We're back again with another classic banger.
This referendum forms part of a series of proposals that attempts to improve the UX for users bridging assets to the Polkadot ecosystem from Ethereum via Snowbridge.
Currently, the user experience for users wishing to bridge assets into the ecosystem is less than ideal. Users are not able to deploy capital into the ecosystem, leading to users feeling frustrated as they are not experiencing their desired UX, including but not limited to the following reasons:
There is not sufficiently deep liquidity for Snowbridge assets for users wishing to deploy any meaningful amounts of assets in the ecosystem (outside of the scope of this referendum)
There is not sufficient liquidity for Snowbridge assets on Polkadot Asset Hub to facilitate fee payment swaps
This referendum requests ~$2,000 of DOT tokens. If/when this referendum is approved, half of this DOT will be converted into MRL WETH via Hydration, bridged to Ethereum via Wormhole, and then bridged back to Polkadot via Snowbridge. This ETH will be paired against the equivalent amount of DOT on Polkadot Asset Hub to facilitate fee payment swaps.
It should be noted that this is Snowbridge ETH, and not WETH.
Note: there is already a liquidity pool of Snowbridge ETH/DOT that exists, however the liquidity is very shallow, and we have seen from the shallow liquidity of the DOT/KSM pool that this can lead to users paying an arm and a leg for their txn fees. Increasing the liquidity of these pools can help delay these issues and hopefully by raising these referendums, people will learn about these liquidity pools, and hopefully arbitrage them, keeping the price normalized.
There is an additional 50 DOT added which is intended to cover transaction fees across various blockchains, and act as a small tip / beer money.
Polkadot OpenGov has funded the development of Snowbridge quite extensively, however, there are some underlying UX issues inhibiting user adoption that are primarily caused by a lack of liquidity.
Currently, when a user bridges assets to the Polkadot ecosystem via Snowbridge, they are not able to utilize them. This is due to the two primary issues listed above.
As stated, one issue is that there is very shallow liquidity on Polkadot Asset Hub to facilitate fee payment swaps. The ELI5 of this is that you can utilize other assets to pay for fees on Asset Hub, and in the background, it is swapped for DOT to pay the fee. This, however, requires that a pool actually exists with some level of liquidity (such as what we are proposing).
If users are able to have their Snowbridge assets swapped for DOT to pay for fees, then they are able to deploy their tokens to other parts of the ecosystem, where deeper liquidity may exist in the future.
Currently, these issues are making the onboarding experience rather bad for those coming from other ecosystems to Polkadot, we need to improve this. The lack of Snowbridge assets being held in the ecosystems showcases potential issues with adoption, and these pain points may be a root cause of why people are not bridging assets from Ethereum to Polkadot.
We propose to deploy and add liquidity to the ETH/DOT pool, which should further alleviate this fee payment swap issue.
Since we will receive DOT, we need to convert it to MRL WETH on Hydration, and then use Wormhole to bridge the WETH to Ethereum and convert it to ETH, and then bridge the ETH back to the Polkadot ecosystem using Snowbridge.
We will then utilize this Snowbridge ETH and the DOT to top up the liquidity pool.
The funds will be sent to a 2/2 multisig consisting of Leemo (Novasama Technologies) and lolmcshizz (Hydration).
It is important that people in the ecosystem are able to use the products that people have spent a lot of time building and that we have spent a lot of funds on. These pain points are immediately clear to anyone using the ecosystem's tools.
As we stated at the top of the proposal, we are aware that there is a lack of sufficiently deep liquidity for Snowbridge assets, for Snowbridge ETH in particular, the Hydration DAO will soon vote on OTCing some of their WETH into Snowbridge ETH, which should increase adoption, which is part of the reason why we want to top up this liquidity pool for fee payments.
Cheers,
Leemo, lolmcshizz, and Crane
Delegate to ChaosDAO: https://chaosdao.org/
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