Protocols struggle to keep their liquidity in the protocol as more than half of the users lock in their funds and withdraw them immediately when there is a better yield opportunity. Renting liquidity is a good bootstrap mechanism but it is not a viable long-term strategy because it puts protocol at the mercy of mercenary LPs. As DeFi matures it is becoming increasingly clear that the goal should be to accrue long-term defensible value. Karma DAO goal is to help enable protocols to establish their own protocol owned liquidity while still providing benefits for the network participants - users.
- Protocols who wish to accrue long-term liquidity can provide their native tokens in exchange for the liquidity which will be locked in protocol custom treasury.
- Users provide liquidity to the protocols for which they receive Liquidity providing (LP) tokens.
- These LP tokens can be bonded through Karma and are locked in protocol owned custom treasury. In exchange for providing LP tokens, users receive discounted native protocol tokens after a vesting period.
- Since LP tokens can not be unbonded from treasury the liquidity will permanently reside within the protocol and there will always be enough liquidity for users to trade their tokens.
- This also opens a new revenue stream from LP fees that protocols can utilise for growth and expansion.
Example: OMM wants to have more defensible OMM/sICX liquidity on their AMM exchange and supplies 1000 OMM tokens to KarmaDAO for bringing in liquidity. A user locks to a selected AMM (e.g. BalancedDAO) OMM/sICX in value of 10$ (5$ in both OMM and sICX) and receives LP tokens which represent this locked value. They bond these LP tokens through Karma and receive 12$ worth of OMM through a short vesting period.
Benefits for ICON Community
- Stronger protocols with more consistent liquidity (Protocol owned liquidity).
- Higher liquidity in protocols which will enable: less slipage, more stable APYs and higher liquidity access.
- Believers in protocols can receive their tokens at a discounted price.
- Protocols now own their liquidity, rather than relying on mercenary LPs.
- Bonds incentivize users to help the protocol succeed through discounted native tokens.
- Protocols accrue additional value through liquidity fee revenue stream as they also become the liquidity providers themselves.
Protocols also gain access to experienced engineering and marketing teams ensuring success from idea to deployment and maintenance.
Olympus has seen a huge success with their concept of Protocol Owned Liquidity (POL) and established itself as the starter of DeFi 2.0. Since it’s conception at the end of March 2021 it has amassed a treasury worth over 800 millions dollars and spurred the creation of many forks on different blockchains some of which are very successful on their own (e.g. Wonderland). OlympusDAO initially wanted to create a token which would maintain purchasing power inside of cryptocurrency space regardless of the movement of the market in $ terms. Since the protocol itself now owns the assets in the treasury and isn’t dependent on liquidity providers which may withdraw funds at any time that there is a better opportunity it had the possibility to establish a token with a floating market price which would achieve exactly that. OlympusDAO made the next step of helping other protocols gather their own POL (mostly in the form of LP tokens on AMMs) with their new integration OlympusPRO.
OlympusPRO has partnered with more than 20 different protocols to help them get liquidity and have gathered more than 13 million $ worth of bonded assets in the span of less than 2 months. BarnBridge, Alchemix, Synapse, Thorstarter, Inverse Finance, Spooky Finance, SpiritSwap, Keeper DAO, Everipedia, mStable and Angle Protocol are some notable protocols that have connected with OlympusPRO for their bonding services.
The initial concept for KarmaDAO wants to focus on helping protocols on ICON gather their own Protocol Owned Liquidity and reward users who do so similar to OlympusPRO (with smaller improvements). Extension to other use cases of POL to follow with future integrations with which KarmaDAO will accomplish its vision.
The Karma bond a.k.a Bond Marketplace provides users with a suite of different bonds they can purchase their favorite Defi token from at a discounted price. It represents the core of Karma. This proposal will provide funding to develop Karma DAO and cover the following topics:
Smart contracts which:
- Handle the bonding of the liquidity providing (LP) token
- Handle the treasury of each protocol
- Allow protocols to provide their native tokens for exchange of bonding LP tokens
- Allow seamless deployment of the suite of SCORE-s for each new protocol
- Handle governance over Karma DAO
- Handle XKARMA token (native protocol Karma token)
- Allows users to easily interact with smart contracts
- Provide an overview of current bonding status
- Can be connected to by various ICON wallets
Design & Marketing:
- A user friendly design and marketing material
- Social engagement campaign
- Promotional website
- 2 Smart contract developers - 25,000$
- 2 Frontend developers - 20,000$
- 2 Designers - 20,000$
Project management: 1 project manager - 15,000$
Design and marketing material: 5,000$
Community management and promotion: 1 Community manager - 10,000$
External testing costs: 5000$
Total estimated costs: ~100,000$
Requested amount: 60,000 bnUSD
Requested amount is 60% the remaining 40% will be funded by the team.
Development of Karma DAO breakdown:
- Development of Karma Bond SCORE-s
- Development of Karma Bond frontend
- Development of Karma presentational website
- Infrastructure setup
- Brand and frontend design
- Social engagement campaign
- Build knowledge base
First milestone (1 month)
- Develop Karma Brand
- Develop Marketing / Promotion material
Create Lite / White paper
- Start frontend and SCORE development
Second milestone (1 month)
- Start work on Karma promotional website
- Internal SCORE alpha testing process
- Frontend and design merge with first alpha features
- Approach existing DeFi protocols campaign (OMM, Balanced, etc…)
Third milestone (1 month)
- Release beta frontend
- Release beta SCORE-s on testnet
- Release Karma promotional website
- Analyse & Improve frontend and SCORE-s based on the testing results
Fourth milestone (1 month)
- Full release on mainnet
- Increased social engagement and marketing on social platforms
- Establish Karma Discord server
- Launch campaign to approach potential new protocols to implement bonding for (Gangstabet, Craft, …)
To ensure a fair launch, there will be no pre-mine activities or venture capital allocation. Instead, we are going to further decentralize Karma protocol and allow community members to make meaningful decisions with voting power on the future of the protocol through our token distribution and rewarding models:
- 35% to Liquidity Token Providers
- 15% for Long-term Staking rewards
- 20% to Karma Worker Tokens
- 30% to DAO Treasury
Note: The tokenomics are not final and can be changed during the course of the development.
Worker Tokens are going to be used for further development, maintenance and promotion of Karma DAO. 50% of all the tokens dedicated to worker tokens will be locked as a Long-Term Stake. The next step for KarmaDAO is to build the Decentralized Reserve Currency for which the treasury is planned to be used as an underlying defensible value.
The first version of KarmaDAO will use xKARMA for which the transition to KARMA will be enabled once the integration of Decentralized Reserve Currency is live.
We are a team of 8 driven members based in Slovenia that has been in the ICON Community since 2018. As a main P-Rep Protokol7 which has members that have contributed to the development of the OMM protocol, Bridge and LICX. Since then we have helped promote and develop new projects in the ICON network. Our decision on making DeFi 2.0 on the ICON network was to help this great community grow even further which supports our mission to develop protocols which will bring more investment possibilities and incentivise users from other BTP connected chains to interact with the ICON network and its amazing DeFi space.
For any questions, please do not hesitate to reach out to us.