saddlefi

Summary

Build a partnership between Saddle and Perpetual protocol through a token swap as well as allocating SDL and PERP rewards to liquidity mining on Perp V2.

Abstract

Perpetual Protocol (Perp) is a decentralised perpetual futures exchange that recently deployed Curie, their V2 on Optimism. V1 of Perpetual Protocol saw over $40b in volume traded on a non-incentivised basis.

This partnership brings added utility to Saddle LP tokens by allowing them to be used as collateral or as credit lent to Perpetual Protocol’s market making entity for yield. Perpetual Protocol benefits by having a partner with deep stablecoin liquidity on Optimism (a prerequisite for our multi-collateral functionality) as well as the ability to utilise interest bearing stablecoins as collateral.

Motivation

There is currently no dominant stableswap provider on Optimism as there largely has not been the demand for this. Additionally, there are currently few use cases for Saddle LP tokens. Increasing optionality and potentially yield for LPs increases the incentive to LP with Saddle in the first place.

Specification

To provide some context, we have recently published our proposal of what the next version of tokenomics of Perp looks like (Proposal: Perp V2 Tokenomics - Proposals - Perpetual Protocol 2 )

At high level, there are 2 programs that make things interesting:

1. Liquidity Acquisition is a method for the new market making entity to borrow stables and other assets for the purpose of market making
2. Liquidity Mining is a method to incentivise market makers to utilise a specific type of collateral

On Perp’s end, we would like to deepen the Saddle<>Perp relationship by aligning incentives in our liquidity mining initiatives. Specifically:

1. The SDL LP token (the specific LP token(s) to be determined at a later date) vault would receive a certain amount of PERP depending on the vePERP gauge weekly vote. These incentives occur independent of the token swap.
2. We will then swap for SDL <> PERP (i.e. SDL treasury receives PERP)
3. Market makers who deposit and use SDL LP tokens as collateral will receive these SDL rewards in addition to PERP rewards emitted to the gauge.

The end result is that Saddle LPs will be able to get more utility out of Saddle LP tokens by being able to stack lending yields (or to simply borrow with Saddle tokens as collateral), PERP rewards, and SDL rewards.

Token Swap

We’d like to deepen the relationship between Perp and Saddle by proposing a $2M token swap of SDL and PERP. This swap is to be done using a 7d TWAP price found using CoinGecko and executed as soon as SDL is transferable.

The reasoning behind this is as follows:

• An early token swap will allow for Saddle treasury to hold PERP which can then be locked up for vePERP and guide emissions to the Saddle vault on a weekly basis.
• Additionally, PERP plans to utilise the SDL by distributing it to Saddle LP stakers in Perp’s vaults.

Liquidity Mining Incentives

As part of the liquidity mining program listed above, we propose that the Saddle treasury allocate $2M SDL to start with for liquidity mining token swap.

For: Swap $2m worth of SDL for an equal dollar amount of PERP with the intention that Perp will add a Saddle LP token vault to their gauge further incentivized with the SDL from this token swap while Saddle will stake PERP for vePERP to incentivize the Saddle LP token gauge.

Against: No change