Discuss: KyberDMM Expansion and Liquidity Mining on BSC

Discuss: KyberDMM Expansion and Liquidity Mining on BSC

Summary

Binance Smart Chain (BSC) is an Ethereum Virtual Machine (EVM)-compatible sidechain that has grown in popularity as an alternative to Ethereum. Tokens on BSC follow the BEP-20 standard and you can transfer assets between Ethereum and BSC using the Binance Bridge.

Hot on the heels of the KyberDMM (Dynamic Market Maker) protocol’s successful deployment on the Polygon network, the Kyber core team is now exploring KyberDMM deployment on BSC as part of our strategy to widen Kyber adoption across different networks.

We would like to propose the following in an upcoming KIP:

  1. The deployment of KyberDMM on BSC, with 10% of trading fees generated on BSC going to KyberDAO. This is on top of the existing KyberDMM deployments on Ethereum and Polygon.
  2. Approximately 4.76% of the KNC Ecosystem Growth Fund, amounting to 2M KNC (~$3M), to be utilized as incentives to bootstrap liquidity and adoption on the KyberDMM on BSC over 2 months.
  3. Working with popular BSC projects to create amplified liquidity pools on KyberDMM and run joint liquidity mining campaigns.

Motivation

For KyberDMM deployment on BSC
The sometimes high and volatile gas fees on Ethereum have resulted in users exploring alternative systems such as BSC for a cheaper experience when it comes to DeFi use cases such as trading, liquidity provision, and lending/borrowing. Similar to Ethereum, BSC has smart contract functionality and allows the development of decentralized applications (Dapps), but with the advantages of lower gas costs and a faster block time of ~3 secs. BSC being EVM-compatible also means Dapps and protocols already on Ethereum (such as KyberDMM) can be easily deployed on BSC without much developer effort and resources, and there are already hundreds of projects on the network today, with over $19B in total value locked.

Kyber’s vision is to deliver a sustainable liquidity infrastructure for DeFi, and this extends to ecosystems on any popular smart contract-enabled network or chain. As a capital efficient liquidity protocol, KyberDMM is able to provide deep liquidity for the diverse ecosystem of DeFi Dapps on BSC, allowing traders/takers to enjoy minimal slippage. KyberDMM would be able to empower BSC liquidity providers with the ability to maximise the use of their capital, earning more with less capital compared to other platforms.

KyberDMM would also be the only dynamic market maker protocol on BSC that enables liquidity providers to achieve high capital efficiency for any token pair.

For Liquidity Mining on BSC
Liquidity incentives have proven to be crucial in attracting initial liquidity on a new network. A well-designed KyberDMM liquidity mining campaign on BSC can help:

  • Bootstrap liquidity: Additional liquidity incentives are necessary to attract more liquidity providers and total value locked (TVL) to KyberDMM as soon as possible. Ideally, with the added bonus of liquidity incentives, KyberDMM can be the most capital efficient and attractive venue in BSC to add liquidity for the selected token pairs.
  • Showcase KyberDMM’s benefits to liquidity providers: If they are incentivized to use the amplified pools, liquidity providers on BSC will naturally learn about and enjoy the benefits of high capital efficiency and dynamic fees.
  • Bring more DeFi participants and value into the Kyber ecosystem: More liquidity providers using amplified pools would mean more of them receiving KNC rewards and becoming part of the Kyber ecosystem, with the ability to stake KNC and vote on the KyberDAO. This further decentralizes the governance of Kyber Network and gives liquidity providers a stake in DeFi’s liquidity infrastructure.

The overall objective is to kickstart KyberDMM’s presence on the BSC network and take the first steps in building a sustainable and scalable liquidity infrastructure for their DeFi ecosystem.

Deploying KyberDMM on BSC

If the proposal is approved, KyberDMM’s BSC deployment will extend the reach of the Kyber Network liquidity hub. 10% of the collected fees (dynamic fees, differs with each pool) from trading activities on BSC will be transferred to KyberDAO on Ethereum and fees will subsequently be distributed as rewards to KyberDAO voters.

Liquidity Mining on BSC

We propose that 2M KNC (~$3M) be distributed across 4 eligible pools over 2 months, with allocation focused on these pools based on demand, asset scarcity, and other strategic requirements on BSC.

Pair and AMP Allocation Rationale
USDT-BUSD (AMP=400) 500,000 KNC Stablecoins pegged to the US Dollar such as USDT and BUSD, are among the most traded and held tokens on BSC. Strongly correlated/stable pairs also provide the best showcase of the high capital efficiency possible on KyberDMM.
USDT-WBNB (AMP=1.5) 500,000 KNC BNB is the native token and a critical component of the Binance and BSC ecosystem. Creating a BNB pool is important in connecting the Kyber and BSC communities.
ETH-WBNB (AMP=2) 500,000 KNC ETH is one of the most liquid and traded tokens on BSC and a popular choice for liquidity providers. Paired together with BNB, this would be a popular pool to maintain exposure to both ETH and BNB.
KNC-WBNB (AMP=1.9) 500,000 KNC To enhance KNC liquidity and encourage KNC holders to lock up their tokens for a prolonged period to govern Kyber Network, liquidity incentives should be awarded to an amplified KNC-WBNB pool on BSC. This also acts as a natural counter against inflationary pressure.

AMP = Amplification factor. Amplified pools have higher capital efficiency. Higher AMP, higher capital efficiency within a tighter price range.

Potential Joint Liquidity Mining Initiatives with BSC Projects

Assuming KyberDMM is deployed on BSC, BSC projects are welcome to reach out and propose joint liquidity mining campaigns with Kyber based on this framework.

Conclusion

Deploying KyberDMM on BSC and utilizing KNC for liquidity mining initiatives (including those with top BSC projects) would be a good strategy to give Kyber a major foothold in one of the most popular DeFi ecosystems today. Depending on the performance of the first liquidity mining initiatives on BSC, more liquidity incentives may be proposed in the future.

Through these initiatives, we expect more BSC users to hold KNC and get introduced to Kyber, thereby enlarging and enriching the Kyber ecosystem. This will in turn reap substantial benefits for Kyber stakeholders in the long run.

Let us discuss all the details of this new proposal as a Kyber community. A KIP will be created based on feedback received on this forum thread.

1 Like

I think that is a great idea. The more chains that Kyber DMM is deployed on, the better.

Definitely all for this idea! Implementing BSC on the KyberDMM seems like the next logical step to bootstrap liquidity after adding Polygon, and it would answer a common need for lower gas fees as well. BSC is also widely used so I think having the next round of liquidity mining on BSC would engage more users to Kyber and increase liquidity.
But does this mean the next round of LM would take place over Ethereum, Polygon and BSC? Or would it just be on Ethereum and BSC? Would be great if it could be over 3 networks with more KNC pools.

It’s good to see Kyber expanding at rapid pace. We are already at polygon and now aligning with BSC will boost our ecosystems.
All the Best!
Ujjwal

As a fan of Kyber and bsc, the way I see it BSC covers various excellent ecosystems and millions of users. It is a very reasonable proposal to delpoy DMM to BSC.

Agree. This initiative will bring more opportunity to KNC. We can see that the previous high market sentiment was partly driven by BSC. I am very excited to see Kyber gradually expanding its ecosystem.

YASSSSSSSSSS!!
Fees on Ethereum have been crazy lately so definitely I’m gonna vote yes for this proposal. Polygon is great and all but not quite enough and it can only be beneficial to have more chains available on the DMM.
So excited for the next round of liquidity mining! I think quite a few users (myself included) had concerns about what would happen with the liquidity situation after Rainmaker ends so it’s great to know the team is still planning for future initiatives!

Would make sense to then make sure there’s a proper bridge to be able to move KNC from polygon to bsc and back. ( Binance did enable matic polygon, would be great if they’d just enable that for KNC too )

I don’t think its the perfect timing to deploy on bsc, but we will see.

Can’t wait for this to happen. Gas prices on Ethereum are crazy high now