Proposal for the Expansion of HYDRA into Ethereum
Note: This proposal is based on the suggestions shared by @Hydra_is_the_future in this post.
Background:
Over the course of this year (and following the collapse of FTX) we have seen an evident trend of centralized exchanges tightening their KYC policies as well as limiting access for several geographic regions.
Among these exchanges is also Kucoin, which is currently the most relevant CEX for Hydra. As a result, centralized exchanges are slowly losing dominance and popularity while decentralized alternatives are becoming more mainstream.
Strategy:
To combat this trend, mitigate negative long-term effects and establish a more efficient user acquisition funnel, this proposal suggests the deployment of HYDRA liquidity on the Ethereum chain. Thus serving the following key objectives:
- Open Access: Ethereum is home to a series of very well connected DEX platforms that not only serve their own user bases, but also reach external audiences through the interconnected nature of the Ethereum DeFi network. Through it, users can buy and sell HYDRA with ease.
- Reduced CEX Dependency: By deploying a DEX pool on Ethereum, Hydra will further reduce its dependency on centralized exchanges, along with the uncertainties surrounding them.
- New Acquisition Funnel: The combination of popularity, accessibility and ease of use makes decentralized options the perfect pathway for cold audiences. By reducing the barrier for buying HYDRA, user acquisition should become more efficient. Once someone buys their first HYDRA, it is much easier to take the next steps and engage deeper with the ecosystem.
Potential options include Uniswap, Curve Finance or Sushiswap.
Implementation:
This proposal takes advantage of the existing liquidity mining framework and suggests the introduction of the following campaign:
- 3,000 HYDRA/month for LYDRA/USDT (0.30% fee rate)
The choice of LYDRA comes as a result of the virtually 0% opportunity cost and therefore improved capital efficiency relative to HYDRA.
To complement the LYDRA side, a separate LYDRA/HYDRA pool is proposed to be deployed via the DAO treasury. This would allow users to directly buy HYDRA through the following two-hop route as an automatic background process:
- USDT → LYDRA → HYDRA
Since the DAO treasury already has sufficient HYDRA and can mint the corresponding LYDRA, the deployment of this pool would not come at any additional expenses. We therefore achieve the following benefits by combining the two strategies:
- Higher expected TVL (liquidity depth) by focusing the LM budget on the more efficient asset LYDRA
- Utilization of the existing DAO treasury for a zero-cost gateway from LYDRA to HYDRA, thus achieving the listing of both assets for the price of only one
The pool is proposed to be sized at 5% of the equivalent pool previously approved for the Hydra DEX, following the same setup with same liquidity zones.
Timeline and Duration:
The execution timeline is tentatively set for shortly after the “LYDRA Pool Launch Event”, as well as the integration of LYDRA into the cross-chain bridge. Both of which are technical requirements for the implementation.
The strategy is proposed to be re-evaluated after a 3-month trial period — starting from the date of deployment. The following criteria are to be considered:
- Achieved TVL
- Utilization of both pools (by tracking their volumes)
- Capital efficiency (via liquidity depth measurements)
Summary of Proposal:
- Expansion of HYDRA liquidity towards Ethereum
- Following a dual-asset strategy with LYDRA and HYDRA
- Deploying a LYDRA/USDT pool through LM campaigns
- Deploying a LYDRA/HYDRA pool via the DAO treasury
- Three month trial period
onwards and upwards