GIP-103: Should Gnosis DAO allocate 8k GNO to fund a USDC incentives program?

Governance
1

Should Gnosis DAO allocate 8k GNO to fund a USDC incentives program?

  • In favour
  • Against
0 voters

Executive Summary

The USDC token on Gnosis Chain (currently available by bridging from Ethereum through the Gnosis Bridge) is not compliant with the Bridge Token Standard, established by Circle in November 2023. With the objective of growing the USDC bridged into Gnosis, and the ultimate goal of Circle taking over the token and converting it to native USDC on Gnosis Chain, we propose to create an incentives program of up to 8k GNO.

Specification

If this proposal is approved, Gnosis DAO will be incentivising the growth of USDC.e, which is compliant with the standard and that can be acquired by calling Deposit() on a Transmuter. The swap of the old USDC to the new one can also be done through the bridge UI. New USDC bridged to Gnosis will automatically be USDC.e thanks to changes in the bridge UI.

karpatkey will define the allocation of the incentives, based on what is deemed the most suitable action on Gnosis Chain. Under this same post, we will be reporting the updates of the program, detailing how much was spent, on which pools/protocols, and which results we have achieved.

The program will run until USDC is natively issued on Gnosis, and we have ensured that it is well integrated into DeFi.

The objective of the proposal, however, is not just bringing capital, but also users. Incentives will be directed to guide specific behaviours that will make users sticky. Gnosis is building a set of products that are already finding Product Market Fit - Gnosis Pay being an example of that. It is the right timing to launch an incentives program to bootstrap the ecosystem. In the end, the results of the program should be:

  1. Have native USDC
  2. Have more users in Gnosis Chain
  3. Have more capital on Gnosis Chain, as a result of 1 and 2, and regardless of having some capital flying away.

As two examples of some strategies that could be utilised to incentivise wanted behaviours:

  • Reward (more) users that deposit USDC in Aave/Spark, borrow EURe and spend it with Gnosis Pay.
  • Reward users that make a large TWAP of USDC for GNO, by giveing them a certain % on top of what they bought (depending on the size and time extension of the TWAP).

Rationale

The adoption of a compliant USDC token on Gnosis Chain is crucial for enhancing its DeFi ecosystem, as it is a requirement for native USDC and CCTP. Having native USDC will help bring Gnosis Chain closer to CeFi, and CCTP will lower the costs of bridging in and out. Additionally, native USDC will provide significant advantages for Gnosis Pay, allowing its worldwide expansion.

Budget

This program aims to direct up to 8k GNO in incentives. Assuming that we need to pay a ~10% APY for incentives and that we achieve significant size (eg., 50M) in 6 months, this translates to roughly ~$2.5M.

This proposal requests 8k GNO, which accounts for potential market volatility. We will continuously work on optimising incentive allocation which may result in the desired growth in a shorter time frame and/or with fewer incentives paid out. In this case, the surplus budget will remain unallocated.

8 Likes
2

Having compliant USDC on GC would certainly be the desirable status. However, I have a few questions regarding this proposal.

Allocating token incentives for growth usually attracts mercenary capital for a limited time till the incentives are depleted. Spending around $2.5m to attract this capital for 6 months would be alright. But what’s more important is to retain that capital after this period. Has there been any consideration regarding the sustainability of liquidity following the initial period?

Was this transition to compliant USDC requested by Circle, has there been any communication between Circle and karpatkey beforehand? Or is it just karpatkey believing that we need native USDC on GC for the purposes mentioned here, mainly “getting GC closer to CeFi”? Are there any plans to utilize USDC (such as being the spendable currency in Gnosis Cards)? If there’s such a plan, has this been already discussed with Circle? To me, it feels like it was a done deal on the condition that compliant USDC liquidity is increased on GC.

If there has been any discussion with Circle on this regard, I would have loved to see this proposal coming from Circle themselves instead of karpatkey. And I would also have loved to see a commitment from Circle again to enable native USDC minting on GC instead of incentivizing a program of bridge-out USDC/bridge-in USDC.e from mercenary capital.

4 Likes
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haven’t followed this and would be grateful for a link. On the L2s I still prefer the USDC.e versions to get them to Ethereum 1:1 and only have to pay for gas without any slipage.

4

This:

I would also have loved to see a commitment from Circle again to enable native USDC minting on GC instead of incentivizing a program of bridge-out USDC/bridge-in USDC.e from mercenary capital.

5

Native USDC is much more than a status. Having natively issued stablecoins improves the rails between Gnosis and CeFi, it enables on and off ramps directly to and from Gnosis, partnerships, etc. Of course we agree that paying users to deploy capital over 6 months that will not sustain over time is a waste of money. However the incentives will be used to bring not just capital, but also users. We will direct the incentives to guide specific behaviours that will make users sticky. Gnosis is building a set of product that is already finding Product Market Fit - Gnosis Pay being an example of that. We think that is the right timing to launch an incentives program to bootstrap the ecosystem. For example, we can reward (more) users that deposit USDC in Aave/Spark, borrow EURe and spend it with Gnosis Pay. Or users that make a large TWAP of USDC for GNO, and give them a certain % on top of what they bought (depending on the size and time, for example).

In the end, the results of the program should be:

  1. Have native USDC
  2. Have more users in Gnosis Chain
  3. Have more capital on Gnosis Chain, as a result of 1 and 2, and regardless of having (some) mercenary capital flying away.

We will add some of this comments to the proposal.

3 Likes
6

Hi guys, GnosisticSquid here, this actually sounds really good to me and i too share the same concerns others have mentioned, but i have faith that Karpatkey and his team have investigated this enough to be able to say with some surety what they are saying. And my plan still stands, within the next few weeks tobuild and post 3 to 4 Gnosis Nodes utilizing Dappnode devices and a host computer i am building here along with Solar array et cetera

7

I agree that USDC has to be supported natively on Gnosis Chain. However, I think any incentive program has to be aligned with Gnosis Pay as Pay is currently also working on accepting USDC as payment option in addition to EURe. Instead of giving incentives on pure deposits, I would suggest to link it to a cashback program. We can already see a correlation between card usage and deposits on Pay without any incentive program. This real use of USDC will also be more convincing for Circle to support Gnosis Chain.

4 Likes
8

Hello everyone,

I wanted to ask some questions about this governance proposal regarding the incentivization of USDC.e and bridged USDC on Gnosis Chain, as well as the medium and long-term plan.

How are the USDC.e guaranteed? Are they guaranteed by the native USDC on Ethereum, just like the bridged USDC, or by another solution?

What is the plan for the blacklisting function, and how will it be used?

Firstly, I’m curious to know what will happen to the bridged USDC in the long term. Will it remain available for trading at a 1:1 ratio against USDC.e? If not, what are the plans to manage this transition and migrate all liquidity?

Next, I’m lost regarding the difference between USDC.e and native USDC. Why is it necessary to create USDC.e if Circle’s USDC is native? It seems to me that on Polygon, USDC.e is the bridged token from Ethereum, not native.

Have you considered paying the fees for OnOffRamp for users near the platforms that do it on Gnosis?

I’m also disappointed that the proposal didn’t take into account all the real users of the chain, such as RealT, which already have real-world uses on Gnosis Chain. Why isn’t there an incentivization for projects that list and prioritize USDC.e?
For example, why not incentivize RealT to pay rent in USDC.e priority (200k $ per week, 50% in USDC), or to cover the purchase on the platform with USDC.e?

Finally, I’m curious to know if you’ve thought about incentivizing projects to prioritize liquidity to use USDC.e, such as DEX and aggregators that highlight USDC.e, which would allow companies to invest more in the DAO and reduce the risk of opportunistic liquidity.

I’m looking forward to seeing your responses to these questions and discussing this governance proposal in more detail.

Thank you for your time.

5 Likes
9

USDC.e is simply backed by USDC on Gnosis, which is backed by USDC on Ethereum. Let me explain.

When you bridge a token via the Omnibridge for the first time it’ll simply take the metadata of that token and deploy a copy to Gnosis Chain, that’s why the “bridged” token which is nowadays typically referred to as USDC.e is simply called USDC on Gnosis - changing this would require a hard fork. USDC was first bridged, thus deployed on Gnosis (then xDAI), in Summer of 2020 before the “.e” convention was even a thing.

The new token uses the Bridged USDC Standard, which allows Circle to take over the contract at which point they would be able to rename it from USDC.e to USDC. But until that happens, and as the token standard dictates we used the USDC.e naming convention.

The USDC:USDC.e swapping is available via the Transmuter, which will be available up to the point in time Circle decides to take over the USDC.e contract at which point it will be directly backed by Circle as it is on Mainnet.

The blacklisting function is simply part of the USDC Standard and is required in any official deployment.

3 Likes
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That actually makes a whole hell of alot of sense. And i am not a numbers guy.