Legendary investor Charlie Munger famously said, “Show me the incentives and I will show you the outcome.”
On Apr. 22, Synthetix, a derivatives protocol, unveiled its new initiative with Lyra: an options protocol that launched last year. It’s designed to incentivize liquidity for its synthetic dollar-pegged sUSD stablecoin on Optimism, the Layer-2 Ethereum scaling solution.
Weekly rewards of 12,000 $SNX and 50,000 $LYRA have been allocated towards bribes to veCRV voters to incentivize them to vote for the sUSD Curve pool on Optimism.
Didn’t catch all that? Let’s run it back.
CRV is the Curve Finance token, veCRV is vote-escrowed CRV, and LYRA is the governance token of the Lyra protocol.
veCRV holders determine the allocation of CRV emissions to the various Curve pools through a weekly gauge vote. Last August, Yearn founder Andre Cronje released a tool that allows DeFi projects to bribe veCRV holders with token rewards in exchange for their votes. This proved popular with DeFi protocols, which realized that using their native tokens for bribes instead of traditional liquidity mining rewards is a more efficient use of resources.
Indeed, Synthetix’s blog post notes that spending $1 on bribes will result in more than $1 in CRV emissions being directed to the sUSD liquidity pool. So, in exchange for their votes, veCRV holders will get weekly rewards in the form of $SNX and $LYRA.
Messari analyst @Saypien_ told The Defiant he normally doesn’t like “blanket liquidity incentives” and that if liquidity incentives are to be used, it’s best to be “well-timed and highly strategic”. That being said, he thinks the Synthetix and Lyra incentives seem to be both.
“Lyra and Kwenta both use sUSD as their stablecoin,” he continued. “If there is a new wave of users responding to the Optimism’s team hints of becoming more decentralized [ie. launching a token], then there will be users needing sUSD liquidity to try out the Synthetix-powered protocols.”
Once the gauge weight vote – which determines how much of the daily CRV inflation the liquidity pool receives – is concluded, CRV incentives will start flowing to the sUSD-3crv pool. sUSD holders will then be able to earn additional yield by providing liquidity into the pool.