To address the challenges that the DeFi environment brings with it over time, MetalSwap implemented continuously better technical solutions, as well as integrating external services like Chainlink’s to enable conditional execution of smart contract functions and particular features.
As a DeFi building protocol, together with Chainlink's technologies, MetalSwap is enhancing its DAO operations, its DEX liquidity, and mitigating risks associated with liquidations and MEV.
Those challenges are not only MetalSwap’s topics: they represent the common hurdles that any DAO or DeFi builder encounters, while innovating within the ecosystem, making this exploration relevant and insightful for all participants in the DeFi space.
DeFi makes possible great tools, but sometimes a DAO faces some trade-offs.
One of the most popular questions across the whole DeFi environment involves the security, and the cheapness of the layer where governance tokens’ lie, paying fees to do DAO activities.
Let’s say it with different words: ETH is the safest chain, but having governance tokens on ETH is expensive, especially for small token holders.
In fact, the DAO on ETH tends to exclude small token holders by limiting accessibility to the Dao activities.
In the paper “The Hidden Shortcomings of (D)AOs – An Empirical Study of On-Chain Governance”, it is clearly mentioned that transactions that create on-chain proposals are significantly larger than delegations or votes, and are therefore much more expensive. Of course, the number of proposals is much smaller than the number of delegations and votes. The paper gives interesting stats about some of the most famous DAOs:
The Hidden Shortcomings of (D)AOs
Note how Compound is an exception when speaking about the vote/delegation ratio: they experienced a voting cost rising than the overall delegation costs.
Also, ENS printed huge governance costs, with 3,5 M$ - one order of magnitude higher than the others, around 300 k$ . This is very interesting, as explained in the chapter 8.1 of the paper: when the ENS Airdrop took place in Nov 2021, ETH price was particularly high, and so the price of gas. Since delegations had to be made at that precise time in order to be eligible for the airdrop, this resulted in the payment of large sums for governance transactions.
Uniswap took a different approach: unlike ENS and Gitcoin, the DAO did not implement that delegation requirement, so delegations and costs are better spreaded overtime. The spike on Uniswap’s daily delegations recorded in Dec 2022 is surely activity coming from airdrop hunters.
The “Governance costs management” is a hot topic and as you see the ecosystem players make different decisions based on many variables, pointing out the challenge of mainframe’s costs.
Many DAOs have tried to get lower interaction costs by relying on third parties such as snapshot - a platform enabling feeless DAO votations and other tools - that is a sub-optimal solution because things are happening off-chain, but it’s a way to involve also the smallest governance token holder.
Some example of famous DAOs we can find on Snapshot are a clear proof of this:
MetalSwap DAO, just like many other DAOs, decided to enhance its spreading bridging the XMT governance token from Ethereum to the blockchains of BnbChain, Polygon, and later on Layer-2 also to Optimism and Linea.
Available blockchain list - MetalSwap dApp
Bridges
Moreover, bridging has been one of the hottest topic in recent years: while it has been the most requested feature across the whole DeFi sector, it has probably been the most delicate and easily breakable piece of DeFi, due to its particularly challenging task: putting together the info of 2 different blockchains, allowing users to migrate their token from a blockchain to another, in order to obtain cheaper services, or to participate in a particular incentivised feature.
Nowadays, the overall cost of bridging from Ethereum is around 4$ per tx, when usually also a percentage of the bridged tokens are asked to pay the service.
last month
https://etherscan.io/gastracker - now
Also, if a user wishes to bridge back from other chains to Ethereum, depending on bridges’ liquidity, may be a different experience than expected - as you can see here on one of the most known bridges is not a good solution for small token holders:
https://cbridge.celer.network/10/1/XMT
The distribution of XMT's liquidity thus meant that some tokenholders held XMT in their wallets on secondary chains, but could not take part on votations because the DAO's voting power is expressed on Ethereum. We just see together how the common bridge solution was often unsecure and always expensive, so a lot of tokenholders found not-worthy to bridge back to Ethereum and put more skin in the game of MetalSwap’s DAO.
The main example is certainly BNBChain: People went to that blockchain because they could swap the XMT governance token with better tx fees. For this reason some users remained for long time with not-voting and not-working XMT on BNBChain wallets just because the environment was not cheap or secure enough to come back to Ethereum, where XMT official staking pools take place now, and where the voting power can be used to vote for MetalSwap’s governance (also while XMT are staked in the official Smart Pools on Ethereum).
May we have a way to solve this issue? Using Chainlink’s Interchain Messaging Protocol together with Automation, maybe we have a new tool ready to be built.
So why not to create an incentive for these users, developing a new tool to “Recall” XMT to Ethereum’s mainchain - created with both Chainlink’s CCIP and Chainlink automation.
Solution #2 - Recall Pools with Chainlink Automation and CCIP together
The Recall Pool concept is simple:
To create new this tool, a useful gear by Chainlink will be used: the Cross Chain Interoperability Protocol
CCIP (Cross Chain Interoperability Protocol)
“You can use CCIP to transfer data, tokens, or both data and tokens across chains.
Given the inherent risks of cross-chain interoperability, CCIP is built with a security-first mindset. Some security features include a Risk Management Network that monitors for malicious activity, decentralized oracle computation from a wide range of high-quality node operators with verifiable onchain performance histories, and the offchain reporting (OCR) protocol, which already secures significant value on several mainnet blockchains.”
The involvement on Chainlink services happens in the following way:
MetalSwap’s users conducted the test of this feature on Mumbai testnet
After a successful Incentivized Testnet, MetalSwap developed the Recall Pool feature on Binance Smart Chain:
https://app.metalswap.finance/#/recall-pool
Recall Pool #1 - 1M XMT Transmitted
0x8EcF7397fDFAef3f0F0a48fD5A64cF1055116086
Recall Pool #2 - 1M XMT Transmitted
0x17D566102a21b5bCB0053334dc6591E86a3266F3
RP_Input_CA_CCIP - here the automation and interchain messaging happening:
0x65e4FCDf4C0F6D8C5eA4842B5B7f4a9FF68bC0d6
RP_Output_CA_CCIP - here the automation part to for XMT distribution on Ethereum:
0xbaFC86942bB4e73aCcEaF115EFdb91d735Fc842E
With this solution, the DAO has a new interesting way to incentivize people to Recall the liquidity on its original blockchain, so taking part in the Governance voting and the official staking pools.
- The DeFi Foundation
✎ What is MetalSwap?
MetalSwap is a decentralized platform that allows Hedging Contract on financial markets with the aim of providing coverage to those who work with Digital Asset and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators.
With Hedging Contract we enable hedge swap transactions through the use of Smart Contracts, AMM style.
It's great to Hedge the Risk of Price volatility with MetalSwap dApp !