Moonwell Ecosystem Grant Draft Proposal

Governance Grant Proposals
1

Moonwell: Ecosystem Grant Draft Proposal

Author

coolhorsegirl, submitting in my capacity as a Moonwell DAO delegate

TLDR

The Moonwell community presents this Moonbeam Grant Proposal driven by the primary goal of Maintaining and Growing Activity. Our motivations center around fostering useful liquidity for the wider ecosystem and expanding our influence as a DeFi ambassador for Moonbeam in the Ethereum/L2 space. With Moonwell’s strong roster of contributors, featuring industry-leading teams and experts such as Gauntlet, Halborn, Lunar Labs, Warden Finance, and VectorDAO, and our position as the largest DeFi protocol by TVL in the Dotsama ecosystem, we stand uniquely poised to promote ecosystem liquidity and help accelerate the DeFi flywheel effect by increasing network activity and liquidity.

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By leveraging Moonbeam grant funding, we aim to attract new users and grow our community. Grant funds, which will be completely channeled to our liquidity providers on Moonwell’s Moonbeam deployment, will play a vital role in increasing TVL, bolstering onchain activity, and empowering core DeFi primitives. These strategic moves affirm our belief in the vitality of liquidity and the importance of lending and borrowing protocols within our ecosystem. Adding to this, the integration of Moonwell’s mTokens, which are yield bearing versions of GLMR, xcDOT, xcUSDT, Frax, and other tokens, by Moonbeam projects such as ZooDAO and Qoda is a testament to our protocol’s potential to spur ecosystem growth. Their choice to build on top of Moonwell not only brings additional utility and opportunities for the Moonbeam community, but also further validates the effectiveness of our protocol. This cross-project collaboration is paving the way for a more interconnected and robust ecosystem.

Moonwell strongly aligns with Moonbeam’s vision of connected smart contracts with EVM as the base layer (as outlined in MIP-39: Activate Moonwell on Base Mainnet). Our plans to leverage the Wormhole message passing protocol for temporal governance emphasizes our commitment to connected contract use cases, fostering efficient governance mechanisms in managing Moonwell’s deployment on Base from Moonbeam. Simultaneously, the Moonwell community has a strong desire to integrate additional XCM powered XC-20s from across Polkadot, including the likes of Bifrost’s liquid staked xcvDOT and xcvGLMR, and Interlay’s xcIBTC. While the grant funds will be used entirely for the purpose of incentivizing liquidity, we wanted the community to know that contributors to Moonwell are building a connected contracts use case as well, which will not be funded by the grant.

As our community expands, we are steadfast in our commitment to making DeFi more accessible to all. We believe in lowering the barriers to entry that have traditionally made DeFi daunting. With this grant proposal, Moonwell demonstrates its dedication not only to innovation but also to creating a more inclusive and approachable DeFi environment. We are eager to simplify and democratize access to these financial tools. Moonwell is leading the charge towards a more dynamic, inclusive, and connected DeFi ecosystem, opening up new possibilities for all users, regardless of their prior blockchain experience.

Project Description

Moonwell is an open lending and DeFi protocol built on Moonbeam and Moonriver, and is the largest DeFi protocol by TVL in the Dotsama ecosystem.

Requested GLMR Grant Amount

The amount requested to support the project initiatives is 2,000,000 GLMR.

Use of Grant

The entirety of the grant funds (GLMR) will be distributed to liquidity providers on Moonwell’s Moonbeam deployment, in an effort to increase both TVL and onchain activity. Engaging with other grant recipients, the Moonwell community will collaboratively promote these incentives, mirroring the successful strategies employed in the recent Moonbeam Ignite campaign. This unified effort will not only spark increased participation, but also foster a sense of unity and shared purpose within our expanding ecosystem.

Motivation for Grant Amount

The proposed Ecosystem Grant Amount of 2,000,000 GLMR will enable Moonwell to continue to bolster liquidity for both bridged and native assets in the ecosystem. Increased liquidity in lending protocols like Moonwell enables borrowers to receive lower interest rates, which makes borrowing for use in other applications and protocols on Moonbeam more attractive, and helps grow TVL and adoption more broadly across the ecosystem. By endorsing this grant, the Moonbeam community is not only backing a proven model of success, but also reaffirming their trust in a project that has demonstrated its transparent and responsible use of prior grant allocations.

Previous ecosystem grant funding was a crucial component in various recent successes:

  • It allowed Moonwell to bootstrap initial liquidity for Wormhole-wrapped assets like WBTC, ETH, and USDC, helping the ecosystem to recover post-Nomad and establishing Wormhole as a major player in the Moonbeam ecosystem.
  • It enabled the Moonwell community to activate and support a new xcUSDT market which brought activity and value from the wider Polkadot ecosystem into Moonbeam.
  • It helped Moonwell in maintaining its position as the top DeFi protocol on Polkadot, in terms of total value locked
  • Moonwell’s leadership in the Moonbeam Ignite incentives campaign brought ecosystem-wide benefits in terms of new users, TVL, and activity between projects. We didn’t see a similar campaign for Tranche 1, largely due to Moonwell not being a grant recipient and other projects not utilizing grant funds.
    • In April 2023, during the Moonbeam Ignite GALXE NFT campaign which the Moonwell community spearheaded, we saw significant growth in Moonwell usage metrics:
    • Unique address count nearly tripled, rising from 4,899 in March to 12,131 in April.
    • Total transaction count rose significantly month-over-month, increasing from 27,127 transactions in March to 44,706 in April.
  • Grant-incentivized liquidity enabled new Moonwell integrations like ZooDAO and Qoda, providing new DeFi opportunities in the Moonbeam ecosystem.

Project Overview and Relevant KPIs

The Moonwell community was honored to receive one of the first grants available to ecosystem projects in the Fall of 2022. This grant funding enabled the Moonwell community to launch and build liquidity in new money markets for Wormhole wrapped assets, as well as native Dotsama assets such as xcUSDT (cross-chain Tether).

It was challenging for the Moonbeam ecosystem to rebuild liquidity on a new bridge, but the community decision to select Wormhole as the preferred bridge provider has born fruit as Wormhole has swiftly evolved into an integral component of the Moonbeam ecosystem, evident in their support for the recently unveiled MRL (Moonbeam Routed Liquidity). Also, other top DeFi protocols, such as Uniswap, have selected Wormhole as their cross chain message passing protocol of choice for multichain governance, and the security of that solution has improved remarkably in the last year.

The Moonbeam grant last fall enabled the Moonwell community to launch the following new markets:

  • Wormhole wrapped ETH, WBTC, USDC, and BUSD
  • Polkadot native xcUSDT (cross-chain Tether)

On December 4, 2022, MIP-11 was executed, adding grant GLMR incentives to these new markets on Moonwell Artemis. TVL at that time was $23.72m. By February 21, TVL had reached an annual high of $48.61m (Source: DefiLlama).

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The liquidity growth in these markets would not have been possible without the previous round of grant funding and support from the Moonbeam community. We hope to continue this positive trend through this current round of funding.

  • TVL growth of Wormhole wrapped assets on Moonwell

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  • TVL growth of xcUSDT on Moonwell

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Team Experience

In March 2022, the Lunar Technology Foundation successfully secured approximately $26M via a combination of a private fundraising round and a public sale of the WELL token, giving it a financial runway of more than four years at the current rate of expenditure. Furthermore, Moonwell holds the distinction of being the inaugural project funded by Arrington Capital’s $100M Moonbeam Ecosystem Fund. The founding contributors to the Moonwell ecosystem are a distinguished ensemble comprising industry leaders in technology, web3, DeFi, smart contracts, and staking.

Moonwell is supported by a diverse set of contributing teams including:

  • Lunar Labs - Founding contributors consisting of Luke Youngblood (former Coinbase Sr. Staff Engineer & AWS Principal Engineer, built Coinbase staking rewards infrastructure), Eli Clendenin (“Majin”, community and communications lead), Octavius (fullstack developer), x0s0l (fullstack developer and Solarbeam co-founder), DevPupo and KidLiberty (frontend developers)
  • Gauntlet Network - Onchain risk modeling, risk management, and protocol optimization
  • Halborn - End-to-end auditing and real-time monitoring services
  • Warden Finance - Risk modeling and risk management
  • Rome Blockchain Labs - Technical implementation assistance
  • VectorDAO - Collective of application designers and developers

Advisors such as 0xMaki, Brandon Kase, Justin Lee, and Mason Borda provide guidance.

Additionally, Moonwell has a global and decentralized community of engaged builders, liquidity providers, developers, writers, designers, delegates, and community members who actively shape and power the protocol. The Moonwell DAO also possesses a robust grants program that offers support for projects looking to grow the Moonwell ecosystem.

This diverse composition of dedicated teams, advisors, and community members collaborating through decentralized governance allows Moonwell to continuously evolve with the ecosystem’s needs.

Timeline and Milestones for Use of Grant

The Moonwell community will have successfully deployed 100% of the original 4.166M GLMR grant funding received last Fall, by August 2023. As a community, we are proud of the fact that 100% of the grant funds went to liquidity providers in the Moonwell protocol, and no grant funding was used for other expenses. To ensure utmost transparency, a grant transparency report was published, which communicated the updated rate of incentive distribution. A grant transparency dashboard is available here, which the community can follow to understand how the grants are distributed on a month by moth basis. All grants are distributed through community governance, as the contributing teams have no direct access to grant funds. Here is an example of a successful governance proposal that distributes grant funding. You can see that Moonwell contributors have worked hard to ensure that the community is informed and all changes to distribution are visible and easily accessible.

The Moonwell community will also commit to providing monthly updates regarding emissions and grant usage on the Moonbeam Forum, as recommended in the Trance 2 Update post: “Teams that receive the grant should update the community via the forums on progress on a regular basis; a minimum of 1 update per month is required.

It is anticipated that the grant funds from Tranche 2 would be distributed from early August 2023, to February 2024, at a rate of approximately 400K GLMR per 4 week reward interval. In total, a grant of 2M GLMR has been requested. Should the final allocation fall short of this request, our utilization blueprint will remain unchanged. However, please note that a reduction in the granted amount would proportionally diminish both the distribution rates and the potency of these incentives, impacting their ability to achieve the intended objectives outlined above.

Collaborations

After receiving last year’s Level 3 Ecosystem Grant, the Moonwell community helped to create and lead the Moonbeam Ignite liquidity campaign. These efforts included holding multiple AMAs, detailed Twitter thread updates, an A.I. art contest, and culminated in a GALXE NFT campaign. This NFT campaign saw ~10,000 participants perform onchain actions across the Moonbeam ecosystem in order to mint ~50,000 NFTs. The Moonwell community spearheaded many of these events and utilized non-grants resources to commission all NFTs and campaign graphics. The Moonwell community will once again team up with grant recipients to collaboratively promote these incentives.

The Moonwell community plans to engage with other grant recipients to both create and promote a liquidity incentive campaign, similar to Moonbeam Ignite. While we don’t have specific collaborations confirmed yet (as we don’t know who the grant recipients will ultimately be), we are excited to partner with other projects to co-promote liquidity incentives, similar to the collaborative success seen with previous campaigns.

Potential promotions could include:

  • Co-hosting AMAs and educational sessions to increase awareness
  • Creating joint social media campaigns and campaign update threads to spread awareness
  • Weekly meetings with participating projects to ensure alignment
  • Organizing collaborative NFT campaigns that require onchain ecosystem activity
  • Cross-community Discord events such as game nights, raffles, trivia, and giveaways
  • Contests for creating and incentivizing the creation of art, videos, infographics, and other promotional materials that showcase the incentives

Like with Moonbeam Ignite, the Moonwell community is committed to spearheading creative and engaging promotions alongside other grant recipients with the collective goal of growing awareness, activity, and liquidity for Moonbeam. We are confident this community-driven, collaborative approach can successfully increase adoption of and usage in the ecosystem.

To be completely clear, none of the requested grant funds would be used for promotional purposes or special incentives to partners. 100% of any received grant will go directly to liquidity providers on Moonwell as outlined in our proposal. This has been the case with all ecosystem grant funds Moonwell has received to date.

As part of a collaborative incentives campaign with other projects, the Moonwell community is prepared to separately fund promotional activities as was the case during Moonbeam Ignite. This could potentially include:

  • Commissioning artists and designers to create campaign graphics, videos, logos, and NFT artwork
  • Funding giveaways like swag, token prizes, gift cards
  • Compensating Moonwell contributors and community members to create and share content like articles, threads, and videos highlighting the incentive program

All of these activities would be resourced independently by the Moonwell community without utilizing any of the Moonbeam ecosystem grant. The grant itself will solely be distributed to Moonwell liquidity providers to increase TVL and activity. We are committed to full transparency on grant use.

Milestones by Grant Amount

Please note: While liquidity incentives can serve as an important growth catalyst, we want to be transparent that we cannot guarantee specific outcomes or achievement of particular KPI targets solely as a result of this grant. There are numerous external variables beyond our control that play an outsized role in determining metrics like TVL, user growth, and interest rates.

We will track results transparently and adjust strategies as needed based on evolving conditions. But no amount of incentives can ensure success if winds shift. The community’s support provides means, not guarantees. We are committed to driving adoption, but cannot promise specific outcomes relying on variables outside our control.

If Moonwell receives 500k GLMR, we have estimated results of:

  • Increase TVL by 10%
  • Grow 30 day EOA (unique addresses) by 10%
  • Maintain current average interest rates

If Moonwell receives 1M GLMR, we have estimated results of:

  • Increase TVL by 20%
  • Grow unique addresses by 20%
  • Decrease average interest rates by 0.5%

If Moonwell receives 1.5M GLMR, we have estimated results of:

  • Increase TVL by 30%
  • Grow unique addresses by 30%
  • Decrease average interest rates by 1%

If Moonwell receives 2M GLMR (requested), we have estimated results of:

  • Increase TVL by 40-50%
  • Grow unique addresses by 40-50%
  • Decrease average interest rates by 1-2%

Vision Of Success

The Moonwell community’s vision of success extends beyond simply deploying the ecosystem grant funds in hopes of boosting protocol volume and liquidity. We aspire to distribute the funds strategically to cater to user expectations and needs, fostering an exceptional DeFi experience.

As a point of reference, we will consider our current user base and rate of new user acquisition, alongside TVL, interest rates, and transaction count, to gauge the effectiveness of our strategies. Steady quarter-over-quarter growth is anticipated as we distribute the GLMR grants and progress with protocol development and expansion. That said, from past experience we’ve learned that grant funding and liquidity incentives are not sufficient to guarantee success or achieve specific KPIs or milestones. Market forces outside of our control often have more to do with the growth in TVL, liquidity, and new users in our community than the grant itself.

The grand vision for Moonwell over the next 2 to 5 years is rooted in the sustainability and growth of the protocol beyond the grant period. Our aim is to build a self-sustaining DeFi hub on Moonbeam that thrives on the constant activity of its users, driving robust volume and liquidity. The path to achieving self-sufficiency will rely not just on the efforts of the Moonwell and Moonbeam communities, but also Parity and Polkadot must invest in infrastructure that brings new users into the Dotsama ecosystem. Currently, the exchange, custodian, and wallet support for Dotsama are not ideal, and we believe that Parity must invest in marketing and communications as well in order to achieve more broad success as an ecosystem. As one of the largest projects and communities in the Dotsama ecosystem, we are well equipped to help.

We strive to be a key player in the Dotsama ecosystem and beyond (demonstrated by our upcoming integration with Base), simplifying the lending and borrowing experience for all, irrespective of ones familiarity with blockchain technology. By focusing on continuous innovation and user-centric development, we aim to evolve into a resilient and intuitive DeFi protocol that helps shape the future of finance.

Rationale

This Ecosystem Grant holds tremendous potential for adding value to the Moonbeam Ecosystem, advancing the stated goal of “Maintaining and Growing Activity”.

The Moonwell community’s strategy to distribute the grant to liquidity providers on its Moonbeam deployment aims to catalyze user activity and also directly contribute to growing TVL, an essential metric of success in the DeFi space. Robust lending liquidity strengthens a key DeFi primitive (borrowing/lending) that facilitates greater DOT and ecosystem liquidity, more cross-parachain activity, compounds network effects, attracts new users, lowers interest rates, and enables future innovation through composability. It essentially “oils the gears” of a blossoming DeFi ecosystem like Moonbeam. We believe this multiplier effect is the most efficient way to provide value relative to other uses of the grant.

This proposed liquidity plan will function similarly to the one made possible by Moonwell’s previous Level 3 Ecosystem grant, which powered the Moonbeam Ignite campaign. During Moonbeam Ignite, the Moonbeam ecosystem saw a substantial increase in not only ecosystem TVL, but also the creation of unique ecosystem addresses.

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Moonwell also seeks to leverage interconnected use cases through the Wormhole message passing protocol. This will advance the objective of building connected contracts use cases, facilitating the governance of Moonwell’s deployment on Base from Moonbeam. The Moonwell community also has a strong desire to integrate additional XCM powered XC-20s from across Polkadot, including the likes of Bifrost’s liquid staked vDOT and vGLMR, and Interlay’s xcIBTC. Grant funds could be used to incentivize these new markets, attracting new users from across the Polkadot ecosystem.

By bolstering Moonwell’s capability to be a DeFi hub for Polkadot, this grant aids in increasing ecosystem liquidity and activity, as well as advancing Moonbeam’s vision of interconnected smart contracts, both of which are integral to the evolution of the ecosystem. Consequently, supporting this Ecosystem Grant provides a direct pathway to realizing Moonbeam’s broader goals and fostering a more connected, dynamic, and active DeFi landscape.

Steps to Implement

Estimated Dates: August 2023 - February 2024

  • Grant Request: 2,000,000 GLMR
  • Rate of Distribution: Approx. 100K GLMR/week
  • Incentivized Markets: xcUSDT, xcDOT, GLMR, FRAX, BTC.wh, ETH.wh, USDC.wh

Grant funds will be transferred to the Moonwell Artemis Comptroller contract, afterwhich they will be distributed as rewards to those supplying on Moonwell. To which markets these rewards are directed to, and the rate at which they are distributed, is ultimately decided by the Moonwell community through the governance process. Every four weeks, governance proposals are submitted that have the ability to alter reward speeds (emissions) on Moonwell money markets. Moonwell contributors have created open source tooling that enables the community to dynamically adjust the grant emissions to the various markets supported on the Moonwell protocol based on TVL. This enables the Moonwell protocol to adapt to changing liquidity and TVL in a dynamic manner, and ensures that as liquidity grows over time, the liquidity incentives can adjust to keep lending rates attractive for liquidity providers.

Community governance also enables the Moonwell community to express their opinion about which assets should be incentivized more than others, for example, the community may choose to support native Moonbeam and XCM assets more than bridged assets, to further grow adoption of projects that have chosen the Dotsama ecosystem as their home.

Security and Risk Management

Moonwell has a rigorous process to minimize risk and ensure the highest level of security:

  • Much of Moonwell’s codebase is derived from Compound v2, allowing the protocol to benefit from its time-tested and battle-hardened architecture that has defended billions in value.
  • Every deployed contract or change is meticulously audited by Halborn before being pushed to production. Halborn also provides ongoing monitoring of contracts through their SaaS service.
  • We run an Immunefi bug bounty program with significant rewards for researchers who responsibly disclose issues. This provides an additional layer of defense.
  • Chainlink price feeds give reliable market data to reduce oracle manipulation risks.
  • Contributors like Gauntlet and Warden conduct extensive simulations and risk modeling tailored to Moonwell.
  • We utilize staged testnet deployments to allow comprehensive testing and review before going live.
  • Emergency pause functionality (Moonwell Pause Gaurdians) can quickly pause markets if and when issues are detected, minimizing damage.
  • The protocol is upgraded through a decentralized governance process to ensure community alignment.

With diligent smart contract auditing, staged deployments, vigilant monitoring, and emergency controls, we aim to uphold the highest standards of security and reliability. Our practices are designed to maximize protection against exploits while empowering the community to guide upgrades safely.

A Primer on Moonwell Governance

Moonwell Governance is designed to be fully open and decentralized, with the community in control of the protocol’s future. Some key points:

  • Voting power is proportional to held, staked, or delegated WELL. 1 WELL = 1 vote.
  • All governance proposals and votes happen transparently onchain via the Moonwell Governance Portal or Snapshot Portal. There is full visibility into governance activity.
  • To date, over 60 onchain Moonwell Improvement Proposals have been successfully passed through governance, demonstrating one of the most active and productive governance processes in the Dotsama ecosystem.
  • Quorum and approval thresholds ensure every proposal has broad community alignment before passing.
  • Moonwell Governance sees wide, diverse participation, with ~200-300 unique voters per proposal on average, along with engaged delegates and contributors.
  • Anyone can get involved in governance and share ideas by creating posts on the Moonwell Governance Forum, regardless of WELL holdings.

To learn more about Moonwell Governance, please consult our Documentation along with these blog posts:

Conclusion

We at Moonwell would like to express our deepest gratitude to the Moonbeam community for the invaluable support and grant funding we have received in the past year. Your continued belief in our vision and your commitment to fostering innovation have truly made a difference. We are extremely proud to be part of this vibrant community and the groundbreaking work it encourages. We look forward to many more years ahead.

Updates

Based on community feedback since original posting, we have updated the following:

  • Inclusion of milestones dependent on GLMR amount received
  • Clarified primary goal: Maintaining and Growing Activity
  • Expanded upon intended collaborations in “Use of Grant” section
  • Expanded “Team Experience” section
  • Added a Security and Risk Management section
  • Added a Primer on Moonwell Governance
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hey, coolhorsegirl, Thank You for your proposal!

I have some questions that the community is likely to have. Thank You in advance for your answers and your time!

  1. You mentioned plans to integrate XC-20s from Bifrost, Interlay. could you please clarify if you have specific plans to attract liquidity incentives, such as making a proposal to Bifrost, Interlay, or other projects, to encourage participation and increase liquidity in Moonwell’s protocol?

  2. What does the ideal scenario look like for Moonwell to exist and function perfectly without liquidity incentives?

  3. If the grant amount you receive turns out to be less than 2M, how would this impact your plans and strategy moving forward?

  4. Have you considered the possibility of using liquidity incentives for a longer duration, like 9 or 12 months, instead of the proposed 6 months? how do you think this longer incentive period might impact Moonwell’s ability to achieve its goals?

  5. With a successful track record of growth and liquidity increase from the previous grant, what are the specific KPIs and milestones you plan to achieve with the new grant funding?

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Hey @turrizt! Thanks for your questions.

There have been requests within the Moonwell community to extend support for additional XC-20 tokens, especially those from Bifrost and Interlay. This can be seen from the positive response to Interlay’s “iBTC x Moonwell: Ay Path to Truly Decentralized Bitcoin Lending” post on the Moonwell Governance Forum, as well as calls for Bifrost asset support in the Moonwell Discord. As of now, we haven’t outlined specific plans to garner liquidity incentives from these projects. However, the Moonwell protocol is equipped to leverage GLMR from this grant, along with WELL incentives, to incentivize these potential markets. (Note that Moonwell currently only supports WELL and GLMR as reward tokens.)

Moonwell operating optimally without external liquidity incentives would mean that the protocol has built a strong reputation for security, reliability, and competitive rates. Users would feel confident to lend and borrow on the platform because of the robust market activity, leading to deeper liquidity pools. This would imply that our user base has grown substantially and we’re attracting a significant volume of transactions.

One of the catalysts for an increase in liquidity on Moonwell without incentives would be the activation of new markets for LSTs (liquid staking tokens). LSTs will drive more liquidity of liquid staked GLMR and xcDOT, as well as more demand for the underlying versions of the same, as stakers will want to leverage their positions to increase their staking yield. We can see this natural evolution of lending protocols to support leverage of LSTs on other networks. The Moonwell community is excited about the opportunity to onboard high quality LSTs, so long as they don’t introduce unnecessary risk to the protocol.

If the received grant turns out to be less than the requested 2M GLMR, we will recalibrate our distribution plans while keeping the objective the same: fostering liquidity and user growth. The pace and scale of distribution will have to be adjusted to suit the actual grant size, proportionally impacting its ability to achieve the intended objectives of liquidity and userbase expansion.

The Moonwell community has created open source tooling that helps adjust the liquidity incentives dynamically based on the size of the grant through onchain governance, so the protocol can easily adapt to a smaller grant size; however, liquidity providers may or may not want to provide liquidity at lower rates.

A reduced grant of 1.5 million GLMR (distributed at 75K GLMR per week) could yield estimated Supply APYs of:

  • GLMR 5.45%, xcUSDT 7.7%, xcDOT 11.45%, FRAX 9.2%, ETH.wh 5.45%, BTC.wh 3.95%, USDC.wh 7.7%

A further reduced grant of 1 million GLMR (distributed at 50K GLMR per week) could yield estimated Supply APYs of:

  • GLMR 3.7%, xcUSDT 5.2%, xcDOT 7.7%, FRAX 6.2%, ETH.wh 3.7%, BTC.wh 2.7%, USDC.wh 5.2%

These calculations directly scale down the GLMR incentive component of the Total Supply APYs by the reduced grant amount, while leaving the WELL contribution constant. It’s also important to note that lower Supply APYs will not only correlate with lower total liquidity, but also with higher interest rates for borrowers.

Stretching the proposed liquidity incentive program beyond 6 months would resemble the scenario above of receiving a reduced amount of GLMR. This extension would entail distributing less GLMR per week, reducing the amount and effectiveness of the incentives.

It should be noted that the Moonwell community has been an excellent steward of the past grant (that for Moonbeam Ignite). While the past grant was only intended to last for 6 months, the community was able to extend grant funding for 9 months, which left all of the Tranche 1 grant budget available to other ecosystem projects. This conservative approach has enabled Moonwell to retain liquidity while conserving grant funding and enabling other projects to launch.

Leveraging Moonwell’s proven track record of growth and successful liquidity expansion from previous grants, we are all set to outline a few specific KPIs and milestones we aim to achieve with this new round of grant funding. Simultaneously, we are acutely aware that many market forces remain beyond our immediate control, as demonstrated by the unforeseen collapse of FTX following our last grant reception. While we can’t offer guarantees, we can however maintain a dedicated focus on reaching the below targeted outcomes:

  • Increase Total Value Locked: We would like to see TVL grow by 30-50% by the end of the 6 month liquidity incentive program. This robust target underscores our belief in the reach of our protocol and the effectiveness of the proposed GLMR incentives.
  • User Growth and Retention: We’ve set our sights on a 30-50% expansion in user acquisition and retention rates. These targets will be gauged through key metrics, such as daily active users and monthly unique Ethereum addresses, providing a clear measure of an engaged and growing community.
  • Interest Rate Optimization: We aim to maintain or lower the current interest rates through enhanced liquidity, benefiting borrowers and helping to grow TVL and adoption more broadly across the ecosystem.
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Hi, Harrison from DAM here. As we participated in the last round of ecosystem grants, we will not be directly submitting a proposal in this round. Instead, we will be encouraging our community to support other proposals.

Moonwell is clearly one of Moonbeam’s flagship projects. It deserves a lot of credit for being the largest project by TVL pretty much since inception and for the community it has developed. I’ve also had the opportunity to meet several of Moonwell’s core contributors IRL over the past year.

But in reviewing this proposal, I’d be remiss not to ask why there is such an emphasis on incentivizing markets for wrapped assets when wrapped assets have poor track records across UX, composability, and security?

Related to the above, and I am clearly biased, it would be great to see more markets in this proposal for native Moonbeam assets such as d2o.

The Moonbeam community should consider the implications of awarding GLMR to proposals nearly exclusively promoting wrapped assets - it disincentivizes issuing native assets on Moonbeam, which is a key mechanism to increase ecosystem value.

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Hey Harrison! Thank you for the kind words and congratulations on the success of d2o to date, including the support for the asset on Orbiter One. I also enjoyed watching your recent Space Monkeys interview and am excited to see what DAM builds next.

The Moonwell community also shares your enthusiasm for native assets, especially the unique capabilities of XC-20s. XC-20s offer significant advantages in composability, security (eliminating the need for bridges), and interoperability, which all together set the stage for robust cross-chain activities within the Moonbeam and greater Polkadot ecosystem. They embody cross-chain interoperability, functioning as regular ERC-20s within Moonbeam and Moonriver, while also being readily transferable to other parachains. This distinctive quality makes XC-20s a cornerstone of the interconnected ecosystem that Moonbeam and Moonriver aim to build.

With all that being said, it’s important to note that a majority of the assets currently supported and incentivized on Moonwell Artemis are, in fact, native to Moonbeam, including xcDOT, xcUSDT, GLMR, and FRAX. As for the three wrapped assets currently supported on Moonwell Artemis, the reality is that their native counterparts either don’t exist yet (such as xcETH or xcUSDC) or they currently lack the necessary liquidity and/or infrastructure to be safely supported (like xciBTC). While wrapped assets are not perfect, they do offer a practical avenue to introduce liquidity from other ecosystems and diversify options for those using Moonwell to lend and borrow.

To further enhance the safe inclusion of new assets on Moonwell, including native and XC-20 assets, contributors from Gauntlet Network plan to introduce an updated version of their “Moonwell Asset Listing Framework”. This framework will further detail necessary guidelines to safely support an asset on Moonwell, considering factors like Chainlink oracle support, volatility metrics, sufficient ecosystem liquidity, centralization vectors, and smart contract risks. The forthcoming Asset Listing Framework v2 should serve as a comprehensive guide for anyone wishing to introduce new markets to the protocol through Moonwell Governance.

Thank you once again for your insightful feedback. Your viewpoint is invaluable as the Moonwell community continues to refine its strategies and maximize the potential of both the protocol and the broader Moonbeam ecosystem.

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From the grants last fall there was a focus on supporting Stella with Wormhole assets. Seeing that Stellaswap, Beamswap, and Uniswap (via liquidity managers) are all applying for grants - If all end up using the assets Moonwell supports (wormhole), is there an ability for Moonwell to work with all 3 of them?

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Hey Mike! It’s great to see that Beamswap has recently transitioned to fully supporting and incentivizing Wormhole-wrapped assets. This turn away from Multichain and toward Wormhole contributes positively to both Moonwell and the broader Moonbeam ecosystem by:

  1. Centralizing liquidity: By joining other projects in supporting Wormhole-wrapped assets, Beamswap is helping to unify ecosystem liquidity rather than spreading it thin across multiple types of bridged tokens. This eases the issue of liquidity fragmentation and makes things less confusing to new arrivals on Moonbeam who may not know the differences between .multi and .wh.
  2. Reducing Slippage: An advantage of a larger, unified liquidity pool is that it decreases slippage—the gap between the expected trade price and the executed trade price. Lower slippage leads to more efficient markets. It means that those looking to swap tokens can handle larger transaction volumes without significantly moving the price. It also means more cost-effective liquidations, a key factor for Moonwell as liquidations play a vital role in maintaining the health and stability of the protocol.

On the subject of liquidations, it’s worth noting that Stellaswap, Uniswap, and Beamswap (being a Uniswap fork) all support flash loans. This support is also important for Moonwell as it leads to more efficient liquidations of undercollateralized positions. Flash loans allow for liquidators to borrow and repay within a single transaction, effectively democratizing the liquidation process.

Lastly, the Moonwell community is eager to collaborate with Beamswap, Stellaswap, or any other DEX that secures grant funding to both help create and get the word out about the resulting incentives campaign.

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Sounds like a positive on all fronts, good stuff, me likey

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Hi Moonwell team,

thank you for submitting your proposal. After reviewing the proposal and reviewing what online information about the team and their past projects is available, the Grant Committee has the following questions and feedback. The following feedback is aligned with the sections of your proposal.

Goal:

It is noted that the grant seeks to improve TVL and help build connected contracts use cases. We specifically would like teams to pick one (and only one) of the following two options as the main goal for their application:

  • Maintain and Grow Activity (active users, transactions, TVL)

OR

  • Building Connected Contracts Use Cases (using XCM and other message passing protocols)

Will you please pick which one you feel most closely fits your proposal?

USE OF GRANT

In is stated in this section that: “Engaging with other grant recipients, the Moonwell community will collaboratively promote these incentives,”

Will you please provide details on the specifics of these engagements, which teams, what types of promotions, and the level of collaborative discussions had to date?

Is it proposed that any of the grant will be used for these purposes (even if in the form of special incentives to partners that Moonwell collaborates with)?

Motivation

“By endorsing this grant, the Moonbeam community is not only backing a proven model of success” Will you please provide some examples of the success directly attributed to the use of grant funds?

Every GLMR that the community ends up voting for Moonwell to receive, is a GLMR less that another project might receive, so it would be useful to understand how this proposal will provide the most value to the community — outside of the info provided in the KPIs. Why is it important that grant funds be put to rewarding liquidity providers over other uses?

Project Overview and Relevant KPIs

Thank you for including your code audits in the submission. It’s also notable that Moonwell also has Immunifi bug bounties. However, in the last tranche one of the teams that submitted a proposal had a bug that was exploited leading to loss of funds, due to an issue with a code upgrade. Will you please detail the steps and process which Moonwell uses to decrease the risk of such an event on Moonwell DeFi services?

How does Moonwell incentivize liquidity providers outside of grant funds? Is there a long term strategy to develop self-sustaining liquidity pools that don’t rely on the use of grant funds?

In the historic KPI graphs provided, it’s appears that there is a cliff when the liquidity incentives run dry. Is it possible that grant funds entirely consumed by liquidity providers does not support long-term growth and the long-term trendline would remain the same without liquidity incentives, or do you have any KPIs or analysis to indicate otherwise?

Team Experience

Please provide full details and background on all key team members as per the template “include names of team members and relevant experience” It’s understood that this information may have been included in previous grant requests, however, the community may not be aware of team changes, and there may be new community members who are new to Moonwell.

Timeline and Milestones for Use of Grant

The referenced Grant Transparency Report was last updated in Dec 2022, and the Grant Dashboard only provides high-level information on emissions. The Moonwell governance portal does provide information on emissions, but it is not user friendly (one must look through each proposal to determine each emissions during the emissions period). Is there aggregate information in an easy to read format that shows the changes of emissions of the last grant which Moonwell received, or is this something that could be provided in the future?

Please advise under what conditions Moonwell might pause and restart emissions and how the final decision would be made?

Vision of Success

A reference has been provided in the vision of success, but no definition of success onward from that reference point, other than anticipated QoQ growth. Please provide a finer definition of Moonwell’s definition of success, using the SMART framework.

Rationale
Will you please provide any details of the impact to Moonwell if the community does not provide a grant in this tranche?

Steps to Implement

It is understood that Moonwell governance is at the end of the decision making for where grant funds should be allocated if the proposal is successful, but it would be helpful to understand a previous circumstance where emissions were changed on target LPs by the Moonwell community based on where the community saw the need. In other words, it’s not clear why the allocations cannot be predetermined, and the reasons and occasions on why they would need to be changed. If there are certain criteria that establish the allocation at least at a baseline, then that should be provided. If there are criteria that would necessitate a governance proposal for a change, then those criteria should be provided.

Please provide an understanding to the community of WELL decentralization and governance / voting process since it forms such a key factor in determining where the end allocation of grant incentives are applied Moonwell markets.

UPDATES TO PROPOSAL

Please note that you have until July 14th, 11:59 PM UTC to make changes to your proposal. A list of changes based on community feedback should be added to the “Updates’’ section of the proposal and any changes should be reflected in the text of the proposal itself

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Hello Moonwell,

  1. Could you kindly provide specific Key Performance Indicators (KPIs) against which the grant achievements will be evaluated? For instance, X Total Value Locked (TVL) within X timeframe, X number of liquidations, X number of new users. I believe TVL alone is not a comprehensive metric that reflects the utilization of your product.

  2. Regarding the previous discussions on the importance of deep liquidity for facilitating liquidations, could you please share the number of liquidations over $10,000 and $50,000+ that Moonwell has conducted since September 2022?

  3. I noticed that Moonwell is already a leading TVL product on Moonbeam, as evidenced by the data on https://defillama.com/protocol/moonwell-artemis. In light of this, could you explain why there is a need for you to request additional GLMR?

  4. Upon reviewing your DAPP, it seems that a significant portion of the APY is supported by Moonbeam Grants. Considering that your protocol has raised over $20 million, this raises some concerns. How do you plan to achieve self-sufficiency and become less reliant on external funding?

Thank you.

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Hi GAMA!

  1. Could you kindly provide specific Key Performance Indicators (KPIs) against which the grant achievements will be evaluated? For instance, X Total Value Locked (TVL) within X timeframe, X number of liquidations, X number of new users. I believe TVL alone is not a comprehensive metric that reflects the utilization of your product.

From past experience, we’ve learned that grant funding and liquidity incentives are not sufficient to guarantee success or achieve specific KPIs or milestones. Market forces outside of our control often have more to do with the growth in TVL, liquidity, and new users in our community than the grant itself. That being said, we can think of liquidity incentives as a necessary catalyst for growth. An analogy to consider is growing a plant: it needs soil, fertilizer, light, and water to grow. The grant funding might be similar to adding fertilizer to the soil. If the sun, water, and other conditions are favorable, the plant will flourish, however, if there is no sunlight, the plant won’t grow no matter how much fertilizer you provide.

It would be dishonest to the community to predict specific KPIs that might be achieved with grant funding, because it will depend more on market conditions and other ecosystem infrastructure, such as exchange, custodian, on/off-ramp and wallet support, however, we can see that liquidity incentives have produced successful outcomes during the launch of Moonwell Apollo ($350M TVL) and Moonwell Artemis ($500M TVL) when market conditions were otherwise more favorable.

Further, our community is committed to collaboration with other ecosystem projects and education about the incentives that are available. Our past success in leadership during Harvest Moon and Moonbeam Ignite, and our proven track record of aligning other ecosystem projects with a shared message for the broader Dotsama community will be key to making the most of this grant.

  1. Regarding the previous discussions on the importance of deep liquidity for facilitating liquidations, could you please share the number of liquidations over $10,000 and $50,000+ that Moonwell has conducted since September 2022?

Since September 2022, there have been:

  • 12 liquidations over $10,000
  • 3 liquidations over $50,000

You can find the complete history of liquidation events on Moonwell Artemis here.

  1. I noticed that Moonwell is already a leading TVL product on Moonbeam, as evidenced by the data on https://defillama.com/protocol/moonwell-artemis. In light of this, could you explain why there is a need for you to request additional GLMR?

Additional GLMR incentives can help to expand usage and TVL beyond current levels. Our 2022 grant focused on launching new markets - this grant is focused on doubling down on growth and adoption in our established markets and making sure the Moonwell community has the resources needed to onboard and incentivize new assets like stGLMR, vGLMR, xciBTC, etc. There is still substantial room for growth.

In addition, deeper liquidity in these markets will translate directly into lower interest rates for borrowers, which makes Moonbeam a more attractive ecosystem for all.

Despite having the highest TVL in the ecosystem, we have received less grant funding than StellaSwap and many other top ecosystem projects, and intentionally did not apply for tranche 1 to allow other ecosystem projects to receive grant funding. We believe this is due to our community’s wise use of grant funds. We are able to attract and retain liquidity providers, even though the incentives might not be as high as other projects.

  1. Upon reviewing your DAPP, it seems that a significant portion of the APY is supported by Moonbeam Grants. Considering that your protocol has raised over $20 million, this raises some concerns. How do you plan to achieve self-sufficiency and become less reliant on external funding?

The benefit of raising capital outside of grant funding is that 100% of our software development, risk management, security, and other expenses can be funded by private investors rather than grant funding. This means the Moonwell protocol meets the highest security and risk management standards and will be able to use 100% of grant funds as liquidity incentives. As a community, we are proud of the fact that we have distributed 100% of grant funds to users of the Moonwell protocol, and no grant funding has been spent on software development and other expenses.

There are no ecosystem projects with significant TVL that have not received grant funding, so it is a bit unfair to judge Moonwell by a different standard simply because the protocol is well funded from private sources. In fact, this outside funding has allowed the community to create a higher quality product than would otherwise exist with grant funding alone.

The path to achieving self-sufficiency will rely not just on the efforts of the Moonwell and Moonbeam communities, but also Parity and Polkadot must invest in infrastructure that brings new users into the Dotsama ecosystem. Currently, the exchange, custodian, and wallet support for Dotsama are not ideal, and we believe that Parity must invest in marketing and communications as well in order to achieve more broad success as an ecosystem. As one of the largest projects and communities in the Dotsama ecosystem, we are well equipped to help.

Thanks for giving me the opportunity to answer your questions!

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I suggest you guys would take into grant post requirements which state that clear measurable things need to be posted: Ecosystem Grants Program: Tranche 2 Update

  • Each application should have clear milestones and targets. It is recommended a minimum of three milestones. The GLMR distributions will be tied to these milestones
  • Teams should keep in mind that while they may ask for the maximum amount (2M GLMR), the community may not give them the full amount during the snapshot vote. In fact, all 4 of the grant teams for Tranche 1 got less than they asked for. When setting targets, teams pro-rate those targets in 4 bands; i.e.

If we receive 500K GLMR, we will aim to achieve X target
If we receive 1M GLMR, we will aim to achieve Y target
If we receive 1.5M GLMR, we will aim to achieve Z target
If we receive 2M GLMR, we will aim to achieve A target.

The Foundation will use these targets as milestones in the grant agreement to act as a gatekeeper for releasing funds.

  • Teams should indicate in their proposal when they are planning to launch their protocol , emission program or other deliverable that is tied to the grant
  • Teams that receive the grant should update the community via the forums on progress on a regular basis; a minimum of 1 update per month is required.
  • In addition, the Foundation may require the team to share performance statistics and metrics on a regular basis.

I am happy with other answers and wish you best of luck with the proposal

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Hey @Jim_CertHum! Thanks for taking the time to share this thorough and valuable feedback with the Moonwell community. I’ve done my best to answer all of your questions, but please advise if anything remains unclear or if you have any further thoughts or questions. Cheers!

It is noted that the grant seeks to improve TVL and help build connected contracts use cases. We specifically would like teams to pick one (and only one) of the following two options as the main goal for their application: Maintain and Grow Activity (active users, transactions, TVL) OR
Building Connected Contracts Use Cases (using XCM and other message passing protocols). Will you please pick which one you feel most closely fits your proposal?

The primary goal of this proposal is “Maintaining and Growing Activity”. While the grant funds will be used entirely for this purpose, we wanted the Moonbeam community to know that contributors to Moonwell are building a connected contracts use case as well, which will not be funded by the grant.

In is stated in this section that: “Engaging with other grant recipients, the Moonwell community will collaboratively promote these incentives,” Will you please provide details on the specifics of these engagements, which teams, what types of promotions, and the level of collaborative discussions had to date?

The Moonwell community plans to engage with other grant recipients to both create and promote a liquidity incentives campaign, similar to Moonbeam Ignite. While we don’t have specific collaborations confirmed yet (as we don’t know who the grant recipients will ultimately be), we are excited to partner with other projects to co-promote liquidity incentives, similar to the collaborative success seen with previous campaigns (Moonbeam Ignite, Harvest Moonbeam).

Potential promotions could include:

  • Co-hosting AMAs and educational sessions to increase awareness
  • Weekly meetings with participating projects to ensure alignment
  • Organizing collaborative NFT campaigns that require onchain ecosystem activity
  • Cross-community Discord events such as game nights, raffles, trivia, and giveaways
  • Creating joint social media campaigns and update threads to spread awareness
  • Contests to incentivize the creation of art, videos, infographics, and other promotional materials that showcase the campaign and ecosystem

Like with Moonbeam Ignite, the Moonwell community is committed to spearheading creative and engaging promotions alongside other grant recipients with the collective goal of growing awareness, activity, and liquidity for Moonbeam. We are confident this community-driven, collaborative approach can successfully increase adoption of and usage in the ecosystem.

Is it proposed that any of the grant will be used for these purposes (even if in the form of special incentives to partners that Moonwell collaborates with?

To be completely clear, none of the requested grant funds would be used for promotional purposes or special incentives to partners. 100% of any received grant will go directly to liquidity providers on Moonwell as outlined in our proposal. This has been the case with all ecosystem grant funds Moonwell has received to date.

As part of a collaborative incentives campaign with other projects, the Moonwell community is prepared to separately fund promotional activities, as was the case during Moonbeam Ignite. This could potentially include:

  • Commissioning artists and designers to create campaign graphics, videos, logos, and NFT artwork
  • Funding giveaways like swag, token prizes, gift cards
  • Compensating Moonwell contributors and community members to create and share content like articles, threads, and videos highlighting the incentive program

All of these activities would be resourced independently by the Moonwell community without utilizing any of the Moonbeam ecosystem grant. The grant itself will solely be distributed to Moonwell liquidity providers to increase TVL and activity. We are committed to full transparency on grant usage.

By endorsing this grant, the Moonbeam community is not only backing a proven model of success” Will you please provide some examples of the success directly attributed to the use of grant funds?

Certainly. The previous Moonbeam grant was a crucial component in various recent successes:

  • It allowed Moonwell to bootstrap initial liquidity for Wormhole-wrapped assets like WBTC, ETH, and USDC, helping the ecosystem to recover post-Nomad and establishing Wormhole as a major player in the Moonbeam ecosystem.

  • It enabled the launch of a new xcUSDT market which brought activity and value from the wider Polkadot ecosystem into Moonbeam.

  • The incentives helped to maintain Moonwell’s position as the top DeFi protocol on Polkadot, in terms of total value locked

  • Moonwell’s leadership in the Ignite incentives campaign brought ecosystem-wide benefits in terms of new users, TVL, and activity between projects. We didn’t see a similar campaign for Tranche 1, largely due to Moonwell not being a grant recipient and other projects not utilizing grant funds.

    • In April 2023, during the Moonbeam Ignite GALXE NFT campaign which the Moonwell community spearheaded, we saw significant growth in Moonwell usage metrics:

    • Unique address count nearly tripled, rising from 4,899 in March to 12,131 in April.

    • Total transaction count rose significantly month-over-month, increasing from 27,127 transactions in March to 44,706 in April.

  • Grant-incentivized liquidity enabled new Moonwell integrations like ZooDAO and Qoda, providing new DeFi opportunities in the Moonbeam ecosystem.

In summary, the previous grant was crucial for building initial liquidity in new markets, maintaining substantial TVL, facilitating ecosystem collaborations, supporting borrowing activity, and strengthening Moonwell’s position as the top DeFi hub on Polkadot - all of which are critical to advancing adoption and maturity.

Every GLMR that the community ends up voting for Moonwell to receive, is a GLMR less that another project might receive, so it would be useful to understand how this proposal will provide the most value to the community — outside of the info provided in the KPIs. Why is it important that grant funds be put to rewarding liquidity providers over other uses?

The Moonwell community understands that GLMR is a limited resource, is extremely thankful for previous grant funding, and wants to ensure that our proposal provides maximum benefit to Moonbeam, especially as more projects than ever apply for grants. As a community, we’ve intentionally stretched the Moonbeam Ignite grant to last for 9 months, instead of the original 6 that was planned, so that other, smaller ecosystem projects could take full advantage of tranche 1 grants. We recognize that Moonwell cannot succeed long-term without a robust ecosystem around it.

To answer your question, liquidity providers now have a wide variety of opportunities to put their DOT, GLMR, and other Dotsama ecosystem tokens to productive use, across many parachains. As an ecosystem, Moonbeam will become more attractive to DOT holders in particular, by offering lower borrowing interest rates, as many DOT holders would like to use leverage. More liquidity of xcDOT on Moonwell translates directly into lower borrowing interest rates, which makes the Moonbeam ecosystem look more attractive for DOT holders, and gives them a viable alternative to simply staking DOT or borrowing against it on another parachain. In addition, enabling the Moonwell community to support new liquid staking markets will also attract more DOT and GLMR holders, as now they can earn a staking reward while simply lending, or for more advanced traders, using leverage.

Moreover, a vibrant lending ecosystem enables the development of new composable services as we’ve already seen with projects like ZooDAO, Qoda, and Superhedge building on top of Moonwell. These integrations expand the capabilities of the ecosystem.

TLDR: Robust lending liquidity strengthens a key DeFi primitive (borrowing/lending) that facilitates greater DOT and ecosystem liquidity, more cross-parachain activity, compounds network effects, attracts new users, and enables future innovation through composability. It essentially “oils the gears” of a blossoming DeFi ecosystem like Moonbeam. We believe this multiplier effect is the most efficient way to provide value relative to other uses of the grant.

Thank you for including your code audits in the submission. It’s also notable that Moonwell also has Immunifi bug bounties. However, in the last tranche one of the teams that submitted a proposal had a bug that was exploited leading to loss of funds, due to an issue with a code upgrade. Will you please detail the steps and process which Moonwell uses to decrease the risk of such an event on Moonwell DeFi services?

Moonwell has a rigorous process to minimize risk and ensure the highest level of security:

  • Much of Moonwell’s codebase is derived from Compound v2, allowing the protocol to benefit from its time-tested and battle-hardened architecture that has defended billions in value.
  • Every deployed contract or change is meticulously audited by Halborn before being pushed to production. Halborn also provides ongoing monitoring of contracts through their SaaS service.
  • We run an Immunefi bug bounty program with significant rewards for researchers who responsibly disclose issues. This provides an additional layer of defense.
  • Chainlink price feeds give reliable market data to reduce oracle manipulation risks.
  • Contributors like Gauntlet and Warden conduct extensive simulations and risk modeling tailored to Moonwell.
  • We utilize staged testnet deployments to allow comprehensive testing and review before going live.
  • Emergency pause functionality (Moonwell Pause Gaurdians) can quickly pause markets if and when issues are detected, minimizing damage.
  • The protocol is upgraded through a decentralized governance process to ensure community alignment.

With diligent smart contract auditing, staged deployments, vigilant monitoring, and emergency controls, we aim to uphold the highest standards of security and reliability. Our practices are designed to maximize protection against exploits while empowering the community to guide upgrades safely.

How does Moonwell incentivize liquidity providers outside of grant funds? Is there a long term strategy to develop self-sustaining liquidity pools that don’t rely on the use of grant funds?

The WELL token provides a core incentive to Moonwell liquidity providers. Additionally, fees generated from borrowing activity compensate liquidity providers, so as borrowing volume grows, so do fee-based rewards. Building long-term demand for borrowing requires education, partnerships, ecosystem development/adoption, and collaboration with other protocols building on Moonwell. Grant funds help to foster liquidity growth, but they sit alongside a variety of other mechanisms used to cultivate organic, sustainable liquidity and a thriving ecosystem around Moonwell long-term. We aim to see consistent lending activity with or without grants.

In the historic KPI graphs provided, it’s appears that there is a cliff when the liquidity incentives run dry. Is it possible that grant funds entirely consumed by liquidity providers does not support long-term growth and the long-term trendline would remain the same without liquidity incentives, or do you have any KPIs or analysis to indicate otherwise?

I would encourage interested people in the community to read Gauntlet’s analysis of liquidity mining, which was recently published in June, 2023. To quote a key part of the analysis that is also relevant for the Moonbeam ecosystem:

“Focusing on the decreasing volume or TVL after the incentives period finished, it may appear the incentives program had been ineffective in creating sticky liquidity or any long-term effect. From this analysis, it would be natural for Uniswap Foundation to conclude that a liquidity mining rewards program is ineffective at generating a long-term “flywheel” of sustained lift in liquidity and volume for their protocol.

Gauntlet has re-examined the data from the Optimism liquidity mining experiments and has arrived at a different conclusion. For some pools, the liquidity mining program does appear to have a long term effect. Our analysis identified and attempted to correct two primary flaws in the existing research:

  • The existing research does not normalize for overall market trends in similar pools not involved in the experiment (i.e. a control group)
  • The existing research did not analyze trading volume enabled by improvements of liquidity

Based on Gauntlet’s analysis, we disagree with the conclusion that the liquidity mining program on Optimism was ineffective at driving sustained improvements to liquidity and volume for all pools. We also expanded upon Zelos’s research through a discussion of the sustained lift that was generated as a result of this program.”

An important thing to note here is that many aspects of past liquidity mining campaigns are confounded by market events, such as the collapse of Terra/LUNA in early 2022 and the collapse of FTX in late 2022. It is inaccurate to look at overall DeFi liquidity that decreased after November 2022, and attribute it to the expiration of liquidity incentives, and not the collapse of FTX. In fact, the Moonwell community has had consistent liquidity emissions from November, 2022 when Moonbeam Ignite began, which will continue until August 2023, however, market forces outside our control have had a negative impact on TVL.

We believe ecosystem incentives have a compounding effect over time, rather than short-lived benefits. Each incentivized period brings in new users, activity, and liquidity into the ecosystem. A portion of these stay engaged beyond that specific incentive window, typically leading to a higher baseline level before the next incentive round.

While growth rates may fluctuate, we are committed to working toward an upward trajectory in adoption by continually innovating, expanding utility, and fostering partnerships. Our ultimate goal is to minimize reliance on external incentives over time as organic activity takes its place. We are confident that well-structured incentives have lasting positive impacts that compound, rather than only temporary gains that fully evaporate.

Please provide full details and background on all key team members as per the template “include names of team members and relevant experience” It’s understood that this information may have been included in previous grant requests, however, the community may not be aware of team changes, and there may be new community members who are new to Moonwell.

Moonwell is supported by a diverse set of contributing teams including:

  • Lunar Labs - Founding contributors consisting of Luke Youngblood (former Coinbase Sr. Staff Engineer & AWS Principal Engineer, built Coinbase staking rewards infrastructure), Eli Clendenin (“Majin”, community and communications lead), Octavius (fullstack developer), x0s0l (fullstack developer and Solarbeam co-founder), DevPupo and KidLiberty (frontend developers)
  • Gauntlet Network - Onchain risk modeling, risk management, and protocol optimization
  • Halborn Security - End-to-end auditing and real-time monitoring services
  • Warden Finance - Risk modeling and risk management
  • Rome Blockchain Labs - Technical implementation assistance
  • VectorDAO - Collective of application designers and developers

Advisors such as 0xMaki, Brandon Kase, Adam Levine, Justin Lee, and Mason Borda provide guidance.

Additionally, Moonwell has a global and decentralized community of engaged builders, liquidity providers, developers, writers, designers, delegates, and community members who actively shape and power the protocol.

This diverse composition of dedicated teams, advisors, and community members collaborating through decentralized governance allows Moonwell to continuously evolve with the ecosystem’s needs.

The referenced Grant Transparency Report was last updated in Dec 2022, and the Grant Dashboard only provides high-level information on emissions. The Moonwell governance portal does provide information on emissions, but it is not user friendly (one must look through each proposal to determine each emissions during the emissions period). Is there aggregate information in an easy to read format that shows the changes of emissions of the last grant which Moonwell received, or is this something that could be provided in the future?

The Moonwell community can commit to providing monthly updates regarding emissions and grant usage on the Moonbeam Forum, as recommended in the Tranche 2 Update post: “Teams that receive the grant should update the community via the forums on progress on a regular basis; a minimum of 1 update per month is required.

Please advise under what conditions Moonwell might pause and restart emissions and how the final decision would be made?

The Moonwell community has the ability to pause emissions if necessary through governance, but this would only be used in exceptional circumstances. Some situations where this could occur:

  • Bridge exploit - Should an exploit drain significant liquidity from a bridge, as seen during the recent Multichain incident, emissions can be paused on affected markets, as seen with MIP-61.
  • Protocol exploit - If a security vulnerability is exploited, emissions may be paused while it is addressed to prevent further damage.
  • Technical instability - If there are severe issues with protocol performance or reliability, emissions could be paused while the problem is addressed.
  • Oracle failure - If price oracles for assets become inaccurate, pausing emissions would reduce risk until feeds are restored.

A reference has been provided in the vision of success, but no definition of success onward from that reference point, other than anticipated QoQ growth. Please provide a finer definition of Moonwell’s definition of success, using the SMART framework.

I’m going to quote @Trilemma’s previous answer to @GAMA in regard to providing specific KPIs for evaluation. I believe that his statement also applies here when requesting that we provide precise metrics for success under a rigid framework like SMART.

"From past experience, we’ve learned that grant funding and liquidity incentives are not sufficient to guarantee success or achieve specific KPIs or milestones. Market forces outside of our control often have more to do with the growth in TVL, liquidity, and new users in our community than the grant itself. That being said, we can think of liquidity incentives as a necessary catalyst for growth. An analogy to consider is growing a plant: it needs soil, fertilizer, light, and water to grow. The grant funding might be similar to adding fertilizer to the soil. If the sun, water, and other conditions are favorable, the plant will flourish, however, if there is no sunlight, the plant won’t grow no matter how much fertilizer you provide.

It would be dishonest to the community to predict specific KPIs that might be achieved with grant funding, because it will depend more on market conditions and other ecosystem infrastructure, such as exchange, custodian, on/off-ramp and wallet support, however, we can see that liquidity incentives have produced successful outcomes during the launch of Moonwell Apollo ($350M TVL) and Moonwell Artemis ($500M TVL) when market conditions were otherwise more favorable.

Further, our community is committed to collaboration with other ecosystem projects and education about the incentives that are available. Our past success in leadership during Harvest Moon and Moonbeam Ignite, and our proven track record of aligning other ecosystem projects with a shared message for the broader Dotsama community will be key to making the most of this grant."

Will you please provide any details of the impact to Moonwell if the community does not provide a grant in this tranche?

If Moonwell does not receive a grant in this tranche, it would hinder our ability to incentivize liquidity and activity in the short term. This could lead to multiple impacts:

  • Slower TVL growth - Less attractive incentives would likely slow the growth rate of TVL across Moonwell markets.
  • Higher interest rates - Less liquidity results in lower utilization and higher interest rates, making Moonwell less appealing to borrowers.
  • Missed opportunities - Moonwell will soon be deploying on Base, Coinbase’s new Ethereum L2. This is a fantastic opportunity to expose Coinbase’s 100m+ registered users to Moonbeam and native assets like GLMR for the first time. However, if rates on Moonbeam are not attractive, they may choose not to provide liquidity, borrow, or further explore the ecosystem.

It is understood that Moonwell governance is at the end of the decision making for where grant funds should be allocated if the proposal is successful, but it would be helpful to understand a previous circumstance where emissions were changed on target LPs by the Moonwell community based on where the community saw the need. In other words, it’s not clear why the allocations cannot be predetermined, and the reasons and occasions on why they would need to be changed. If there are certain criteria that establish the allocation at least at a baseline, then that should be provided. If there are criteria that would necessitate a governance proposal for a change, then those criteria should be provided.

Predetermining incentive allocations upfront would hinder the Moonwell community’s ability to respond and optimize distributions as circumstances evolve. There are a few reasons adjustable/dynamic emissions are necessary:

  • Predetermined, static emissions become suboptimal as relative TVL changes between assets based on shifting user behavior and market conditions. Governance enables realignment.
  • Sudden events like exploits necessitate quickly reshifting incentives away from affected assets, as seen with the recent Multichain incident and subsequent MIP-61 proposal to remove liquidity incentives from Mulitchain markets.
  • To support and incentivize new asset markets on Moonwell by rebalancing incentives across all markets.

By empowering an engaged community to continuously optimize incentive distribution as liquidity conditions and supported markets evolve, we can be responsive and capitalize on new opportunities for driving ecosystem growth. Preset allocations would hinder that flexibility.

Please provide an understanding to the community of WELL decentralization and governance / voting process since it forms such a key factor in determining where the end allocation of grant incentives are applied Moonwell markets.

One overarching goal of the Moonwell community has been to create financial infrastructure that will stand the test of time and outlive any contributing team or individual. Moonwell Governance has been designed to be fully open and decentralized, with the community in control of the protocol’s future. Some key points:

  • Voting power is proportional to held, staked, or delegated WELL. 1 WELL = 1 vote.
  • All governance proposals and votes happen transparently onchain via the Moonwell Governance Portal or Snapshot Portal. There is full visibility into governance activity.
  • To date, ~60 onchain Moonwell Improvement Proposals have been successfully passed through governance, demonstrating one of the most active and productive governance processes in the Dotsama ecosystem.
  • Moonwell Governance sees wide, diverse participation, with ~200-300 unique voters per proposal on average, along with engaged delegates and contributors.
  • Quorum thresholds ensure every proposal has broad community alignment before passing.
  • Anyone can get involved in governance and share ideas by creating posts on the Moonwell Governance Forum, regardless of WELL holdings.

To learn more about Moonwell Governance, please consult our Documentation along with these blog posts (Introducing Moonwell Governance, Moonwell Governance 101).

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