BarnBridge

The UMA team has graciously accommodated our request to build out a template KPI option program that can be repeated across any number of SMART Alpha pools. Such a KPI option program could be used to bootstrap secondary liquidity for SA assets, making the week-long lockup less intimidating for potential users, and importantly, making it possible for these assets to be further used in lending markets (i.e. you need to be able to liquidate an asset to accept it as collateral) and options markets (e.g. junior positions not volatile enough for you?)

The following link details how the KPI option program would run. Essentially, the program would pay out up to a maximum amount of BOND that is determined by a) the TVL at the end of the program, and b) how often epochs were competitive or not. KPI option tokens would be distributed to users providing secondary liquidity for the junior and senior assets associated with the ETHUSD and BTCUSD pools. The payout function that determines how many BOND are distributed for a given outcome is provided in the link below.

• https://github.com/UMAprotocol/UMIPs/blob/master/Implementations/smart-alpha.md

This signal vote is to determine community interest in providing 10,000 BOND from the DAO to trial a month-long KPI option program. 5,000 would be allocated to ETHUSD and 5,000 to BTCUSD - these figures represent the maximum payout possible. Success of the program would be determined by how much secondary liquidity was attracted. The secondary market of choice for now will be Balancer, as it is possible to neutralize asset volatility if you have a modifiable three-asset pool composed of:

1. Underlying Asset (50%)
2. Junior Asset (50% * Junior Dominance)
3. Senior Asset (50% - Junior Asset Weight)

If the program proves successful, we can look to have a longer one for the ETHUSD and BTCUSD pools, as well as further use the template for joint rewards programs with other communities for their asset’s SA pools. A more formalized Medium post would be published detailing the rewards pilot program should we move forward with this.