Hop Protocol

Author: shanefontaine
Date: December 5, 2023

Summary

Hop V1 is on track to be deployed on a number of new chains in the Ethereum ecosystem that have already gone through Hop governance. This includes:

• Linea (Live on Nov 6)
• Polygon zkEVM (Successful Snapshot Vote)
• Scroll (Successful Snapshot Vote)
• zkSync (Successful Snapshot Vote)
• PGN (RFC Only, still needs Snapshot vote)

It is likely that the ETH and HOP bridges will be deployed on each of these chains. Given that, the ETH bridges would benefit from having AMM incentives applied to them to help for a seamless Hop experience. The HOP bridges do not use AMMs and will not be considered for these incentives.

This proposal suggests allocating HOP to the ETH AMMs of the new chains to be supported by Hop. If accepted, there will not be a new post/vote for the addition of incentives on the new chains since this is meant to account for all of them.

This post is meant to open up the discussion about the addition of incentives on these chains and their respective amounts.

Proposed Amounts

This proposal seeks to set up an incentive program for the ETH AMM on Linea, Polygon zkEVM, Scroll, zkSync, and PGN. The incentive values below were calculated by looking at the TVL of each chain and comparing it to the TVL of Optimism and multiplying that ratio with the HOP incentives on the ETH bridge on Optimism to derive a value. A multiplier of 3x was added to account for the potential growth of these chains given that they have been live for far shorter than the reference chain, Optimism. The exact formula used is:

HOP Incentive Amount = (Chain TVL / Optimism TVL) * Optimism ETH Bridge HOP Incentives * 3

Using the TVL data from L2Beat on December 5th, 2023 and applying that calculation to each chain, we get:

Chain	TVL (Million)	HOP Incentives / Month
Optimism	$4,130.00	346,800
Linea	$175.00	44,085
Polygon zkEVM*	$114.00	28,718
Scroll	$42.90	10,807
zkSync	$536.00	135,025
PGN**	$1.53	385

*The original Polygon zkEVM proposal asked to reallocate 15% of the current Polygon PoS chain’s incentives to the Polygon zkEVM chain. This will be applied automatically, as it has already been voted on, but is not counted in the numbers from this proposal. With these additional 15%, the number of HOP incentives distributed on Polygon zkEVM becomes 60,968 per month.

**It is expected that the TVL of PGN will drastically increase prior to Hop support so that the effort/time/cost of supporting the chain makes sense for the entire Hop ecosystem. The support of the chain must also pass a Snapshot vote.

These values should give the AMM on each network the ability to build up liquidity for an awesome Hop experience. Summing all the new incentives results in 219,021 additional HOP distributed per month, or 2,628,252 per year (0.263% of the total supply). However, it is expected that (1) some of these chains will not be live for a few weeks or months, and (2) when they are live, these will only be live for a few a short distribution cycles until the release of V2.

It is important to note that Hop V2 is coming soon. The system is set up in such a way that direct incentives will be far less important to the health of the system and thus this current incentive system will not apply for Hop V2. These proposed Hop V1 incentives will only be in place until V2 is fully live, meaning that these incentives will only be distributed a small handful of times.

Timeline/Next Steps

• This RFC will last a few days in order to gather any appropriate discussion or feedback.
• After discussion and feedback, a delegate will post this proposal to Snapshot.
• If the Snapshot vote passes, AMM incentives for the ETH bridge on these chains will be automatically applied when the chain is supported.