years or has prior work experience in the ecosystem at high profile institutions.
| Name | Title | Qualifications | Past Work | Role & Responsibilities | Handle |
|---|---|---|---|---|---|
| Ariah Klages-Mundt | Research & Development | PhD candidate in Applied Math at Cornell, Bloomberg Fellow, Commercialization Fellow | Predicted Black Thursday-type crises in Dai; Quant development in fintech | Leading research initiatives, mathematical modeling, and protocol optimization. | aklamun |
| Steffen Schuldenzucker | Research & Development | CS PhD from University of Zurich, Former PostDoc at Goethe University | Algorithmic game theory in financial markets, Market Designer for Worldcoin | Research on financial market design, stability studies, and algorithmic strategies. | sschuldenzucker |
| Lewis Gudgeon | Development & Operations | Computer Science PhD candidate at Imperial College London, MPhil in Economics Research from Cambridge | Economics consultant, DeFi risks publications | Development oversight, risk assessment, and operational streamlining. | ljfgudgeon |
| Daniel Perez | Development & Operations | Software engineer with 10+ years of experience, PhD candidate at Imperial College London | 3,000+ GitHub stars, blockchain security research | Full stack development, system security, and codebase management. | danhper |
| Jonas Klemm | Growth & Governance | Dual MSc in International Business, BSc in Industrial Engineering | Co-authored most frequently cited paper on stablecoins, Research Team at Binance, Innovation Team at European Central Bank | Governance strategies, partnerships, and integration. | jooooo5as |
Project Links and Contact Information
Website: Gyro.finance
Docs: Overview - Gyroscope Protocol
Github: Gyroscope ¡ GitHub
Dune Dashboards: Gyroscope (dune.com)
Twitter: Gyroscope (@GyroStable) / X (twitter.com)
Point of Contact: jooooo5as
Point of Contactâs TG handle: @ jooooo5as
Twitter: jooooo5as (@jooooo5as) / X (twitter.com)
Email: jonas@gyro.finance
Do you acknowledge that your team will be subject to a KYC requirement?: Yes
Section 2A - Team and Product Information
Gyroscopeâs primary products, particularly the Gyro Dollar (GYD) and the accompanying E-CLP pools have shown robust activity and engagement, demonstrated by truly organic TVL growth since launch to around 40M, across the already deployed pools on Ethereum, Arbitrum, Optimism, Polygon, and Polygon ZKEVMs. We believe this is a strong commitment from our users and do not take the trust placed on us lightly. GYD is an All-Weather Stablecoin, meaning it is a fully collateralized stablecoin with multiple layers of checks and balances that ensure GYD maintains peg even during the most intense crises of the sort we saw in 2022-23. E-CLPs are a special kind of concentrated liquidity pools that are industry leading in capital efficiency, safety and robustness.
The Gyroscope team showcases a deep and diverse array of expertise and accomplishments across the spectrum of finance, computer science, and economics, with extremely well-rounded approaches to tackling challenges in DeFi. Ariah Klages-Mundt brings a strong background in applied mathematics and finance, having contributed to the prediction of Black Thursday-type crises in Dai and engaging in quant development within fintech. Steffen Schuldenzucker, with a foundation in computer science and a focus on algorithmic game theory, has explored financial markets through an academic lens, contributing to the understanding of market design and stability. On the development and operations front, Lewis Gudgeon merges his knowledge in computer science and economics to oversee development while focusing on DeFi risks, whereas Daniel Perez leverages his extensive experience in software engineering to enhance system security and manage the codebase effectively, as evidenced by his significant GitHub contributions and blockchain security research. Growth and governance are spearheaded by Jonas Klemm, who has applied his insights in international business and industrial engineering within the research and innovation sectors of Binance and the European Central Bank, respectively.
To showcase this further, here are just a few works by one of the founders Ariah Klages-Mundt (Google Scholar):
- Stablecoins 2.0: Economic Foundations and Risk-based Models - Stablecoins 2.0 | Proceedings of the 2nd ACM Conference on Advances in Financial Technologies
- While Stability Lasts: A Stochastic Model of Stablecoins - https://berkeley-defi.github.io/assets/material/While%20Stability%20Lasts.pdf
- (In)Stability for the Blockchain: Deleveraging Spirals and Stablecoin Attacks - https://cryptoeconomicsystems.pubpub.org/pub/klages-mundt-blockchain-instability/release/3?readingCollection=a1e776d2
- What Drives the (In)stability of a Stablecoin? - [2307.11754] What Drives the (In)stability of a Stablecoin?
Together, this team combines cutting-edge research, practical development expertise, and strategic growth initiatives to advance their projects in the dynamic landscape of decentralized finance. In short, the team behind Gyroscope are deep academics and operators in crypto who have spent an extensive amount of time studying in-depth the stablecoin landscape, only to realize that there was no real solution to the problem of a true decentralized stablecoin that simply just worked - aka maintain peg, so decided to build it themselves over the bear market of 2022-23.
Digging deeper into the Gyroscope Protocol, as of early January, Gyroscopeâs users hold at least 205 Million USD worth of total assets across all Chains. This number is expected to be much larger now as crypto markets have performed strongly since January. As of now, at least 50% of this capital is parked on Ethereum in various Lending Markets, DEXs and other On-Chain avenues. Below is a Sankey diagram that shows how users of just 3 GYD pools are allocating capital to other protocols. We believe this demonstrates how the utility of Gyroscope is already clear to a group of highly-active, experienced DeFi users.
As of today, at least 60% GYD pool LPâs addresses with overall assets valued between 50K-100K USD. To illustrate this point further, the average Net Asset Value per LP stands at approximately $629,317, skewed by high-net-worth individuals but with a median of only $13,523.82, reflecting that the majority of users are at the lower end of the asset scale.
At this point in the market cycle, we believe we need to go above and beyond just organic volume, and instead also focus on offering more incentives to attract more users and scale to levels GYD was designed for. By using the ARB incentives, Gyroscope can offer higher yields on the entire range of E-CLP pools deployed on Arbitrum by marrying the high capital efficiency, better pricing with a robust state of the art stablecoin, in order to get to the kind of strong Lindy necessary for scaling up. We genuinely think crypto needs a true decentralized stablecoin, and we have designed GYD with exactly this in mind!
What novelty or innovation does your product bring to Arbitrum?
Gyroscope introduces a groundbreaking innovation to the Arbitrum ecosystem through its Gyro Dollars (GYD) and Elliptic Concentrated Liquidity Pools (E-CLPs), setting a new standard for stablecoin design and liquidity provision. GYD leverages a diversified asset basket with automated risk diversification and optimized bonding curves for unprecedented stability, complemented by a resilient oracle and circuit breaker system tailored for maintaining peg even in the most turbulent of market conditions! The E-CLPs, offering up to 75% more efficiency than traditional pools, revolutionize liquidity provision with their elliptic design for asymmetric concentration, enhancing capital efficiency and reducing the need for active management.
The synergy between GYD and E-CLPs aims to enhance the stability of GYD through optimized trading pools, providing more liquidity around the peg price. This integration also introduces a more efficient collateral class of LP shares for backing GYD, utilizing E-CLPs as a yield strategy for reserve assets. The potential for incorporating LP positions in E-CLPs into a leverage mechanism for GYD further innovates the possibilities for borrowing against yield-bearing collateral types on Arbitrum. This synergy between GYD and E-CLPs secures enhanced stability and efficient collateral utilization for GYD. Together, these innovations provide Arbitrum with a robust stablecoin network that integrates advanced risk management, liquidity efficiency, and user accessibility, marking a significant leap forward for Arbitrum users.
How do you measure and think about retention internally? (metrics, target KPIs)
When it comes to retention metrics there is a need to differentiate between the stablecoin, GYD, and the concentrated liquidity pools, E-CLPs:
- GYD retention:
- Interest in holding GYD: GYD supply + GYD supply MoM
- GYD usage: % of GYD used as settlement asset (a-GYD-b swaps)
- interest by service providers / organizations: expressed interest by treasury managers & other service providers to use GYD as a one-stop-access to risk automation & a diversified stablecoin portfolio
- E-CLP retention:
- interest in creating E-CLPs: measured by number of inbounds asking for a custom E-CLP with a willingness to add incentives; special focus on inbounds from service providers for liquidity management
- interest in providing liquidity to an E-CLP: TVL of all E-CLPs; MoM change of E-CLP TVL
- Interest in integrating E-CLPs / pool shares: % of aggregator volume supporting E-CLPs; count of third-party platforms including E-CLP shares.
Is your project composable with other projects on Arbitrum? If so, please explain:
Yes, Gyroscope was designed from the ground-up to be a robust, composable stablecoin for DeFi.
Gyroscope pools are built on top of Balancerâs infrastructure, pool LP token (or BPTs as per Balancer) can be staked in Balancer or Aura. Additional marketplaces for vote incentives are also supported via HiddenHand. The pools are already included in the order routing of 1inch, CowSwap, 0x, Balancer SoR, and KyberSwap (chain specific).
The Gyroscope stablecoin, GYD, is an ERC-20 token. The first integrations are already there, with additional conversations for lending market inclusion underway.
Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?
While there are stablecoin protocols on Arbitrum, we believe there are none that really offer a truly robust decentralized solution that is All-Weather. It just works. To elaborate on this, take the case of GYD: most stablecoins maintain stability through collateralization or algorithmic mechanisms. GYD differentiates itself by implementing a basket of assets for backing, combined with automated risk diversification rules. This approach aims to segment and contain risks from across the asset space, a feature that is less common in existing stablecoin designs which often rely on a single asset or a less diversified basket. The optimized minting and redemption bonding curves of GYD guide the protocol in using reserve assets to maintain stability, a method that contrasts with the more static mechanisms employed by other stablecoins. These curves allow for dynamic adjustments based on market conditions, enhancing stability. The implementation of a resilient oracle and circuit breaker system in GYD offers a proactive risk management tool that is designed to handle market stress more efficiently than the reactive measures typically found in other protocols.
Now consider E-CLPs that Gyroscope pioneers: Concentrated liquidity pools have gained popularity for their capital efficiency. However, Gyroscopeâs E-CLPs take this concept further by allowing asymmetric concentration of liquidity along the curve of an ellipse, a feature not present in traditional concentrated liquidity pools. This elliptic concentration can be up to 75% more efficient than the Stableswap pools, providing a significant improvement in capital efficiency for LPs. Unlike other liquidity pool designs that require LPs to actively manage their positions to adapt to yield-accruing assets, E-CLPs are designed to adapt automatically without the need for active management. This passive approach to concentrated liquidity is novel and reduces the operational complexity for liquidity providers. This high degree of customization available in E-CLPs, where liquidity no longer needs to be spread evenly within uniform price bounds, provides a flexibility that is unmatched by traditional concentrated liquidity pools, which often operate within fixed price ranges.
Lastly, the entire protocol was designed to be synergistic in ways that make Gyroscope truly unique. More deeply, the integration of GYD and E-CLPs is designed to enhance the stability of GYD by providing optimized trading pools that offer more liquidity at critical price points around the peg. This is a strategic advantage over other stablecoin protocols where liquidity might not be as efficiently allocated to maintain stability. Further, the use of E-CLPs as a collateral class for backing GYD introduces a more efficient yield strategy for reserve assets. This approach to using liquidity pool shares as collateral is more advanced than typical strategies, which may not leverage the full potential of liquidity positions as yield-bearing assets. Lastly, the potential integration of LP positions in E-CLPs into a leverage mechanism for GYD represents an innovative approach to increasing the utility of liquidity positions, offering a model for yield-bearing collateral that is not commonly found in other protocols.
Section 2B - Protocol Details
Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.
Is the protocol native to Arbitrum?: No, but weâre extremely motivated to bring the infrastructure and liquidity for GYD, build a strong liquidity network for stablecoins and consequently build a thriving stablecoin ecosystem on Arbitrum. On top of that we do like to bring our concentrated liquidity pools (E-CLPâs) to Arbitrum users and protocols to benefit from. These CLPs are superior to existing market offerings and provide broad cost and efficiency benefits to the entire Arbitrum LST and stablecoin ecosystem.
On what other networks is the protocol deployed?: Gyroscope contracts are currently deployed on Polygon, Optimism, and Ethereum.
What date did you deploy on Arbitrum mainnet?: The infrastructure for E-CLPs was deployed on 25/08/2023. The first E-CLP pool ( USDC-USDT E-CLP) was launched on 02/10/2023. Gyroscope Protocol
A second pool was launched in the last week with collaboration from Balancer and Frax. Further E-CLP (both for GYD and others, for example LST/LRT pools, will follow in the coming weeks.
Do you have a native token?: Gyroscope has the governance token GYFI, which is however not distributed yet. Notably, in early Q2â24 Gyroscope will announce a points system.
Past Incentivization:
There are no internal incentive programs that have started yet. Only yesterday has Gyroscope announced the points system that will be releasing imminently.
With respect to external incentivization in the past, BAL rewards from Balancer have been the primary source of incentivization offered to Gyroscope E-CLP LPs. To put some numbers into this:
The total number of BAL tokens released as part of the Balancer Incentivization Program since the inception of the wstETH/WETH E-CLP on 2023-07-06, has been 30161 BAL. The total USD value of these BAL tokens (calculated based on USD value for each day at the then USD price of BAL) is 116732 USD. The total TVL in Gyroscope in this particular E-CLPs at the peak was just over 8 million USD. The current total TVL is 5 million USD.
Take for example, the wstETH/WETH E-CLP on Ethereum: the pool is attracting a similar level of TVL per BAL rewards as Balancerâs Stableswap wstETH/WETH pool. I.e., the APRs from BAL rewards are at a pretty similar level at least considering that the E-CLP is still seen as a ânewâ technology (and so interpreted as slightly riskier than StableSwap).
The Gyroscope - Balancer integration and partnership has been extremely mutually rewarding for both parties, and this is further evidenced by the continued deep cooperation from both sides. The mission is to bring the most powerful, efficient, and robust Liquidity and Stablecoin primitives to the world!
Current Incentivization: Currently the protocol is incentivized with external incentives. We are working closely with the Balancer team and most of our E-CLP pools receive BAL rewards. In the near term, weâre launching a points system to attract liquidity to our GYD stablecoin pools.
Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program? No, but the core team has applied for a DAO/ Foundation grant
Protocol Performance
This main Dune Analytics dashboard shows an overview of relevant metrics and includes links to additional dashboards with more granular information. Currently, Gyroscope has 9200 distinct monthly active users (MAUs) with 29,017,839 USD in total TVL across all E-CLPs. The current circulating supply of GYD is 1,446,320.
Below are the specific links to each sub-dashboard:
- E-CLP Overview Dashboard: https://dune.com/gyro_finance/gyroscope-e-clps
- E-CLP Individual Pool Highlights Dashboard: https://dune.com/gyro_finance/gyroscope-individual-e-clp-insights
- GYD (The All-Weather Stablecoin) Deepdive Dashboard: https://dune.com/gyro_finance/gyd
- Gyroscope Governance Data Breakdown Dashboard: https://dune.com/gyro_finance/gyroscope-governance
- Gyroscope Contract Deployments: https://dune.com/gyro_finance/gyroscope-contract-addresses
Below are a set of specific metrics from our Dune Dashboards to get a glimpse into the protocol:
(Fig 1)
(The Legend for Fig 1 - Total TVL as of the 10th March 2024: 29,684,795 USD)
We would also like to bring to attention the Capital Efficiency of the E-CLPs. Take for example, Gyroscopeâs concentrated liquidity pools on Optimism. They have become the default routing target of 1inchâs trade aggregators. As such, Gyroscope infrastructure can help the Arbitrum ecosystem to become much more capital efficient, more competitive, and in turn more resilient. To showcase this with some numbers, these are the latest daily figures (for the 9th March 2024):
| Rank | ECLP | E-CLP % volume by 1inch | E-CLP 1inch Volume | ECLP Volume |
|---|---|---|---|---|
 #1 |
wstETH/WETH | 31.9 | 471,777 | 1,478,209 |
 #2 |
wstETH/WETH OP | 30.8 | 253,823 | 824,508 |
 #3 |
USDC/USDT arbitrum | 9.5 | 2,532 | 26,689 |
Further, over the past 30 days, excluding GYD pools (multi-hop & end-to-end), E-CLPs have served as a 1inch routing target for transactions totaling $16,443,120 USD across the top 5 pools.
Below are the 30 day stats on Gyro DEX and LPers
| Blockchain |  User 30d |
 Txs 30d |
 Swaps 30d |
 LPer 30d |
|---|---|---|---|---|
| â TOTAL â | 8870 | 14034 | 14905 | 324 |
| OPTIMISM | 4820 | 7574 | 8142 | 70 |
| POLYGON | 2149 | 3955 | 4013 | 182 |
| ARBITRUM | 1272 | 1650 | 1745 | 8 |
| ETHEREUM | 629 | 855 | 1005 | 64 |
Protocol Roadmap
In early Q2â24 Gyroscope will announce a structural growth program. We would like to also reward Gyroscope users on Arbitrum.
-
While the Gyroscope protocol launched late last year, the UX can still be significantly improved. The process to mint GYD will soon be substantially easier by allowing âzapsâ to obtain the required reserve asset instead of putting this burden on the user.
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The public Token Generation Event & full launch of the Gyroscope DAO are planned for Q2.
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Two iterations of the E-CLP are also being rolled out:
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Support for Aave receipt tokens (aTokens) in E-CLPs: as the current Aave yield for stablecoins ranges from 10-20% this can substantially boost the attractiveness of LPing into an E-CLP. âWrapping/ unwrappingâ aTokens will likely be abstracted from the user as well.
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Support for FX pools: E-CLPs will support FX pairs such as USD/EUR. A special oracle mechanism to avoid/ minimize MEW will be in place. This allows positioning GYD as the settlement asset in a small, but growing DeFi area.
Audit History & Security Vendors: https://github.com/gyrostable/audit-reports/blob/main/Nethermind/NM0094-GYROSCOPE-PROTOCOL-FINAL.pdf Protocol - Nethermind - 08/15/2023
audit-reports/Nethermind/NM0076-GYROSCOPE-GOVERNANCE-FINAL.pdf at main ¡ gyrostable/audit-reports ¡ GitHub - Governance - Nethermind - 08/15/2023 audit-reports/Nethermind/NM-0055 Security Review - Gyroscope CEMM.pdf at main ¡ gyrostable/audit-reports ¡ GitHub E-CLPâs - Nethermind - 08/17/2022
For more audits see: Audit Reports - Gyroscope Protocol
Security Incidents: There have been no security incidents since our E-CLPâs and GYD stablecoin have launched.
Section 3 - Grant Information
Requested Grant Size: 100,000 ARB
Grant Justification
Our grant ask is heavily Inspired by Gyroscopeâs success on other Chains where we have previously deployed our technology, such as Gyroscopeâs Optimism pools that went from 0 to over 5 Million in TVL with just over 100k USD worth of BAL incentives: https://dune.com/queries/3528315/5934947 (worth pointing out that these incentives were split over 7 months! Therefore the per day incentives were tiny compared to what will be the case with the requested ARB incentives).
Below figure shows the BAL incentives since the inception.
With the above highlighted, and the previously deployed Gyroscope poolâs growth rates as our goal, our grant ask of 100K ARB aims to increase Gyroscopeâs TVL on Arbitrum from its current levels of high 5 figures, to at least a target of 10 Million USD. At this level of TVL, these synergies between E-CLPs and GYD gets going. We believe the combination of superior E-CLP pools, along with Gyroscope Points System + the ARB incentives will boost Volume, TVL and User Activities, and get us to our desired goals. This projected growth rate conservatively maps directly to the growth rates observed with the BAL incentives on Optimism. On most of the pools deployed already on Arbitrum, and the yet to be released pools on Arbitrum (details of the pools and intended distribution of incentives below), an extra 5% yield on the target TVL from incentives will be the initial target for getting the pools bootstrapped. Note that it might only need to be ~5% because the hurdle rates are helped to be met with yield-bearing assets. The main exception would be GYD pools â would expect a higher boost to be required there because GYD is new. The requested grant of 100K ARB is able to cover this over 12 weeks on the target TVL assuming an ARB price of ~2.
Initially for a total of 4 to 5 target E-CLPs, ARB tokens will be used to incentivize a level of liquidity that demonstrates the risk management and capital efficiency value propositions of E-CLPs and GYD on Arbitrum (Pool details provided in Section 4). This will be complemented with the Gyroscope Points System, a social media campaign (twitter thread, twitter spaces, blog post, and Discord announcement) will kick-off the campaign. Following the grant and after reaching the target level of liquidity (and establishing a track record of liquidity on Arbitrum), the Gyroscope community will seek to integrate new use cases of GYD and E-CLP LP shares within the Arbitrum DeFi ecosystem. During this period, Gyroscope will continue to develop the roadmap with Arbitrum (with Arbitrum exclusive releases), focused on the full deployment of GYD (the all-weather stablecoin), a potential stablecoin liquidity network and a number of high demand E-CLPs and novel risk adjusted strategies.
Grant Matching:
Grant Breakdown:
Gyroscope will use the grant proceeds towards:
*The requested Grant amount of 100,000 ARB is envisioned to be split as follows:
- 33.33% to LST E-CLPs - That is ~33000 ARB
- 66.67% to stablecoin E-CLPs in even weekly tranches - that is ~67000 ARB
$10M TVL * ~5% APR * 12/52 weeks = 100k ARB
As more E-CLPs get added to Arbitrum, they will each be incentivized within this framework. The budget for stablecoin E-CLPs may also include incentives for lending markets that feature GYD vs other stablecoins (and similar initiatives).
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Providing incentives for LPâers who participate in the GYD (stablecoin) pools when GYD launches in the next couple of weeks (Details of pools provided in Section 4).
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Providing incentives for LPâers who participate in the select non-GYD E-CLP pools, example: LST E-CLPs (Details of pools provided in Section 4).
Funding Address: 0x823F70044351b213083F0ABc2169F95E2731064E
Funding Address Characteristics: Gnosis Safe multi-sig controlled by FTL Labs, the team currently building out Gyroscope
Treasury Address: [Please list out ALL DAO wallets that hold ANY DAO funds]
Contract Address: [Enter any specific address that will be used to disburse funds for grant recipients]
Section 4 - Grant Objectives, Execution and Milestones
Objectives: The aim of the incentive program is to kickstart synergistic feedback loops between the E-CLP liquidity infrastructure and GYD on Arbitrum. Therefore, Gyroscopeâs primary focus with the ARB incentives is to significantly increase liquidity over time towards the Gyroscope Stablecoin (GYD), and the Gyroscope E-CLP Pools deployed on Arbitrum. This we believe will push GYD towards Lindy rapidly. Gyroscope already has close to mid 8 figures (30 Million USD) spread across our Asset E-CLPs and GYD E-CLPs, primarily coming from Ethereum and Optimism. Our Arbitrum pools on the other hand have yet to explode in TVL and usage, as these are newly deployed pools after all. Here, We would like to express our deep wish to scale up our innovations for Arbitrum users with the help the requested ARB incentives that will complement the Gyroscope Points System.
Execution Strategy
- Products:
- One stablecoin E-CLP for USDC/USDT has already been deployed here.
- Additional stablecoin E-CLPs for GYD/USDC and GYD/DAI (or similar) will be deployed
- One LST E-CLP for wstETH/rETH (or similar) will be deployed
- Resources: new pools will be calibrated & deployed by FTL Labs, the team currently building out Gyroscope. FTL Labs and the Gyroscope community will also promote the pools on social media and through AMAs, create Dune dashboards to visualize the pool performance, and organize relevant AMAs.
- Use of funds: the monthly budget will always be fully distributed to currently live pools and will be added to pools in weekly tranches. Currently there are 10 asset E-CLPs and 4 GYD E-CLPs.
The Current Asset E-CLPs on Arbitrum are the following:
- USDT/USDC Pool
- Frax/sFRAX
Additionally the following pools will be deployed very soon after the Gyroscope Points System is introduced this week.
- aUSDC/aUSDT (boosted E-CLP)
- aUSDC/GYD, aUSDT/GYD, aDAI/GYD (boosted E-CLPs)
- wstETH/aWETH, rETH/aWETH (boosted LST E-CLPs)
- LST/LST pairs and LRT/LST pairs
Risk management: only audited contracts will be used to deploy relevant new pools and disseminate liquidity incentives. The E-CLPs have been extensively audited, while audited & battle-tested Balancer gauges can be used to stream incentives to LPs. Any rate provider contracts used in the pricing of LSTs will be whitelisted by Balancer before usage.
What mechanisms within the incentive design will you implement to incentivize âstickinessâ whether it be users, liquidity or some other targeted metric? [Provide relevant design and implementation details]
In terms of the stickiness of LPs, we have 4 primary strategies that we will be focusing on (Flowcharts for each strategy given lower down in this section):
- Enhancing E-CLPs
- Minimizing Liquidity Withdrawal Friction
- Developing the Gyroscope Points System & Liquidity Network
- Building Deep Trust with GYDâs Automated Risk-Control
To elaborate, we are aiming for E-CLPs to be the most efficient liquidity pools on the market. This will be reinforced with a new âboostedâ type of E-CLP (not announced yet but imminently) that will compound capital efficiency on two fronts: asymmetric concentrated liquidity from E-CLPs and yield from auto-rehypothecation of pool assets to leading lending protocols. This in turn will compound multiple yield sources for LPs into pool shares that can also then be used as productive collateral elsewhere. In further detail, part of the strategy is to make the pools good enough that the friction of removing liquidity positions is not worth the effort. Here:
- We use the ECLP with aToken support to get the organic pool APR as high as possible
- Using the volume/ TVL figures of incentivized pools to get aggregator integrations; permanently boosting volume and thus swap fees (already got aggregator integrations on other chains with this method).
- Get additional volume (swap fees) from a created liquidity network (set of complementary pools where GYD becomes the settlement asset for trades)
Further, the soon-to-be-started Gyroscope points system can reward long-term liquidity provision. Additionally, we expect to build-up a liquidity network that will create organic yield for LPs once sufficiently bootstrapped. We are relying on the two earlier mentioned E-CLP iterations here. Lastly, for GYD, user stickiness comes from trust & the realization that the GYDâs automated risk-control mechanisms work as intended. The primary user is not necessarily an end-user, but can also be a DAO or DAO service provider.
Below are a set of Flowcharts that showcase the above strategies succinctly:
- Enhance E-CLPs
- Developing the Gyroscope Points System & Liquidity Network
3.Minimizing Liquidity Withdrawal Friction
- Building Deep Trust with GYDâs Automated Risk-Control
Specify the KPIs that will be used to measure success in achieving the grant objectives and designate a source of truth for governance to use to verify accuracy:
Key Performance Indicators (KPIs):
| Key Performance Indicators | Sources of Truth | Deadlines |
|---|---|---|
| Reach at least 4800 user count using Gyroscope Protocol on Arbitrum | Dune, Blockchain explorer | 12 weeks |
| Demonstrate TVL capture of at least $10 mil to new E-CLPs on Arbitrum from incentives | Dune, Gyroscope dApp, Balancer subgraph | 12 weeks |
| Demonstrate competitiveness of E-CLPs by having 1 E-CLP receive on average at least â of all of the respective 1inch volume for a given market | Dune | 12 weeks |
| Demonstrate aggregated volume of at least $100 mil using new E-CLPs on Arbitrum | Dune, Gyroscope dApp, Balancer subgraph | 12 weeks |
| Integrate GYD or E-CLPs with at least two Arbitrum-native DeFi protocols | Dune, Third party dApp, blockchain explorer | 3 months |
| Integrate 2 other stablecoin projects to push our ambition to create a stablecoin liquidity network on Arbitrum | Dune, Gyroscope dApp | 3 months |
Explanation of KPIâs
- Reach at least 4800 user count using Gyroscope Protocol on Arbitrum
The current Gyroscope Protocol user count on Arbitrum is 1.200 as per https://dune.com/queries/3478676/5852404. Weâre aiming to bring more than 3600 (+300%) new users to the Gyroscope Protocol with the incentives. Current MAU is 9000 distinct users per month on all chains (https://dune.com/queries/3489187/5865254). In addition to adding ARB incentives to the E-CLPâs to attract new users, we will also marketeer E-CLPs on Arbitrum with at least 5 tweet threads highlighting E-CLP opportunities on Arbitrum and a hosted Twitter/Discord space event.
- Demonstrate TVL capture of at least $10 mil to new E-CLPs on Arbitrum from incentives
Current TVL on Arbitrum is $60.000. With 55% of target grant (137.500 ARB) going to GYD/[stablecoin] E-CLPâs and 35% (87.500 ARB) going to LST pools, together weâre looking to capture at least $10 mil TVL on Arbitrum. 10% of ARB incentives (25.000 ARB) will be used flexibly for other use-cases, for example weâre in talks with silo.finance on Arbitrum for a GYD/USDC lending market. We do not have the exact numbers on past incentivization programs, but targeting 4% to 7% APY (with the successful wstETH-WETH pool as an example: (Gyroscope Protocol) in combination with Aura Finance we managed to get to $6 mil TVL in a single E-CLP on Ethereum. This pool is one among the pools that is being incentivized with BAL incentives.
- Demonstrate aggregated volume of at least $100 mil using new E-CLPs on Arbitrum
Weâre aiming for 7.5% capital efficiency over 3 months with at least $10 mil TVL, allowing TVL & volume to ramp up over time. Currently the top 3 E-CLPâs capital efficiency is ranging between 5% and 20% (https://dune.com/queries/3222574/5388568). With the upper target goal of $15 mil TVL, weâre aiming for ~7.5% capital efficiency each day over the total value locked in E-CLPâs.
- Demonstrate competitiveness of E-CLPs by having 1 E-CLP receive on average at least â of all of the respective 1inch volume for a given market
E-CLPâs have already shown that they are competitive against other alternatives, as demonstrated in https://dune.com/queries/3363427/5640590. We expect E-CLPs to be at least as competitive on Arbitrum.
- Integrate GYD or E-CLPs with at least two Arbitrum-native DeFi protocols
We have already established good partnerships, see examples:
- Balancer (currently E-CLPâs are mostly built on Balancer tech and most E-CLPâs get BAL incentives)
- Aave and their stablecoin GHO
- Soft partnership: Frax Finance (including 1 E-CLP on Arbitrum)
- Redacted Cartel (E-CLPâs for their pxETH pairs)
- BeethovenX (Boosted E-CLPâs on Optimism)
- Soft partnership: Silo Finance is a leading lending market on Arbitrum, currently exploring to onboard GYD as a lending asset
Arbitrum will be the first L2 where the Gyroscope stablecoin will be bridged to. As such, the goal is to integrate with at least two Arbitrum-native DeFi protocols.
Integrate 2 other stablecoin projects to push our ambition to create a stablecoin liquidity network on Arbitrum
E-CLPâs have the unique feature to have their liquidity connected with each other so trades can get routed via multiple E-CLPâs, see USDC-GYD transaction as an example:
Therefore weâre aiming to integrate 2 other stablecoin projects and pairing these with GYD in E-CLPâs boosting overall Arbitrum Stablecoin liquidity. This will help to build up a liquidity network, where GYD becomes a settlement asset connecting various stablecoins.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?
Gyroscope has built, tested and successfully deployed a range of liquidity and stablecoin primitives. These products will offer Arbitrum users and protocols access to highly specialized concentrated liquidity pools that are ideally suited for LSTs and stablecoins.
Over the last several months, Gyroscope has released a number of concentrated liquidity pools (i.e. the E-CLP) that outperformed existing liquidity infrastructure, such as StableSwap AMMs. The E-CLPs concentrate and manage liquidity according to rules specified on a pool level. As such, there are no barriers to entrance. At the same time, E-CLPs are highly customizable and allow, for example, for asymmetric liquidity profiles.
On aggregate, these E-CLP pools have attracted over 10K LPs with a TVL surpassing 40M USD with a peak MoM aggregate growth rate of 40%. The user engagement and trading volume are robust, evidenced by over 13,000 Discord members, 12.4k Twitter followers, and a total trading volume of more than 700 Million USD.
Particularly interesting, Gyroscopeâs concentrated liquidity pool on Optimism has become the default routing target of 1inchâs trade aggregators. As such, Gyroscope infrastructure can help the Arbitrum ecosystem to become more capital efficient, more competitive, and in turn more resilient.
E-CLPs have large market share in the markets they are in now: 1inch tends to route through E-CLPs when one exists (For example: https://dune.com/queries/3003923/4986164).
In Volume/TVL restricted to 1 inch volumes (i.e., competitive order flow), E-CLPs can be very competitive with Uniswap v3. (For example: https://dune.com/queries/3033222/5042155).
Gyroscope is also launching a stablecoin, GYD. GYD directly tackles Arbitrumâs critical need for a robust, resilient, asset-backed, non-custodial, and decentralized stablecoin through GYD. GYD brings with it numerous innovations (with rigorous academic research and live testing backing them) that sets it apart. Gyroscope stands out as being the most promising direction for on-chain decentralized collateralized stables. GYD is now out of beta and testing phases and is expected to launch over the next few weeks.
GYD effectively grants users one-stop-access to a diversified stablecoin portfolio that benefits from a vast array of secondary stabilization mechanisms (e.g. circuit breakers, a robust price-feed design, and, amongst other things, an emergency pricing mechanism). GYD is designed from the bottom up for decentralized risk control.
In short, Gyroscope will be able to use the grant in three unique ways:
- The grant will help to bootstrap new concentrated liquidity pools to a point where they can become self-sustaining by relying on swap revenue, boosting DeFi on Arbitrum to become more capital efficient, more competitive, and in turn more resilient.
- The grant will help to bootstrap some GYD presence on Arbitrum, providing liquid venues to enter/ exit GYD and thus allowing users & protocols access to easy stablecoin diversification on demand.
- Generally speaking, DeFi on Arbitrum is less ossified and requires less TVL for competitive DeFi products. This makes Arbitrum a particularly good option to scale up Gyroscope to a point where E-CLPs can fully demonstrate their competitiveness. Similarly, it will be easier to establish a liquidity network with GYD as a central asset on Arbitrum.
Soon after the GYD and target E-CLPs launch on Arbitrum, Gyroscope will focus heavily on 2 fronts:
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The Integration of GYD and E-CLP LP shares (a new collateral type) into DeFi protocols on Arbitrum.
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Promoting new risk control strategies that are unlocked for stable-to-stable liquidity providers that:
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Significantly reduces depeg risk borne by LPs compared to multi-asset Stableswap pools.
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Maintain high capital efficiency and ability to generate swap fees on volume.
Broadly, these risk-adjusted yield strategies work in the following way:
- LPs spread liquidity amongst separate GYD E-CLPs (e.g., GYD/USDC, GYD/DAI, GYD/USDT etc). This serves to isolate exposure from depeg risks of USDC, DAI, and USDT, making use of GYDâs properties of diversifying as best as possible the risk of other stables and being an efficiently priceable asset.
- Stable-to-stable swaps can connect across different GYD E-CLPs via GYD efficiently using Balancer v2âs gas-efficient architecture. This happens automatically in smart order routing.
- The E-CLPâs capital efficiency boost over Stableswap allows separate GYD E-CLPs to be competitive with multi-asset Stableswap pools
GYD is designed to be the best connecting asset for such strategies, a hub-and-spoke-asset building on new risk management mechanisms; Longer term, LP positions in LST E-CLPs will be integrated into a leverage mechanism for GYD. I.e., there will be a GYD borrow facility against these positions as a more efficient/composable collateral type.
Using Gyroscope products, existing protocols and projects can already lower the costs associated with maintaining liquidity. By improving capital efficiency and reducing costs across the ecosystem, we are allowing protocols to reinvest in themselves and helping to ensure their sustainability through adverse economic conditions.
The symbiotic relationship aligns incentives between CLP liquidity providers and GYD utility will create a positive feedback loop that drives flow, activity, and deep liquidity for LSTs and stablecoins in Arbitrum, rapidly accelerating development and growth of the ecosystem.
Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream? Yes
Section 5 - Data and Reporting
OpenBlock Labs has developed a comprehensive data and reporting checklist for tracking essential metrics across participating protocols. Teams must adhere to the specifications outlined in the provided link here: [Onboarding Checklist from OBL 19] Along with this list, please answer the following:
Is your team prepared to comply with OBLâs data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO? Are there any special requests/considerations that should be considered?
Yes, we do!
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard?
Agree! We have already made a Dune Dashboard to track Protocol Performance for E-CLPâs on other chains. We will make a dedicated Arbitrum Dune Dashboard to track performance of everything we deploy on the Arbitrum Network. Examples of how and which data we track on Dune can be found under section âprotocol performanceâ. Together with the Dune Analytics report every two weeks we can give updates where we are in terms of achieving objectives and KPIs stated in this proposal.
First Offense: *In the event that a project does not provide a bi-weekly update, they will be reminded by an involved party (council, advisor, or program manager). Upon this reminder, the project is given 72 hours to complete the requirement or their funding will be halted.
Second Offense: Discussion with an involved party (advisor, pm, council member) that will lead to understanding if funds should keep flowing or not.
Third Offense: Funding is halted permanently
Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? Yes
Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the programâs funding stream?: Yes