This referendum forms part of a series of proposals which attempts to improve the UX for users bridging USDT & USDC (hereinafter “stables”) to the Polkadot ecosystem from Ethereum via Snowbridge.
Currently, the user experience for users wishing to bridge stables 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 wrapped stables for users wishing to deploy any meaningful amounts of stables in the ecosystem (outside of the scope of this referendum)
There is not sufficient liquidity for Snowbridge-wrapped stables on Polkadot Asset Hub to facilitate fee payment swaps
This referendum requests 1,000 USDT, 1,000 USDC, and $2000 worth of DOT tokens. The native stables will be converted via various means (detailed below) into Snowbridge wrapped stables. The stables will then be paired against the equivalent amount of DOT on Polkadot Asset Hub to facilitate fee payment swaps.
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.
Problem Statement
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 stables 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 currently no 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 stables 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 USDT & USDC holders in the ecosystems showcases potential issues with adoption, and these pain points may be a root cause of why people are not bridging stables from Ethereum to Polkadot (bridging stables is one of the primary use cases for bridges).
We propose to deploy two liquidity pools, which should alleviate this fee payment swap issue:
USDT (Snowbridge) / DOT
USDC (Snowbridge) / DOT
Since we will receive native stables, we need to bridge them over to Ethereum and then bridge them back to the ecosystem using Snowbridge. The likely route we will take is:
Swap native stables for MRL stables via Hydration
Bridge MRL stables to Ethereum via Wormhole
Bridge stables from Ethereum to Polkadot via Snowbridge
We will then utilize these Snowbridge-wrapped stables and the DOT to create liquidity pools.
There is a chance that the exact amount of liquidity deployed may be marginally lower than the numbers presented above, but not by any meaningful amount.
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-wrapped stables, and we are in discussions with Polkadot Ecosystem Agents to attempt to resolve this issue without the use of the Treasury. In the event that those discussions are not fruitful, we will be requesting funds from the treasury to hopefully alleviate this issue.
Cheers,
Leemo, lolmcshizz, and Crane
Delegate to ChaosDAO: https://chaosdao.org/
I'm sure this will have a big impact...