Improvement Process - OP Grant Final Report

MetalSwap Improvement Process [BLOG](1)

In May 2023, MetalSwap won an OP token grant directly from the Optimism foundation after applying for the Grant Cycle 11°. As a result, MetalSwap obtained 30k OP tokens, which it decided to distribute entirely to MetalSwap users, specifically 20k to those who opened hedging positions and 10k to those who performed liquidity providing actions on the dApp.

On December 23, all liquidity providers were able to redeem their OP rewards, bringing this incentive initiative closer to its conclusion.

The goal of today's article is to complete a report on this incentive operation on the Optimism blockchain, analyzing all the main statistics about the dApp, such as the number of open positions, the addresses that interacted, and much more.

OP token distribution

As mentioned in the introduction, 30,000 OP tokens were to be distributed and at the time of writing this article, most of these have been distributed to users who have used MetalSwap on the Optimism blockchain in the last 6 months.

Specifically, the entire allocation of 10,000 OP tokens for liquidity providers has been fully distributed. Regarding the 20,000 OP tokens set aside for users who opened hedging positions, 15,000 have already been distributed in the recent months. The remaining 5,000 tokens are still in the distribution pool and are scheduled to be dispersed gradually over the coming months.

Benefit of this Grants

The incentive distributed by the dApp has certainly helped to attract more users, both in terms of opening positions and for LPs within the Optimism blockchain.

Specifically, over these 6 months, 1059 hedging positions have been opened on the three different available assets (ETH, OP, and WBTC), with a total of 234 addresses interacting with the smart contracts.

This was an incredible step forward compared to the results previously obtained on the ETH mainnet, where MetalSwap had garnered significantly lower results.

In some situations, the grant even opened up the possibility for farming operations within the dApp, as the premium required for the position was less than the liquidity reward obtained by the user.

The TVL (Total Value Locked) grew rapidly thanks to the incentives and exceeded over 250k in various cryptocurrencies deposited by liquidity providers.

Premium collected and others Stats

As said before, thanks to the grant in OP tokens, opening hedging positions on MetalSwap's dApp was much more economical since, in some situations, the liquidity rewards covered even 100% of the premium required for that specific hedging operation. This led to over 1000 hedging positions opened on the dApp and a premium collected of over $24.000, distributed in various cryptocurrencies available within the dApp on the Optimism network, including OP, USDC, WBTC, and ETH. According to the whitepaper, 80% of the premium collected by the dApp is allocated for the buyback of the XMT token, and this process has already started and will continue in the following months.

Thanks to the brand new Dune dashboard dedicated to MetalSwap, we can also analyze how users behave during these months when the grant was being distributed. The majority of the positions, corresponding to 65.1%, were opened on the OP token. The second most used asset was ETH with 31.1%, and finally WBTC, which accounted for 3.8% of all hedging operations. 

Most users opted for short positions, meaning positions that profit when the reference token decreases in value in dollars.

Users, in addition to OP token rewards, could also participate in various swap competitions that took place during almost all the months of the incentive derived from the grant. $4700 USDC were distributed to those who managed to rank, providing an additional incentive to use the dApp.

Secondary benefit of this grant

This extensive use helped the team collect a lot of data that will be very valuable in the future development of the dApp. Specifically, the mathematical restructuring received a significant boost as the data collected greatly facilitates the analysis of the mathematical structure. Also, in terms of UX, there will be an improvement since, over these 6 months, the team has learned a lot about the needs of the users. 

The liquidation system for hedging swaps worked extensively during this period and was a very important test to improve the dApp in all aspects. 

Lastly, let's not forget that also the XMT token was distributed to all those who opened positions within the dApp, which led to testing a situation of double rewards where the OP token was also subject to a decrease in its issuance based on the balance within the pool. Testing a sophisticated system of double rewards shows that it is possible to have decreasing and more sustainable incentives that tend to increase the retention effect.

Final thanks

MetalSwap is proud to be part of the Optimism ecosystem, which is increasingly establishing itself as one of the most important and used Layer 2 solutions in the entire ETH ecosystem. The Optimism foundation recognized this grant to MetalSwap as it saw great potential in this project, and we can only thank them for the trust they have placed in this project.

- The DeFi Foundation


✎ What is MetalSwap?

MetalSwap is a decentralized platform that brings Hedging Contracts 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 MetalSwap we enable Hedging Contracts on the DeFi field, AMM style.