Bootstrapping liquidity for renZEC on Binance Smart Chain

Applicant background

The Ren team has built RenVM, an open network providing access to inter-blockchain liquidity for decentralized applications. Currently, we have served about $3.3 billion in total and $4.7 million in Zcash volume going to and fro Ethereum to date. Zcash is one of the first assets we supported at launch and is one of the main assets we are trying to bootstrap liquidity and get integrations for across the decentralized finance ecosystem (DeFi).

Motivation and overview

Our goal with this proposal is to bootstrap liquidity for renZEC (Zcash wrapped through RenVM) on Binance Smart Chain (BSC), using liquidity mining incentives. BSC is an Ethereum-fork by the Binance team, with greatly increased scalability, through centralizing the validator nodes, leading to drastically decreased transaction fees. While there is a significant trade-off with the centralization, especially the Asian market has proved that the reduced transaction costs are very attractive for retail users. And given Binance's popularity as a centralized exchange, even many mainly Ethereum users trust to some extent that BSC is a safe trading platform.

100% of the requested grant would be used as liquidity mining rewards, either solely on one AMM exchange, or distributed across several, which could be 1inch exchange (https://1inch.exchange/#/), SushiSwap (https://sushi.com/), or PancakeSwap (https://pancakeswap.finance/).

The liquidity mining rewards would bootstrap liquidity of renZEC on one or more of the given AMMs on BSC, as it would be rational for ZEC holders to bring their liquidity for the rewards, without relying on the expectation that there already would be significant trading leading to trading fees sustaining the liquidity being there. Without liquidity mining rewards, and without any prior trading of the asset, it is irrational for liquidity provider to bring their liquidity, as there is no expectation of earning any trading rewards. To break that threshold where no expected trading leads to no liquidity forming, leading to no trading, leading to no liquidity forming etc., one needs to deploy liquidity mining rewards.

Technical approach

This proposal is non-technical, only involving coordination with one or more of the AMM teams to set up the liquidity mining distribution through their contracts.

Execution risks

The only foreseeable obstacle is if the teams of one of the AMMs are unwilling to work on organizing the distribution of the liquidity mining rewards through their contracts, but we have already been in talks with both 1inch and PancakeSwap, and wouldn't forsee any issues by going through SushiSwap either.

Downsides

If the project is successful, we would see more ZEC liquidity transferring over to BSC. The possible risks with having significant ZEC liquidity there instead of on other platforms is the platform risks with BSC, which could be something like temporarily halted liveness from its centralization, or validator hacks or something similar.

Evaluation plan

The metrics for evaluating the success of the project is the growth in liquidity and volume of renZEC on BSC, compared to now where there is no liquidity and volume. renZEC activity can be tracked here: https://bscscan.com/token/0x695fd30af473f2960e81dc9ba7cb67679d35edb7

Tasks and schedule

As soon as a budget would be released, the Ren team would coordinate with one or two of the preferred AMMs and set up the liquidity mining incentives. Shortly after when the launch is ready, a marketing program would launch to increase awareness about Zcash on BSC, and the privacy properties Zcash can offer when you redeem back renZEC to native ZEC. The promotional material about the privacy properties a DeFi user can get through Zcash is already being worked on.

Budget and justification

We request in total $7,500, all of which would be used as liquidity mining rewards in one of the mentioned AMMs, with matched rewards from one of the given teams. We could also go with a strategy where $5000 goes to one of the AMMs and $2500 goes to another.

The requested budget is very small in comparison to typical liquidity mining schemes, which sometimes distributes upwards of millions of $ in token rewards. On the other hand, those schemes often distribute illiquid governance tokens, where there is significant opportunity risk in farming those rewards which could lose value very quickly. In this case, the rewards would be in pure ZEC which is an incomparably more liquid asset. The relatively smaller liquidity mining rewards would also attract more retail users than whales which is beneficial for organic growth.

Overall this subsidy will bootstrap ZEC's liquidity in various DeFi platforms, ultimately providing more utility for the assets and its users. Ensuring ZEC is adopted throughout DeFi is crucial to its sustained adoption and its long-term success in the wider crypto-ecosystem.

Campaign

Started
2 months ago
Funding
$7,500 
Funded through  Zomg logo
1
Launch the liquidity mining program

Launch the liquidity mining program

Reward: $7,500
The team was awarded $7,500 in ZEC as an initial payout on Apr 20th, 2021, 1:13 pm.
Launch and promote the liquidity mining program