[Grant Application] LICX - Token for DeFi solutions

[Yasha]

Project title
Liquid ICX (https://licx.finance)

Project category
Development – DeFi

Project duration
3 Months to create MVP (minimal viable product)

Project description
We believe in providing people with more options for their crypto assets and thus we are bringing DeFi to the ICON network. LICX is the basis for our DeFi solutions and it is an IRC2 token that represents staked ICX making it possible to be transferred without compromising the security of the network. This provides an alternative option to exchanges for ICONists to receive rewards while keeping liquidity of their ICX. This will reduce the amount of control that exchanges can get over the network by providing extra liquidity to the network as well as allow the ICONists to be in possession of their private keys, ICX in the pool will be controlled by a smart contract so there is no central authority involved. LICX will also increase the number of transactions on the network as it will allow stakeholders to do other transactions than claiming and restaking.

What is included in MVP
MVP includes:

1. Smart contract
   The smart contract will allow the minting/burning of IRC2 tokens as well as staking/voting and distribution of rewards to LICX owners.

2. Web application
   The web application will provide an easy and secure way to interact with the smart contract as well as all the documentation and information about LICX.

At the MVP stage, we want the smart contract to be able to mint LICX by sending ICX to it or burn LICX by sending it to the smart contract and get an appropriate number of ICX in the pool transferred to the user. LICX represents a share of the staked ICX pool, so users will always be able to receive the appropriate rewards of staked ICX allocated to them as well as all the ICX that they initially sent to the pool. LICX will be transferable so users can stay liquid with their staked ICX.

The web application will provide the possibility to easily connect ICONex wallet to it and convert ICX into LICX or vice versa. Transferring from your wallet to another address option will also be implemented for easier user interaction. All the documentation, information and statistics will be provided so that users can see the current state of the project, information on how to use the web application and verify its integrity.
We already did a technical proof of concept which demonstrates that a design concept is feasible.

Below you can see the early design concept for the web application and the creation of the LICX logo.

Timeline

Project milestones
We want to implement 3 major milestones for this project

• Milestone #1 - α-Version
  Alpha testing. Functionalities: Minting/burning LICX via a simple web application.
• Milestone #2 - β-Version
  Beta testing. Functionalities: Staking and voting implemented. Improve web application UI.
• Milestone #3 - MVP
  Deployment of MVP on the main net. Web application functions finished.
  We will have 6 sprints each lasting 2 weeks after every sprint we will provide a progress report. We dedicated 2 sprints or 1 month for each version of the project. Estimated release date is at the end of Q2 2020
  
  
  
  User stories
  We have already defined users stories for our development:
• US1 - As a user, I want to login to my existing ICONex wallet, because then I will be able to interact with the LiquidICX web-app.
• US2 - As a user, I want to deposit my ICX to the smart contract, because I want to stay liquid and also earn the rewards at the same time.
• US3 - As a user, I want to withdraw my ICX from the smart contract, because I want to get my ICX and rewards back into my wallet.
• US4 - As a user, I want to transfer my LiquidICX to another wallet, because I still want to transfer my ICX, even though it’s staked.
• US5 – As a user, I want to be able to see information about the unstaking period, because I want to know when I will be able to claim my ICX and get them back into my wallet.
• US6 - As a user, I want to get general information about the project in FAQ, because I want to gain additional information about the project/application.
• US7 - As a user, I want to see general information/statistics about the application, because I want to see the current state of it.
• US8 - As a user, I want to see great documentation about the smart contract and how the project works in general, so I can verify its integrity.

Funding the project

Work package - Frontend/Web app (33 SP)
Work package - Backend (8 SP)
Work package - Smart contract (59 SP)
Total number of SP: 100 SP
Estimation for SP = 320€
Estimated costs: 32,000€ or 35,200$ → €:$ ratio 1:1.1
Costs covered by block42: 11,800$ (1/3)
Costs covered by grant 23,400$ (2/3)

The grant funds will be used for the development of the project:
-2 developers – in charge of developing the smart contract with all the functionalities for issuing/burning LICX, staking/voting, and reward distribution as well as any other frontend or backend development needed.
-1 Technical advisor – in charge of overviewing how the functionalities are implemented from a development side
-1 UX/UI designer – in charge of providing a user-friendly interface for web application in charge of interacting with LICX smart contract
-1 Project manager – in charge of assigning tasks to members of the team, keeping track of deadlines as well as communicating with the community about the progress of the project.

The funding requested is to enable us to provide an MVP, if the community feedback is good we want this to be a larger project and this is just the first stage of the project.

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Functionalities in future versions
This MVP is the fundamental basis where we want to build a whole ecosystem on-top of it. We will continue to update the project after the release and utilize its full potential. Already thinking ahead we have discussed some possibilities. We want to:

• Provide future use cases for LICX, we will collaborate with ICON Dapp providers to implement functions that allow LICX to be utilized by their Dapps (already in discussions).
• Fully integrate LICX in the upcoming ICON DeFi ecosystem.
• Provide faster unstaking times without hurting the security of the network (not actually unstaking ICX, but enabling users to swap their LICX for ICX of other users).
• CDPs, Upfront interest rates (staking rewards), Flash loans, …

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About block42

Block42 was founded in the year 2018 focusing exclusively on blockchain technology. At the time of the founding, the four co-founders had already extensive experience in the fields of software development, business consultancy, and scaling their own businesses. Since the nearly two years of existence, the company steadily grew, consisting now out of eleven team members. Most of them are software engineers, all of them able to provide full-stack software solutions. Here are some of our projects:

ICON Network:
Block42 is providing network security and stability for the ICON blockchain by running a validator node.
We are providing information and developing applications, like block42’s https://icxstakr.io/, https://iconwhale.watch/, https://medium.com/block42-blockchain-company.

KTCHNG GmbH – Ethereum Wallet Integration:
KTCHNG is a mobile app utilizing augmented reality technology to scan real-world products. Block42 was responsible for developing the Ethereum Smart Contract, the backend application as well as the integration of the already existing app to the blockchain. More information can be found here: https://ktchng.com/

Fantom Staker Info:
https://fantomstaker.info is a tool similar to the P-Rep overview on ICON. Our goal is to provide delegators with reliable information about the network and all its validators to help token holders to choose the “right” validator to stake to. Most importantly we want to do that in an easy way.

Smart “Wedding” Contract:
In August 2018 Lukas Götz, CEO and co-founder of block42 got married. A few months later he and his spouse signed a wedding contract – but not in written form as it would be usual. The team of block42 developed an Ethereum-based Smart Contract, which represents – legally binding according to Austrian’s law – a wedding contract for the couple. More information could be found at one of those references:

• ico.li
• Bis dass der Code uns scheidet: Erster Smart Wedding Contract in Österreich
• https://de.cointelegraph.com/news/osterreicher-fuhrt-erste-blockchain-hochzeit-mit-smart-wedding-contract-durch

[ICON_ADMIN]

Initial Review Result Comments

Review Result

Approve

Review Comments

We like the idea of creating a liquid version of ICX to be used in ICON apps while still allowing ICX holders to earn interest. Please provide more technical details prior to receiving funding. For example, we want to know the formula to calculate the “cost of LICX” and how will voting be handled. Please leave a comment with more details.

Also, we would like this contract to be audited by a 3rd party to ensure security. If lots of people use this, the smart contract becomes a honey pot and somebody could take over the ICON Network with the stolen ICX.

Depending on your comments, we can finally decide the amount to pay. Please take a look at this comment and let me know your opinion. Thanks!

Next Procedure

ICON Foundation provided the Initial Review Result Comments on the proposal. Grants recipients will respond to the Foundation’s response. Depending on your comments, the foundation will decide the amount of grants to pay and provide the Final Review Result Comments.

[Yasha]

Thank you for the reply, here is all the additional information you have requested.

Cost of LICX
To provide an easier user understanding of LICX we want to keep the ratio of LICX:ICX pegged in a ratio of 1:1, instead of increasing LICX value as more rewards are distributed, the smart contract will mint new LICX based on the amount of new ICX gained in the pool as rewards which will be proportionally distributed among all the wallets with LICX, as we want to create something that Iconists are used to we want to provide a similar solution as I-score (L-score) so users can claim their rewards. Simply put the amount of ICX in the pool will always be proportional to the amount of LICX distributed. Users will always be able to send LICX to the contract to burn it and receive ICX after the unstaking period. The smart contract will also work as an auto-restaker because rewards will be restaked each day at the end of one term.

Governance
The MVP of LICX will stake and vote towards block42 which will be stated on our web application when a user will want to deposit ICX into the pool. The first version after MVP will provide governance options where users will be able to set the voting % for different P-reps, that way even if the amount of LICX on a wallet changes, that will proportionally change votes to the P-reps based on the user’s selection. All vote changes will be made once per day at the same time as restaking takes place so that it already affects the P-rep term for the next day.

Audit
We have reached out to ICON Foundation regarding the self-audit tool, but definitely think that a 3rd party audit is needed for this instance as well. We are still looking for reputable smart contract audit companies to work with, if anyone is familiar with anyone who can help us in this regard please let us know. As we do not know the exact cost of the audit we would like to keep the option to discuss the funding of it open for later stages when we know a more detailed price for it (The approximate cost when considering similar DeFi projects build on ethereum was from 5,000-27,500$ as seen from this medium post under section 3. Things I wish I knew before building Ethereum #DeFi dapps | by Andre Cronje | Yearn | Medium).

LICX Progress
The first sprint for LICX project began on the 30th of March and ended on the 12th of April
The main tasks that we focused on were to get a base foundation for project development, you can see the first bi-weekly progress report below.

ICON Tools — LICX update #1

[Yasha]

This sprint’s report is a day late because of some health issues with one of our team members. But here is a quick update on what we accomplished and what we intent to accomplish in the next sprint.

ICON tools — LICX Update #2

[Yasha]

ICON tools — LICX Update #3

[Yasha]

DeFi on Ethereum overview
The success of DeFi in Ethereum provides us with a great overlook of why DeFi works and what are the necessary needs for it, that is why we have taken that as an example and will build in a similar way with the possibility to improve upon it at the points we think could be handled better.
In the first year of DeFi on Ethereum the total value of locked USD already exceeded 145 million dollars and at the time of writing stands at 887.4 million dollars. We want to bring a portion of that DeFi to the ICON network which will help increase it’s value.

Yearly increase of USD locked in DeFi on ethereum stands at more than 100% on average

• September 12th 2017 - 2.1 million dollars is locked
• September 12th 2018 - 147.8 million dollars is locked
• September 12th 2019 - 491.1 million dollars is locked
• September 12th 2020 - Estimation of over a billion dollars will be locked

Images and statistics taken from: https://defipulse.com/

Projected amount of ICX locked in LICX smart contract:

• 2020 Q3 we expect to have 100,000 ICX locked in LICX
• 2020 Q4 we expect to have 1,000,000 ICX locked in LICX
• 2021 Q1 we expect to have 5,000,000 ICX locked in LICX
• 2022 Q1 we expect to have 20,000,000 ICX locked in LICX
  Note: the numbers of the ICX locked might vary depending on how many other teams will build DeFi solutions and Dapps on top of LICX

LICX provides the same function as wETH in Ethereum DeFi and according to the ETH tracker it already has more than 2,2 million ETH or more than 475 million dollars (at the time of writing) locked up. wETH’s only function is to provide an ERC20 compliant representation of ETH, this means that smart contracts that are only ERC20 compliant can also use ETH in a form of wETH.
LICX on top of making ICX IRC2 compliant also provides the possibility to stake and use the ICX at the same time which makes Dapps that use them more attractive, because it allows users to get staking rewards as well.

The best way to fully utilize LICX is not by using LICX itself but by integration with other Dapps and DeFi solutions. The images below show how wETH is one of the base layers of DeFi on Ethereum and on top of it different protocols are built, we imagine that a similar approach would be successful on the ICON network with the base layers being Balanced, LICX and Bridge.

Growth of LICX
The user base for LICX is expected to come in three waves of users:

1. Users who want LICX to have transferable staked ICX
2. LICX becomes used by certain Dapps
3. DeFi solutions are built on top of LICX

LICX is a base layer of DeFi, so the biggest part of the users will be driven to LICX when other DeFi protocols like lending, derivatives, payments, DEXes, and assets are connected to it. We expect other teams to also utilize LICX and will offer help of integration to them for their DeFi solutions, which will allow a faster process of development as the foundation for it is already built as well as maximizing rewards beyond what Ethereum DeFi allows because the 6-36% (about 14% at the moment) of staking rewards can be gained on top of the rewards from the DeFi protocols implemented, which gives a great edge to the ICON DeFi space.

While the owners of LICX might utilize it in many different ways because it allows the liquidity of staked ICX, they are not the ones who LICX should be promoted to.
The main focus is integration with Dapps and DeFi solutions that can be created on top of LICX instead of promoting LICX directly to users, that is why we are in contact with different Dapp providers regarding LICX integration with their Dapps.

On-boarding Dapp providers and DeFi solution providers

• We are already in contact with some Dapp providers and are in discussions with them regarding the development of the Dapps in a way that supports IRC2 tokens. If the Dapp supports IRC2 tokens it will be able to utilize LICX (Tipping bot form piconbello, ICONswap from ICONation, ICONbet…)
• DeFi solution providers will not have to build a new layer below their DeFi solution but could use LICX instead, which means faster development and fewer costs.
• Because we want to ensure that DeFi is built on the ICON network we will also research more DeFi solutions that we can build on top of LICX and possible integration with solutions that are already being built by ICX station (Bridge, Balanced).

Marketing

LICX is a base layer protocol so it does not make sense to spend a lot of time to market it, we will approach all of the ICON community through medium posts which will be further spread through twitter, telegram, and Reddit. After more DeFi solutions are developed on top of it and when more Dapps implement IRC2 compliancy, it might make sense to create a bootstrap program to boost the awareness of DeFi and Dapps that use LICX on ICON. This provides a great marketing opportunity for the ICON network as people can not only use Dapps but are also rewarded for holding ICX tokens at the same time.

[ICON_ADMIN]

Final Review Result Comments

Review Result

Approved

Reporting Period

Grant recipients should produce Periodic Reports in order to continue to receive grant funding. If the Periodic Report is showing that the initiative is not meeting expectations, the ICON Foundation has the option to halt continued funding. Please check the link (ICON Community Grant Program (“ICON CGP”)) and leave reports on this page (https://forum2.icon.community/c/g/pr)

The team must submit the Periodic Report by the timeframes below (UTC):

2020/05/28 02:00 AM (UTC)
2020/06/24 02:00 AM (UTC)

Funding Amount

The ICON Foundation is going to give out $23,400 in 2 monthly installments based on the Periodic Report. The amount of ICX will be determined and paid according to the price at 02:00 AM (UTC) on the day of payment.

2020/05/29 02:00 AM (UTC) - $11,700
2020/06/25 02:00 AM (UTC) - $11,700