SIP-00XX: Optimize Spice Earning by Depositing 20% of SOV on Segment Finance

[Peter]

SIP-00XX: Optimize Spice Earning by Depositing 20% of SOV on Segment Finance

Background:

Following the approval of SIP-0079, the Adoption Fund’s SOV is staked to harvest BOB’s Spice Points, with an option to renew staking every two weeks. The rewards generated by this strategy should be used to incentivize users to provide liquidity on Sovryn’s AMMs on BOB.

Pursuant to the partnership announcement of May 13th Segment Finance deployed a money market for SOV enabling it to lend SOV and to earn boosted Spice Points on it.

Description:

During the BOB’s Fusion 2 Sovryn could already harvest around 1.2B Spice with the staked 13,8M SOV. The average Value of deposited SOV was around 22M $USD. In the same time period Segment Finance could generate for its users 1.9B Spice having only around 2,2M $USD as TVL value - so basically 15 times more spice per $ than the Adoption Fund’s SOV. Responsible for this over-proportional result was mostly the extra amount of Spice Segment had earned for its extraordinary user activity.

This SIP proposes that 20% of the Adoption Fund’s SOV totalling of 3,864,000 SOV be transferred (lend) into the Segment Finance Contract, creating an opportunity for Sovryn to receive over-proportional spice earning. Assuming a constant spice distribution, the average spice earnings rate can be more than tripled this way, compared to the current status.

The deposit should remain there for the duration of 2 weeks with an option to renew every two weeks and if applicable to increase the staking amount. In case Sovryn governance decides to not to extend the lending period, the SOV will be withdrawn and returned to the Adoption Fund immediately. The harvested Spice amount on Segment Finance is distributed daily, the earning results can be tracked both on the BOB’s and Segment’s dashboard.

Risks:

Like every other DeFi platform, Segment Finance involves smart contract risks.

However, according to Defillama Segment Finance is currently the 3rd biggest protocol on BOB, 30% of the BOB’s users are interacting with Segment on a daily basis. The protocol utilizes the battle tested codebase of Compound V2 and has gone through multiple audits. On top of that, Segment has an active bug bounty program on Immunefi and an active security monitoring system. Apart from the external solutions, protocol operations are being managed through a multisig wallet with a 48 hours timelock.

The risk is also mitigated by the fact that the SOV deposited into the Segment’s Contract will be SOV bridged to Ethereum (eSOV) and in the event of a loss of funds, the assets can be black listed and the original SOV (on Rootstock) will not be affected.

Proposed Changes:

Transfer (Lend) a total of 3,864,000 SOV from the Sovryn contract on BOB (0xc17c6462ceafe9a8819258c6ba168bef5544fc21) to the Segment Finance SOV contract (0x2136EbC7Be1E65fDB4A407Ac2874b3d6850A64c2)

License

Copyright and related rights waived via CC0.

[Sacro]

Hi,

thanks for your proposal.

A lending pool for $SOV was discussed here before. See

Potential SIP: Create a lending pool for $SOV

Hello Sovryns, in this thread I would like to take up the discussion from the Telegram channels and propose the creation of a $SOV lending pool. In addition, i propose to bootstrap the $SOV lending pool with (enter 6 digit number) $SOV from the adoption fund to ensure liquidity. Explanation: One-sided markets do not work. Sovryn has already had to painfully realize this. Zero was such a one-sided market. There was an imbalance due to insufficient liquidity and bridging opportunities. The ZUS…

TLDR of that discussion: A lot of concerns, the Sovryn community did not have much interest in allowing shorting of $SOV.

While i am in favour of a two-sided market for $SOV; allowing both longs and shorts; i am not in favour of incentivizing shorting of $SOV with our adoption fund on other platforms.

Best regards,

Sacro

[Phrygian12]

BOB has been very underwhelming. I’m not certain why we would risk more money on BOB. Spice points seem meaningless, and I can’t figure out a reason to want them.

I can’t remember who suggested we get back to working on BitcoinOS, and stop tinkering with BOB, and at the time I didn’t agree with them, but at this point… Maybe we should put our resources and attention to something that actually bears fruit.

[pugsley]

Why should SOV spend focus on earning spice? Especially, when

• in Season 1 locking in $1MM for a month generated 30M Spice
• In Season 2 spending $500-$1000 in gas generates 30M Spice

[Album] imgur.com

Who’s to say that in Season 3, creating a new dApp, or something elsee, won’t generate 1B Spice points? Where does it stop?

I think it’s better to move away from generating Spice as a goal vs chasing a moving target.

[AllRoadsLeadToSovryn]

The whole spice earning narrative is nothing but hot air.
You put in a lot of valuable time for a month in season 1
only to get annihilated by mega inflation of spice in season 2.

There is clearly no plan what spice should be and do.

BoB activity has not been impressive so far & that spice earning joke
must have played a major role.
Many users have been taken for a ride by BoB, Sovryn & other dapps
and they are not stupid and will not forget.

If I was a new user I’d have packed my bags and left as well.
But I am in it for years and I will until it plays out or not.
I say give Sovryn users on BoB real rewards for staking & focus
on the functionality of the dapp.

It is not yet any fun to use & has many glitches
I regret having staked my SOV on BoB hastiliy.
No rewards & an asset that was tanked on purpose.

Tldr
Don’t put a dime on Segment for the sake of just earning Spice.

[Hyde]

@Peter - I am opposed to this proposal. There are some of the issues already mentioned, but what I see as a major obstacle, is Liquidity Risk. I am afraid that if a big portion of SOV would be borrowed, we might not be able to recieve all lended out SOV when there will be need for it. We need to keep in mind that these funds belong to Sovryn’s Adoption fund. The other thig that I would be afraid is Flash Loan attack. Another concern is that these funds would be transferred from Sovryn’s TVL to Segment Finance’s TVL. Is that what we want?

One other thing - Sovryn also offers borrowing and lending services. While currently available only on RSK, I believe it will soon be available on BOB as well. Is it beneficial for Sovryn to support competitors?

BTW - how did they earn so many points? I have my concerns if that was not abusing the points system. Sovryn has better and safer options to harvest Spice.

[btcLegosi]

A minor detail here responding to Hyde, but refraining from giving a value judgment on the proposal.

Competition should exist in a market that drives us to innovate, a free market. Strategic alliances are good if they are measured and mediated.