TIP 48: Liquidity Bootstrappening Part 3: Threshold DAO x Wormhole

Proposals
22

I’m generally in favor of this proposal, I think early liquidity bootstrapping is important for tBTC to succeed.

That being said, I have a few concerns / questions:

  1. Regarding Liquidity Providers terms
    I think that the terms provided for Wormhole’s liquidity providers should be open / generalisable to any liquidity provider that wants to come in and do the same thing in the future. I dont think the terms should be exclusive to Wormhole / Jump / whoever else is involved here.

  2. Regarding Bridges
    While I think Wormhole is a good option, I dont think it should be the only bridge used here. Incentive alignment is important, and IMO the call options are sufficient.

While I understand the desire to not fragment liquidity, I dont think it’s good for tBTC to rely on a single bridge provider for cross-chain distribution. I dont think we can expect tBTC to be widely used if it relies on a single bridge provider, because then, how are we better than Bitgo / WBTC?

Additionally, the whitelisting pre-requisite seems aggressive. No bridge has the same LP partner relationship that Wormhole does with Jump, so IMO the 5,000 BTC cap (~$150M USD) is the wrong way to assess bridges for whitelisting. Instead, bridges should be assessed based on tech / decentralization.

4 Likes
23

Agree with your points @nicepapayas.

Especially point 2 so as to prevent Wormhole from creating a monopolistic position for itself and the protocol becoming overly reliant on a single bridge. Granted Wormhole’s defacto “exclusivity” is for the term of the option but curious to get the community’s input on this nevertheless.

Re point 1, correct me if I’m wrong but I think the terms are technically available to any LP. The proposal mentions “qualified LPs” but not sure what that means in practice and what Wormhole’s whitelisting criteria would be?

3 Likes
24

This proposal has passed the Snapshot April 29th, with the results:

Results:

  • Yes: 1.1B T - 100%
  • No: 0 T - 0%
  • Abstain: 0 T - 0%
4 Likes
25

As part of TIP-48 (Liquidity Bootstrappening, Part 3), a liquidity provider committed to provisioning 25,000 BTC of deposits into the tBTC system. Unfortunately, the liquidity provider has reneged on the agreement, as part of a broader shutdown of their on-chain crypto and DeFi operations. While this is frustrating in the short-term, there is still a clear path forward for aggressively scaling tBTC TVL.

Fortunately, many of the pieces for growth are already in place, including a bond program to build the DAO’s Bitcoin POL and a proposal for tBTC minting rebates.

For the committed 25,000 BTC liquidity provision, the DAO is exploring alternative liquidity providers. If it isn’t able to secure a satisfactory alternative provider, the T tokens earmarked for the liquidity provider’s warrants (~5% of supply) provide a significant amount of optionality. At the DAO’s discretion, the tokens can be used for a large-scale liquidity mining program to encourage TVL growth. If well-designed, it’s feasible this program could be more capital-efficient than the original TIP-48.

In the short-term, the Treasury Guild intends to focus on building base layer (Ethereum L1) demand, liquidity, and yield opportunities for tBTC, which is critical to growing TVL. This means increased incentives on major stableswap pools and onboarding tBTC as collateral for stablecoins and lending protocols like Ajna (WBTC and USDC pools already live), crvUSD (pending), and thUSD (pending launch).

A tBTC-wBTC pair based on the new Curve stableswap implementation is deployed and will be incentivized pending a gauge approval vote. To help drive incentives on Curve, the Treasury Guild has secured a $500,000 OTC allocation of CRV at $0.40/CRV from Curve founder (and NuCypher cofounder + Threshold Councilmember), Michael Egorov.

Additionally, a tBTC-wBTC stableswap pair on Balancer has been deployed.

The above describes the DAO’s high level strategy. Many of the above priorities fall within the scope and discretion of the Treasury Guild but for anything that requires broader DAO approval, implementation details will be included in followup proposals on the forum.

As the only permissionless path to use Bitcoin in DeFi, tBTC remains… inevitable.

9 Likes