Summary
This proposal seeks to use up to 1.5M MAGIC and 5 ETH for Hop Protocol’s fast bridging support for MAGIC to/from Arbitrum One (One), Arbitrum Nova (Nova) and ETH L1 as part of an initial pilot for 6 months. This would allow a daily bridge limit of ~250k in each direction and can be increased if/when demand is required. Fast bridging will greatly improve the UX of transferring MAGIC across chains when games building with Treasure on Nova scale up. Once established, this could reduce bridging time from One to Nova (and vice versa) down to 1 minute (indicative). MAGIC used in this program is recoverable by the DAO.
This proposal helps establish the infrastructure required to gauge demand and scale up on Nova as required. The program will commence alongside other MAGIC activations on Nova (eg. game release) when available. For the avoidance of doubt, the launch time for this service is still to be determined. It also remains contingent on relevant HOP governance proposal approvals. We anticipate demand for MAGIC on Nova might be small initially, then scale up as more games onboard. At the end of the pilot period, the program will continue in situ unless otherwise stated.
If this proposal is ratified, the DAO will propose support for fast bridging from HOP Protocol via HOP’s ‘HIP’ governance process. This could take between 2 to 4 weeks, if approved.
Rationale
- Nova is Arbitrum’s social and gaming centric chain released midway through 2022. This chain is completely separate to One (different architecture) - where the majority of Treasure’s products, platforms and partners currently reside.
- While One remains Treasure’s home - leveraging ETH L1’s network decentralisation and security, which are vital for assets of higher value - the tradeoff is that One’s gas fees are largely derived from ETH L1. In an environment of renewed high transaction volume, gas could be a non-trivial amount
- There are various options to combat and abstract this cost (eg. more games are moving into hybrid models, where the majority is offchain or gasless).
- Nova presents an optimised environment for high throughput and lower transaction costs designed for gaming. However, usage is still low relative to One due to its maturity.
- As infrastructure and tooling scales up, we anticipate growing demand from games to launch on Nova - and are seeing initial shoots of this emerging. This will likely include games that are ‘Powered by Treasure’ and denominated in MAGIC.
- Acknowledging there are no current games using MAGIC on Nova, the current UX for bridging MAGIC from One to Nova is cumbersome, and adds significant friction. Centralised exchanges and fiat onramps are likely to add support for Nova over time, as adoption grows. In anticipation of eventual growth, this proposal seeks to establish enhanced UX for users seeking to bridge MAGIC to Nova.
Proposal
This proposal seeks to use 1.5M MAGIC from the Liquidity / Staking allocation and [5 ETH from the Treasury to facilitate 500k daily volume of MAGIC fast bridged between One and Nova (250k each way) using Hop Protocol’s ‘bonding’ service and StableSwap AMM.
This includes seeding the infrastructure required to enable fast bridging:
- Bonding
- Treasure will act as a Hop Protocol ‘Bonder’ to provide the liquidity for fast MAGIC bridging. See here for more details on how ‘Bonding’ works.
- MAGIC to be split indicatively [500k] / [250k] / [250k] across ETH L1 / One / Nova (final split will be made closer to the point of launch based on current demand)
- ETH to be split across ETH L1 / One / Nova to bond users transactions
- Treasure, as the bonder will receive [0.2%] fees on all transactions
- StableSwap AMM
- To enable the fast bridging process, Treasure will seed 500k MAGIC via hMAGIC <> MAGIC liquidity pools on Nova and One (250k each) via Hop Protocol’s StableSwap AMM
- hMAGIC is the ‘bridgeable’ representation of MAGIC and enables the bridge process between L2 and L1.
- The StableSwap AMMs (on One and Nova) within the Hop UI will allow users to swap in and out of hMAGIC<>MAGIC while bridging. This process is abstracted away from the user
- These markets also allow arbitrageurs to take advantage of small price differences and rebalance the markets across chains as needed
- There is no impermanent loss as the hMAGIC to MAGIC is 1:1
- As an LP, Treasure will receive up to 0.04% fees
- Pending approval by the Hop DAO, Hop Protocol could offer ~12k HOP per month across the two pools as incentives to the community to seed additional hMAGIC<>MAGIC liquidity to bolster the 500k MAGIC injected directly from TreasureDAO.
- The HOP incentives are designed to drive roughly $270k of additional MAGIC liquidity to the AMMs if rates normalize around 8%.
Should this TIP be ratified, we will submit a ‘HIP’ through the Hop DAO process.
Polling Period
The temperature check polling process begins now and will end on May 2, 2023 at 2:30pm UTC. If quorum is reached, a Snapshot vote will be put up shortly thereafter.