Bringing Terra stablecoins to Solana pt. 2 (and beyond)

Background:

Last week, I posted this: Bringing Terra stablecoins to Solana

We received a lot of great feedback. This is a follow-up discussion to address some of those points, and to initiate a discussion about how to best allocate the community fund pool moving forward.

Proposal:

At current prices, there are 73+ million units of LUNA in the community pool, which is ~$400M at today’s price. Even after a substantial percentage of this is used to bootstrap Ozone, we should still have ~$100M left over for community initiatives.

This is a lot of money that is not currently being used for anything. IMO we stand to benefit as a community if we use some of these funds for strategic partnerships with other ecosystems, and the applications that are built on them.

One such example of this is Saber (Saber | Solana AMM), which was brought up multiple times in last week’s post. Saber began liquidity mining incentives last Thursday, and now has $88M in TVL, now the 4th largest dApp by TVL on Solana. The USDC-UST pool currently has $6M in TVL.

Given Solana’s budding ecosystem and strategic importance to Terra, Saber’s increasing role in this ecosystem, and their willingness to work closely with the Terra team, I propose we allocate time-boxed / capped LM rewards from our community fund to the Saber USDC-UST pool.

Benefits:

  1. $UST grows together with growth of other Ecosystems / applications like Saber
  2. For $UST to be successful, we need exogenous adoption of $UST, and not just in Terra ecosystem on Terra blockchain
  3. Partnerships drive awareness of $UST and the broader $LUNA ecosystem, which self-reinforces adoption and strength of $UST. I think of the LM incentives as part marketing dollars, part incentive-alignment with external project teams / users
  4. Initial partnership proposals + LM rewards are time-boxed / capped, which gives both sides an opportunity to evaluate ROI and adjust parameters

Costs:

  1. Nominal, minimal cost as a % of total community pool
  2. Increases circulating supply of $LUNA

Open discussion items:

  1. How much LM incentives does it make sense to allocate to USDT-UST pool on Saber?
  • Mercurial (24,000 LUNA over 8 weeks) can be used as benchmark
  1. Given that there are multiple stablecoin pools on Saber, what would we want to see from the Saber team to make this attractive for $LUNA community?

My hope is that these initial discussions re: Mercurial, Saber can be used to create a framework for how we think about structuring LM for strategic partnerships for community pool funds in the future. Feedback welcome

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Because this is still going to be considered a “Trial Period”, I am not too worried about the LM benchmark of 24k LUNA over the 8 week period. I don’t think anyone would have a problem even if we 10x that number over the same period as long as the Saber team can match incentives and share risk. I would also say that the LUNA community should not bear the majority of risk in deals like this. At this point, UST has a path for growth and adoption regardless of this partnership and we shouldn’t discount that. There should be an incentive for the LUNA community (aside from UST growth) to protect the bottom line. In other words, we should just be careful to not undervalue what UST brings to other ecosystems.

LUNA/UST is the fine girl in the club that everyone wants to talk to.

Hello sers, some context on Saber:

Saber is the leading cross-chain stablecoin exchange on Solana with $100M+ in TVL (as of writing). As Solana’s core cross-chain liquidity network, Saber helps facilitate the transfer of assets between Solana and other blockchains. Market makers deposit crypto into a Saber liquidity pool to earn passive yield from transaction fees, token-based incentives, and eventually automated DeFi strategies.

Saber was launched to mainnet in June. Since then, it has quickly grown to be one of the largest dapps on Solana (currently #4 in terms of TVL). This has been significantly supported by Saber’s existing stable pools for UST and LUNA.

However, liquidity is just the first step. The Saber Labs team is more focused on actually providing utility for cross-chain stablecoins (e.g. UST) and Saber LP tokens (like UST-USDC and wLUNA-renLUNA LP). We’ve been actively exploring ideas with the Terraform Labs team on how we can increase usage of UST and UST-USDC LP tokens by contributing to projects on both Solana and Terra.

On a personal level, I’m a big fan of the Terra ecosystem and the mechanics of UST/LUNA. Terra, and specifically Mirror, is what got me heavily back into DeFi earlier this year.

We’re excited to have this opportunity to engage directly with the Terra community on initiatives to drive UST adoption (not limited to liquidity mining).

2 Likes

This is an excellent proposal.

I don’t think I’m in a position to comment on the extent to which Terra should incentivise LM on Saber, so all I’ll add is that I would fully support a “substantial” allocation (whatever that means to someone more informed), for all the reasons you laid out.

With stablecoins like USDT and even USDC under fire right now, it seems timely to really drive UST adoption into other blockchains, and broader awareness.

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24k Luna seems fine imo for a little tester. What are the metrics measured to determine if this trial is a ‘success’?

Maybe something in exchange could be the Saber team keeps the UST-USDC pair pinned to the top of list?

One concern I have with the effectiveness of these marketing campaigns is there no utility yet for UST on Solana. Are these scheduled to start around the Sol Anchor launch? Maybe a mAsset-UST margin trading on Mango or options on Psyoptions? For it to be an effective marketing campaign ideally there would be rails in place to get them to keep trading with the UST or putting it in Anchor after the incentives run out otherwise that extra liquidity wont be put to use.

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I largely agree with this. I think UST needs pools and liquidity across Solana. This pool should ideally be accompanied by pools for UST + SPL assets along with assets that are Terra-native. Possibly collab with the team at Raydium to achieve this.

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