SECTION 1: APPLICANT INFORMATION
Applicant Name: @zing
Project Name: Sweep Protocol
Project Description:
Sweep Protocol provides a dollar yield coin that is designed to replace zero-interest dollars in AMMs, wallets, and other software applications. It runs a unified money market across seven blockchains with a home base and governance on Arbitrum. It funds collateralized lending in DeFi and CeFi, and is optimized for lending against tokenized securities. Sweep has a long term focus on making DeFi competitive with CeFi for core banking services.
Team Members and Roles:
Andy Singleton: Founder and architect
Maxi: Tech lead
Pablo: Programmer
Andy2: Security and financial engineering
Player1Taco.eth: Community
Project Links:
- Website: https://www.sweepr.finance
- Docs: https://docs.sweepr.finance
- Github: SweeprFi · GitHub
- Twitter: Sweep Protocol (@SweeprFi) / X (twitter.com)
Contact Information
Point of Contact: Andy Singleton, @zing
TG handle: zingle
Twitter: andysingleton
Email: andy@singleton.ai
Do you acknowledge that your team will be subject to a KYC requirement?: Yes
SECTION 2a: Team and Product Information
Summary of protocol goals
Sweep is designed to be a decentralized bank that implements core services such as savings accounts.
Liabilities: Borrowers mint SWEEP coins as a liability. The protocol charges interest by moving USD target price for repayment. SWEEP is sold and redeemed in AMMs, such as a Balancer stable pool on Arbitrum. The SWEEP coin moves through LayerZero and AMM arbitrage to link multiple chains in a single money market.
Assets: Sweep funds collateralized lending through vaults called Stabilizers. They can provide margin funding for tokens, DeFi assets, or tokenized securities. Stabilizers have variable call times. Currently, they allow up to seven days to settle a securities trade, and the protocol promises to be able to return all assets within seven days. Over time the protocol should be able to provide longer-duration, more useful money.
Decentralization: The protocol can decentralize by pushing responsibilities to borrowers. Each vault is controlled by a single borrower. The borrower is responsible for providing junior tranche capital, qualifying to buy securities or other assets, making allocations, and harvesting rewards. Sweep gives users a simple process to design a new asset Stabilizer and propose it to receive a loan allocation.
Team experience:
Andy and Maxi worked together to build Assembla, a SaaS company which served 100K teams and was sold to PE. Andy had exits with SNL Securities, PowerSteering Software, and Assembla. He started working on tokenized securities with the launch of Aboveboard in 2018.
What novelty or innovation does your product bring to Arbitrum?
Arbitrum will benefit from this grant if it gets more money market providers, and it gets assets in a form that is accessible to DeFi.
In this grant application, we propose to drive demand for the use of RWA securities on Arbitrum. Sweep is uniquely positioned to do this with Stabilizer vaults and asset relationships that can precisely target the assets that we want to bring to Arbitrum.
Sweep is optimized to provide margin funding for tokenized securities.
- It improves compliance by providing a single qualified buyer/borrower for each asset
- It can allow up to 7 days to settle a trade. Time to call money is set on a per-asset basis, and can be extended to accommodate longer and more useful loans.
- The team works with asset providers to provide a smart contract interface for redemption. This sells the assets in large off-chain markets rather than small on-chain markets. Although we consider this a requirement for usability in DeFi protocols, we have found that providers often resist this request.
Is your project composable with other projects on Arbitrum?
Yes. Sweep increases cash efficiency for swappers and liquidity providers by replacing zero-interest dollars in Arbitrum AMMs such as Balancer, Uniswap, Curve, TraderJoe, and PancakeSwap. Sweep can provide margin funding for DeFi strategies on Arbitrum, and most importantly, for RWA securities deploying on Arbitrum.
Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?
Yes. For example, FRAX and sFRAX have a similar deposit structure and placement in AMMs. Sweep has a unique focus on expanding placement of underlying assets and expanding the usefulness of its lending.
How do you measure and think about retention internally? (metrics, target KPIs)
SWEEP is designed for automation and long-term embedding with its promise of a savings coin that does not require staking or reallocation when the business cycle changes. How much of it is embedded with protocols, DeFi pools, and wallet “sweep account” automation?
Relevant usage metrics:
We propose to focus this grant on the number, usability, and asset volume of tokenized securities.
The following metrics are useful for measuring the performance of the protocol:
- TVL. How much SWEEP is borrowed to fund assets held in Stabilizer vaults on Arbitrum?
- SWEEP placement. How much of the SWEEP savings coin is held on Arbitrum?
- Spreads. Are wholesale borrowers able to attract deposits and still make a profit with their assets?
- Cash efficiency. One core economic challenge in cash management is keeping enough cash available for redemption, while keeping most of the cash invested in interest-earning assets. Sweep’s cash drag is simply the USDC that provides purchase and redemption routes in SWEEP/USDC pools.
- RWA assets
The protocol includes elements of Lending, CDP, and Yield from the OBL list. We will submit a curated list of the most relevant metrics from these categories.
Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan:
Yes
Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal?
No
SECTION 2b: PROTOCOL DETAILS
Is the protocol native to Arbitrum?
Yes. The protocol was first deployed on Arbitrum. Governance and rate setting takes place on Arbitrum. Governance and rate setting transactions are distributed to other blockchains through LayerZero messaging.
On what other networks is the protocol deployed?
Ethereum, Binance Smart Chain, Polygon, Optimism, Avalanche, Base. These deployments form a single money market that is linked by AMM arbitrage, and fast bridging of the “omnichain” SWEEP token.
What date did you deploy on Arbitrum mainnet?
23 August, 2023 - Arbitrum Transaction Hash (Txhash) Details | Arbiscan
Do you have a native token?
Sweep Protocol has tested governance with a private distribution of SWEEPR tokens. Users can find out more about the future community distribution and tokenomics here: Governance | Sweep Protocol
Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run?
None
Current Incentivization: How are you currently incentivizing your protocol?
Not incentivized
Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program?
No
Protocol Performance:
The protocol has operated reliably with adaptive pricing and interest rates across multiple blockchains, AMMs and asset classes. It is not yet attracting meaningful asset volume.
Sweep provides an analytics API that returns information for all chains including volume, pricing, all assets, and events. Code and live version are linked here: Analytics | Sweep Protocol
Protocol Roadmap:
The roadmap focuses on expanding the channels for invisible cash management, and expanding the usefulness of loans to borrowers.
- High yield aggregation. This will be deployed before the end of March and it is likely to move yield to savers to 10% for as long as there is a high demand for crypto leverage.
- SWEEPR governance float. This will activate community governance and rewards.
- AMM rewards for SWEEP/volatile pools
- Sweep classic - a low risk variant of SWEEP that places assets in off-chain and fully-identified systems
- Invisible AMM cash management. Uniswap V4 and Balancer hooks to automatically swap (in bank terms, “sweep”) under-utilized zero-interest stables for SWEEP.
- Real yield stablecoin accounting. Provide a stable version of Sweep that serves as a “real yield” dollar for its host blockchain, adding up the time that a holder has the dollar and making the interest claimable later.
- 30 day terms. Sweep currently promises to return all money within 7 days. As the protocol accumulates more assets in fast liquidity DeFi pools and <5 day tokenized securities, it can extend some money to pools with 30 day redemption terms. This makes the RWA placements more economically useful and increases yield.
Audit History & Security Vendors:
Sweep Protocol went through an audit from Sublime. The report is posted here. No blocking issues were found, and all issues were fixed. The Sweep team includes a risk officer who previously ran a computer security company. Sweep is exposed to risk when it lends against collateralized DeFi strategies. Sweep reduces risk when it lends against off-chain securities, and when it lends (places assets) on fully identified blockchains. Sweep reduces the risk of asset loss by lending to a single qualified borrower for each strategy (removing the risk of oracle and collateral manipulation), and requiring appropriate overcollateralization (stabilizer “equity”).
We intend to offer a bug bounty program and run a crowdsource audit.
Security Incidents: [Has your protocol ever been exploited? If so, please describe what, when and how for ALL incidents as well as the remedies to solve and mitigate for future incidents]
No incidents so far
SECTION 3: GRANT INFORMATION
Requested Grant Size:
12,500 ARB
Justification for the size of the grant
The goal is to incentivize $2M of RWA security holdings on Arbitrum. A typical money market fund needs up to a 5% boost in order to compete for on-chain assets in the current environment. The funds required to achieve a 5% boost on $1M for one fourth of a year are $2M*.05*.25 = $25,000. At an ARB price of $2, this will require 12,500 ARB.
Grant Matching: TBD depending on SWEEPR release
Grant Breakdown:
We will pay incentives to borrowers that subsidize holdings of tokenized money market securities, in circumstances where they need to pay more than the USD money market rate for on-chain funding.
We propose that the Arbitrum Foundation should only pay for target TVL that is actually delivered. So, if zero target TVL is delivered, the cost of this grant should be zero. The grant amount will be a cap. This can be implemented by incrementally delivering ARB based on TVL reports, or by getting a refund of ARB based on TVL reports.
Funding Address: [Enter the specific address where funds will be sent for grant recipients]
0x23Ab3E2954Ec5577730B7674f4bA9e78Eb96C4d1
Funding Address Characteristics:
The specified address is a Gnosis safe with a 2 of 3 multisig. This allows for faster operation than the treasury contract controlled by DAO voting.
Treasury Address:
- DAO treasury contract: 0x7c9131d7E2bEdb29dA39503DD8Cf809739f047B3
- Gnosis multisig on Arbitrum, controls protocol-owned assets such as the automated marketmakers: 0x23Ab3E2954Ec5577730B7674f4bA9e78Eb96C4d1
Contract Address:
Existing assets are implemented with a subset of this Stabilizer code and linked in the docs for each chain. Stabilizer contracts will be added as assets are added to the program.
SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES
Objectives:
The off-chain securities system has a much larger asset base than DeFi. Off-chain securities, delivered in the form of tokenized securities, will allow DeFi to absorb a much larger volume of assets and do more structuring on-chain of stablecoins, yield products, and new offers.
Our goals are:
- Increase the number of issuers that offer tokenized securities on Arbitrum
- Make these assets easier to consume in DeFi, with smart contract interfaces for purchase and redemption
- Incentivize the purchase of $2M in tokenized security assets
A typical RWA security is a money market fund that pays a 5% yield. This category has declining sales because on-chain yields are higher. That is why we are recommending subsidies. This is a good time to develop a channel for RWA securities. They will be needed to absorb larger asset volumes as DeFi grows.
Execution Strategy:
Strategies to increase demand for dollar-yield assets on Arbitrum will typically be leaky. DeFi providers with multi-chain strategies can move the dollars to other chains. RWA asset providers will immediately redeem dollars into off-chain accounts. Sweep is proposing a mechanism to lock the targeted assets and their structuring into DeFi products onto Arbitrum.
We propose to offer a subsidy to borrowers that hold qualifying assets in Stabilizer vaults on Arbitrum. Borrowers can claim ARB rewards equivalent to the difference between the short term USD treasury interest rate, and the SWEEP interest rate, plus 1%. This would be calculated over the two week period prior to the time of the reward.
Total rewards distributed in each two-week period will be capped at 1/6 of the grant amount in total. Unused rewards in each period will be either unclaimed by the grantee, or returned by the grantee.
What mechanisms within the incentive design will you implement to incentivize “stickiness” whether it be users, liquidity or some other targeted metric? [Provide relevant design and implementation details]
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.
- Number of RWA assets available in a DeFi-friendly form
- TVL of those assets in Stabilizer vaults
Grant Timeline and Milestones:
Sweep principals will work to increase the supply of RWA assets. We will push through these steps in April.
- Identify qualifying assets. These should be tokenized securities with ownership restrictions. A pipeline of RWA providers has already committed to Arbitrum deployment
- Contact qualifying asset providers. Ask them to deploy on Arbitrum. Help them improve their products with on-chain vaults and (important) on-chain redemption workflows.
- Qualify borrowers
- Fill the funding pipeline by advertising SWEEP with the newly improved risk/return profile of off-chain money market yield, plus on-chain rewards. These funds can easily travel from SWEEP purchases on other chains.
This plan has a risk of not delivering the target assets. However, under the pay for performance plan, this risk does not cost the DAO anything.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?
Sticky value will be measured by the availability of money market assets, and their usability in DeFi. The incentive period will add to these volumes by:
- Attracting issuers, who will have an incentive to expand their offerings in the on-chain and Arbitrum channel
- Attracting buyers, who will have gone through the qualification process with issuers
- Allowing yield products like Sweep to mature on the “Lindy” curve and deliver better risk-adjusted returns at lower rates.
- Simplifying the pathway for other protocols that use tokenized securities and assets from off-chian markets. Sweep will help issuers structure on-chain vaults and redemption processes for
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
Is your team prepared to comply with OBL’s 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. The team will comply with the reporting requirements.
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard?
Yes. We will add relevant metrics to the analytics API. We will provide a Google sheet that parses the resulting JSON and displays the results in real time. We will snapshot this report and add commentary for bi-weekly reporting.
Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? This report should include summaries of work completed, final cost structure, whether any funds were returned, and any lessons the grantee feels came out of this grant. Where applicable, be sure to include final estimates of acquisition costs of any users, developers, or assets onboarded to Arbitrum chains.
Yes
Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?: Yes