This proposal defines multiple activities that aim to build momentum in zkEVM, including the native launch of a new Idle primitive on this network.
This document points out how Yield Tranches create new risk-adjusted opportunities for LPs, and their combination in a Balancer Boosted pool allows protocols to open new gateways to onboard liquidity. Lastly, Harvesting Vaults remove farming inefficiencies and optimize AMM LPing.
Proposed activities are planned to be completed in less than four months.
Idle and Polygon announced the B2B incentive program to foster DeFi integrations and Institutional onboarding, which resulted in ~276k MATIC transferred to Idle DAO multisig. Following the original agreement, Idle allocated incentives exclusively to B2B players, identified as DeFi/CeFi integrators and institutional liquidity providers.
Many ecosystem integrations were completed (Harvest, Pods Finance, Ricochet, Degen Dogs…), but the most notable high-effort B2B collaborations have been set up with CelsiusX, Clearpool, Swissborg, and Lido.
While the ecosystem expansion is still continuing and developing, today, Idle DAO has retained ~267k MATIC (97% of the initial allocation), demonstrating solid and rigorous management in fund allocations.
The combined experience, audacity, skills, and vision of the Polygon team perfectly align with our DeFi ethos, initially carried out by Ethereum. The team is publicly recognized as one of the best in the whole crypto space, closing top-class business deals with prominent TradFi and digital companies worldwide.
In addition, Idle Leagues, composed of teams of quantitative researchers and DeFi engineers with backgrounds in arbitrage, treasuries, risk management, volatility products, and crypto-assets, can create the bedrock for DeFi to serve as the financial rails for 1+ billion users and bring long-term sources of yield paired with a safe and intuitive user experience.
From the technical perspective, several solutions (alternative L1s and L2s) are available today to face limits imposed by L1. The features introduced by zkEVM represent a novel approach to those challenges, coming along with a trustless setup and deep connections with key ecosystem players.
Consequently, the conditions presented above create the opportunity to make zkEVM the preferred scalability solution for the upcoming Idle deployments.
When a new chain is launched, early adoption is mostly driven by performances that are above the market to compensate for risks related to short longevity and potential undiscovered vulnerabilities. Overperformances are usually generated via incentives, representing a direct cost for early-stage protocols deployed on the new network.
Extra returns do not always guarantee liquidity scaling, as security concerns can prevail over financial aspects. Risk-mitigation tools can smooth the onboarding process, enabling users to pick their preferred risk-return solution.
Yield Tranches are a DeFi primitive that segments yields and risks to appeal to a diverse range of users, offering two risk-return profiles: Senior and Junior tranches. Senior holders withhold part of their yield in exchange for funds coverage. That yield is routed to Junior holders in exchange for the coverage given to Senior funds. The introduction of Yield Tranches to bootstrap networks helps to face challenges mentioned above, creating protected and boosted strategies.
Yield Tranches application is also extended to on-top integrations like Balancer, which approved the proposal to deploy its protocol on zkEVM. It becomes the most trusted AMM available on that layer. Idle already collaborated with Balancer, releasing the second-ever Balancer Boosted pool.
New protocols can autonomously apply for a Balancer Boosted pool, but the use of Yield Tranches as underlying yield source provides the following benefits:
- simplified integration, as Balancer already supports Yield Tranches’ infrastructure;
- creation of two segregated risk-adjusted pools instead of one, as they can aggregate assets with only Senior or Junior profile (e.g. DAI/USDC/USDT Senior or DAI/USDC/USDT Junior);
- matched incentives and growth efforts from Idle DAO.
Lastly, AMMs like Balancer perfectly fit the latest product that Idle plans to release: a Harvesting Vault infrastructure (official name TBD) to build automated strategies that compound accrued rewards, increasing the principal. The strategy claims tokens and harvests them to increase the underlying asset, generating trading volume while amplifying yields for final users. This mechanism is also beneficial for integrators, as they can connect their product with a vault that requires low dev efforts and maintenance.
By achieving the above goals and developments, we want to make Idle the zkEVM’s leading protocol for risk-managed yield strategies. With our first 2 core products, we want to bring to zkEVM the building blocks of DeFi portfolios that can perform across market cycles. Our mission is to scale with zkEVM the access to long-term sustainable DeFi yields.
This section identifies technical and commercial activities aimed at building ecosystem connections and expanding the range of services accessible to zkEVM users.
There are two main development working areas, each with its own scope and tech specifications. Considering how fast market needs and trends evolve in crypto, Idle DAO will have the flexibility to dynamically rank working areas according to market priorities and ecosystem updates.
Activities related to Yield Tranches
- identify an underlying yield source compatible with Yield Tranches infrastructure
- integrate targeted protocol into Yield Tranches
- deploy Tranches infrastructure and integrated protocol in zkEVM
- launch zkEVM support on Idle website and integrate released Yield Tranches
Activities related to Ecosystem Development can amplify the outcome, such as the deployment of Balancer Boosted pool that uses Yield Tranches as underlying yield source.
Similarly, the onboarding of high-yield protocols like Clearpool would create the highest grade of financial sustainability without external incentives.
Activities related to Harvesting Vault, a new zkEVM-native primitive
- identify a yield source compatible with Harvesting Vaults
- develop, peer review, and test Harvesting Vaults factory
- integrate targeted protocol into Harvesting Vault
- integrate released Harvesting Vaults into Idle website
All activities are expected to be completed in less than four months since the parties agree on this plan.
These product releases are reinforced by business and communication activities, such as:
- focus marketing and social media activities on promoting zkEVM as the reference L2 chosen by Idle;
- engage with Idle ecosystem partners to foster protocol/liquidity deployments and design new integrations;
- engage with institutional investors to bootstrap and grow zkEVM liquidity;
- join AMAs/Spaces hosted by Polygon or zkEVM partners;
The budget request is 125k $MATIC, with no transfer required from Polygon team because Idle DAO already controls these funds. Remaining funds will be used to maximize the traction of released products, and their allocation will be mutually agreed between Idle and Polygon team.
When activities assigned to a working area are completed, 50% of the budget request is unlocked and assigned to Idle DAO.
Polygon team is informed about this proposal and the next step is the formal approval by Idle DAO.
We are going to leave this thread open for comments regarding this proposal and, if there are no objections, we will open the temperature check.