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:
- 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.
- 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.
- 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.