In a previous article here, we announced the official launch of MetalSwap's Hedging Swap product on the Optimism Mainnet. This significant milestone has opened up a new era of decentralized finance (DeFi), offering swappers a more cost-effective product and the opportunity to hedge on a new asset, the Optimism Protocol governance token, OP.
A GranT Opportunity: 30k $OP Distribution
MetalSwap has been awarded a grant directly from the Optimism Foundation, enabling us to distribute 30k $OP to users of the tool and liquidity providers. To celebrate this achievement, we have developed a new feature to distribute OP tokens in a fair and evolved way. This feature aims to:
- Incentivise the use of Hedging Swaps and Liquidity Providing on the Optimism Chain.
- Reward the most active people in the dApp.
- Allow the incentive to drop slowly, creating a smooth transition between the incentive and non-incentive period.
-Retain a high number of dApp users when the incentive is over.
So, how did we achieve these goals? Let's delve into the details.
Hedging Swap Liquidity Reward - 20k OP
MetalSwap OP Dapp
Hedging Swaps are designed to have a Liquidity Reward in XMT. Thanks to the grant, we will be able to distribute 20k OP to those who use this instrument. The distribution logic is simple: users will receive an amount in OP based on how much the individual transaction paid in Reward. For example, if you pay a counter-value of $20.00 in Premium, you will receive 20 OP.
However, there are two factors that will influence the number of OP distributed: The number of OP in the distribution wallet: As the OP are distributed, the number of tokens within this wallet will decrease, and therefore the incentive will decrease accordingly. Initially, there will be 8k OP in this wallet. As the Optimism Foundation distributes 40% of the Grant and then the remainder according to milestones that the project has to reach, the rest will be added later. This mechanism will create two interesting effects: decreasing the incentive over time in a decreasing and smooth way that will help retention, so that more people will use the tool at the end of the distribution.
The Balancer: The Liquidity Reward is influenced by the Balancer. The more positions are opened in one direction, the more the Liquidity Reward will incentivise the opening of hedges in the other direction. This mechanism helps to balance the liquidity of the system. This will then also influence the distribution of OP. If the Balancer shows an imbalance of opening positions, it will be more convenient to open a position towards one direction than the other because you will receive more OP.
Liquidity Dapp Balance
These mechanisms will reward the most active people in the dApp by allowing them to take the best possible chances. By the time we have the remaining 60% available, we will fill the wallet which, as explained in point 1, will instantly increase the incentive by increasing the convenience of opening Hedging Swap positions.
NFT Liquidity Providing Reward - 10k OP
OP Liquidity Providing
Each entity that provides liquidity to the MetalSwap protocol receives Liquidity Rewards in XMT automatically. When providing liquidity, an NFT is generated representing the liquidity provided.
10k OP will be distributed over six months, ending the 23th dec 2023 to anyone who provides liquidity to open Hedging Swaps. The following assets may be provided: ETH, WBTC, OP, and USDC.
Liquidity NFT Staking
Any Liquidity Provider that also stakes the NFT in the next six months will also have the opportunity to obtain the distribution in OP. As previously mentioned, MetalSwap currently has 40% of the OP available for distribution. So, the distribution has 4k OP available which will be distributed with this logic:
- 666 OP for the ETH Liquidity Providing Pool
- 667 OP for the WBTC LP Pool
- 667 OP for the OP LP Pool
- 2000 OP for the USDC LP Pool
This distribution logic was chosen to incentivise Liquidity Providing that is balanced and functional to the protocol. Each Liquidity Provider supplying each asset will participate in obtaining the relative OP in proportion to the amount of Assets supplied to the total and the time the liquidity remained in Stake.
NFT Staking page
This mechanism will ensure that those who immediately stake their NFTs will receive more OP distributed according to the portion of total Liquidity staked. However, it's important to note that to receive the OP of the distribution, it will be mandatory that the NFT remains in Stake until the end of the distribution. It will always be possible to Unstake the NFT representing the liquidity, but anyone who does so before the end of the distribution will not receive the OP.
When MetalSwap has the remaining 60% of the distribution available, it will provide OP to the pools on a pro-rata basis.
The launch of MetalSwap's Hedging Swap product on the Optimism Mainnet marks a significant milestone in the DeFi landscape. The lower transaction fees and the opportunity to hedge on a new asset, OP, present a unique opportunity for users. Moreover, the distribution of 30k $OP tokens to users of the tool and liquidity providers offers an exciting incentive to engage with the platform.
The MetalSwap team is committed to creating features that incentivise use, reward active users, and retain a high number of dApp users. The Hedging Swap Liquidity Reward and the NFT Liquidity Providing Reward are prime examples of this commitment. By leveraging these features, users can maximise their opportunities and contribute to the growth and development of the DeFi ecosystem.
Join us on this exciting journey as we continue to innovate and redefine the possibilities of DeFi. Together, we can shape the future of finance.
To the MetalSwap
… and beyond!
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-The DeFi Foundation
✎ What is MetalSwap?
With MetalSwap we enable Hedging Swap transactions through the use of Smart Contracts, AMM style.