The C3 team is excited to present a proposal and hear your feedback for the strategic use of our Targeted DeFi Rewards (TDR) allocation. C3 stands at the forefront of showcasing Algorand’s technology as a settlement layer, as a premier settlement layer within the broader industry. Our focus is on bridging users from various sectors, enhancing the ecosystem’s visibility and utility.
Before we delve into it, it is worth noting that we are about to launch our websocket connectivity which several market makers have been waiting for. Once out, this is expected to fully address our liquidity issues by enabling extremely competitive spreads across all C3 markets thus drastically increasing user retention.
Proposal Overview
We propose to allocate our TDR in two primary ways to catalyze growth:
Lending Incentives (60% of TDR Allocation)
Objective: To attract external capital by incentivizing lending activities within C3.
Distribution: 50% of this allocation is earmarked for the USDC lending pool, with the remaining 50% distributed pro-rata across other asset pools (ALGO, AVAX, ETH, WBTC, ARB, plus two forthcoming tokens).
Rationale: Lending on C3 is uniquely advantageous as it allows users to earn yields on their assets while using them as collateral for trading. This dual utility not only attracts TVL to Algorand but also boosts trading volume by enabling collateralized trading.
Delegated Market Making (DMM) Product (40% of TDR Allocation)
Objective: To establish a robust liquidity foundation for C3’s order books through a delegated market making product powered by hummingbots.
Mechanism: Users can LP their assets, which are then autonomously utilized to enhance order book liquidity, in return for yield.
Incentive: Allocation of ALGO rewards to kickstart and support the DMM product.
Call for Feedback
We highly value the insights and suggestions from all of you. In our quest to refine this proposal, we are open to exploring other innovative ideas too based on your feedback, including but not limited to:
Trading Rebates: Implementing rebates in the form of ALGO, potentially equaling or exceeding the trading fees incurred by users, as an incentive for increased platform usage.
Incentivized Borrowing: Allocating a portion of the TDR to reduce borrowing costs, thereby promoting more competitive margin trading on C3.
Please share your thoughts, suggestions, and any alternative ideas that could enhance this proposal.
I have a few questions before giving my feedback.
Is DMM possible for all users or is it only allowed for market makers? If yes, could you point me towards that option, didn’t see it last time I used it.
Is the work for allowing wrapped assets withdrawal on the backlog?
Feedback:
Lending incentives should be more highly concentrated on Algo incentivization. Not a full 100% on it, but some higher majority to trigger users interest. Even some kind of points event like it was done for AVAX.
Correlated to the first question. If users can’t contribute to DMM…are we incentivizing whitelisted and anonymous market makers for doing what they should? DeFi rewards have been widely used to incentivize users liquidity activation. In this case how do you envision this happening through this proposal?
Overall I’d appreciate more content on the rationale to better comprehend the final goal. Thanks for your time in advance
DMM would be available for everyone, any user would be able to contribute to it and it would be done using hummingbot’s open source algos so no need for anonymous or whitelisted market makers. Its not live yet, but we are working on it and hope to get it live in time for this TDR.
Reason we think its best to incentivize other markets rather than all on ALGO market is that Algorand aleady has its fixed amount of users, whereas through C3 there is a clear opportunity to get usage from users outside of Algorand.
I understand the reasoning for incentivizing ALSO other assets, but considering where the funds come from, the purpose should lead to have Algo stand out, maybe make an event with points and boosted incentives, this would lead users to consider Algo much more, not taking this chance when using TDR seems a bit counterintuitive for the purpose of this program. Also when is C3 going to be added in the Defillama Algorand page?
Is there any region specific marketing to spread awareness about this reward opportunity ?
For example: in india if we use a CEX , 1% TDS will be deducted for each trade (loss or profit).
People are moving funds to international exchanges, trade there and then bring profit back to Indian exchanges to offramp
A permissionless decentralised exchange like C3 fit the purpose making things easier for Indian traders. If marketed well to Indian audiance (also to traders of countries with ridiculous crypto tax) C3 can become a leading dex in web3.
Hey Michel, it’s a shame that you couldn’t integrate Elixir so quickly, but it’s nice to see that you’ve found an alternative for now.
However, the allocation for the DMM product seems far too low to me. GMX and competitors grew back then precisely because there was an LP option back the; it was a new source of yield in crypto based on different assumptions. And just the other day Jeff from Hyperliquid was also talking about how their overwhelming success comes from their HLP product. Also, lenders are a separate group of people. They conscientiously choose the risk profile that comes with overcollateralized lending, or in other words from Vertex experience we know that those people don’t tend to trade and therefore not much more volume is to be expected from them. Furthermore, given the foreseeable diminishing attractiveness of lending yields over the long term, best to focus on other points like the DMM product. Accordingly, the allocation to the DMM product should be weighted higher than lending.
Briefly on the subject of incentivized borrowing. This is clearly the better option compared to the incentives for simply providing capital for lending. The volume for margin trading will increase, and with it the yield and hopefully therefore more capital will be attracted.
This is a good 1% TDS comparison is a great idea. I’d say we dont need to use TDR resources for marketing spend as we have our own budget for that and will take this idea into account for those efforts.
Hey Cysec, Elixir is still a priority for us! We would use this DMM rewards for an Elixir powered product hoping we get that in time, else we would launch it with our inhouse one and potentially migrate it to Elixir later if we dont get in time for the TDR use.
I know how important this LP option is for adoption which is why we are prioritizing. Based on your feedback, it looks like you would do more than the 40% to DMM right? How much more?
I would raise the rewards for this to 60+ percent. In the end, of course, it depends on what the projected yields for the individual products will look like