[DAO:45db0f5] Decentraland X Powered by Decentraland

[dao]

by 0xa7b100ecd7dbf8445688297d889394d001563a87

Should the following $64,000 grant in the Platform category be approved?

Abstract

Currently, Decentraland users are utilizing third-party trading platforms whenever a user wants to swap in or out of assets, particularly $MANA. This is actively extracting capital out of the Decentraland ecosystem with every swap. We propose introducing a native Decentraland DEX to encourage ecosystem users to swap in and out of $MANA on a native platform.

Our core contract functionality will have 60% of all swap fees paid directly to the Decentraland treasury, with the remaining amount supporting development and maintenance costs on the DEX. Additionally, all code will be open-sourced to the desired specifications of the Decentraland DAO in order to maintain security, decentralization, and transparency for the community.

Grant size

64,000 USD in DAI

Project duration

3 months

Beneficiary address

0x61336bCF79131CEc9955f3884321b00d1EA241Ed

Email address

alex@solidity.io

Description

Implementing a Decentraland community-first DEX would be a key step in creating sustainable, on-chain infrastructure for the DAO. As a cash-flow generative and fundamentally Decentraland-backed asset, the DEX would provide a solid DeFi foundation for the ecosystem, and will benefit $MANA holders sustainably into the future.

With the Decentraland community containing many Web3 users and investors, the utility of an Decentraland DEX will generate significant value for existing holders, incentivize new Decentraland holders to join, bring liquidity providers into the $MANA ecosystem, and will create more demand for $MANA. Additionally, the fees derived from the DEX will serve to increase the DAO treasury value as a whole through DEX revenue.
The core of this proposal is centered around our motivation to build for the community, and embrace Web3 values through the implementation of technically sound, user-friendly, DeFi infrastructure.

The goal of the Decentraland DEX is to create a self-sustaining, cash-flow generative addition of digital infrastructure to the Decentraland ecosystem. Major swaps like Metamask, Uniswap, Sushi, and GMX offer trading fees as high as .875%.

Decentraland DEX will provide: key trading pairs to allow our community to trade with a single DEX UI, competitive/lowest trading fees, charting, integration with other DAO infrastructure, top-of-the-line design and development, and more.

$MANA generates over $100m per day in trading volume on average. If the Decentraland DEX is able to capture just 1% of this volume, the Decentraland treasury could grow by $720,000 over one year. Our proposal represents less than 10% of this cost.

$MANA holders are valuable community members and the target market for DeFi products. Decentraland DEX offers $MANA holders a commercial incentive to support $MANA-backed infrastructure directly benefiting them and the DAO. DEX growth creates a flywheel of incentive for $MANA holders, driving further adoption.

Key value to highlight:
DEX will attract $MANA liquidity
DAO establishes core DeFi infrastructure
Revenue to be directed to Decentraland DAO to increase treasury holdings
Brings DeFi users into Decentraland

Specifications |
Solidity.io 2 will design, develop, and deploy a decentralized exchange for the Decentraland DEX. The DEX will utilize modified Uniswap v2 core contracts to enable the decentralized exchange of ERC-20 tokens. All data points from the DEX will be aggregated to a decentralized datastore to enable real-time charting on the platform.
Utilizing the customized Uniswap v2 contracts, an exchange SDK will be created to allow for an easy swaps of assets.
The SDK will enable Decentraland builders to integrate native swaps on core Decentraland infrastructure. Builders will be free to skin the SDK into other core Decentraland infrastructure, allowing accessibility across the Decentraland community. This offers a new tool for platform developers to create innovative applications and integrations.
Users can swap in and out of tokens utilizing the platform’s liquidity to perform transactions. The swap will display relevant information, including price impact, slippage, and deadline. In addition to swap, users will be able to add liquidity to pairs, this process will be a separate flow allowing users to customize their transaction.

Roadmap and milestones

Specifications |
Solidity.io 2 will design, develop, and deploy a decentralized exchange for the Decentraland DEX. The DEX will utilize modified Uniswap v2 core contracts to enable the decentralized exchange of ERC-20 tokens. All data points from the DEX will be aggregated to a decentralized datastore to enable real-time charting on the platform.
Utilizing the customized Uniswap v2 contracts, an exchange SDK will be created to allow for easy swaps of assets.
The SDK will enable Decentraland builders to integrate native swaps on core Decentraland infrastructure. Builders will be free to skin the SDK into other core Decentraland infrastructure, allowing accessibility across the Decentraland community. This offers a new tool for platform developers to create innovative applications and integrations.
Users can swap in and out of tokens utilizing the platform’s liquidity to perform transactions. The swap will display relevant information, including price impact, slippage, and deadline. In addition to swapping, users will be able to add liquidity to pairs.

Timeline & Steps To Implement |
Vote approved, development begins
DEX UX/UI Design
Technical Architecture
DEX Smart Contract development and testing
Front-end Development and Integration begins
6 weeks to complete development
Front-end Development and Integration Completion
Smart Contract/Platform Internal Audit
Smart Contract 3rd Party Audit
Go-Live!

Vote on this proposal on the Decentraland DAO

View this proposal on Snapshot

[alexm]

There is some visual UI mock-up that we have done. How could we add in these visuals?

[AaronLeupp]

Easy YES from me. The simple math seems to add great value alone!

[MetaDoge]

I respect this try to bring Defi to DCL, that matters a lot.

However, could you explain what kind of incentive for MANA holders can be expected? Staking? Liquidity Mining? Or?

@dao

Decentraland DEX offers $MANA holders a commercial incentive to support $MANA-backed infrastructure directly benefiting them and the DAO.

Also, I think getting a name will help you looks good, but more importantly, i think you might need to engage more with DCL communities. That will help you get more trust from dcl communities. As this is a new idea from a new face without any early prototype or evidence support. So it is very easy to make ppl being sceptical.

[MorrisMustang]

Has your team deployed this stack previously?

[alexm]

Yes, intimately familiar with DEX’s and other similar DeFi products across lending, staking, asset indexing, and more.

[alexm]

Very fair. The core functionality is trying to generate some amount of fees for the DAO as well as have a native swap that can be used across the ecosystem by other builders and community members. I have been doing my best to reach out to various DCL members over the last several months, take in feedback, and learn about the community, and I think I have done a decent job of that (constantly trying to do more). I’ve gotten a DCL name, done research, and explored the ecosystem while refining this proposal over the last several months. Obviously, we have lots to learn, but we hope this is a good stepping stone to being more involved in contributing to the ecosystem more broadly.

In reply to @Existential14: I feel confident in our ability to attract some level of liquidity for basic pairs through marketing… It is true however that we could also fund liquidity from the DAO and increase the production of fees and revenue for the DAO that way. Marketing/Liquidity is truly the only hurdle if we choose not to aggregate liquidity and I think with proper marketing/comms we will attract enough liquidity to operate.

[Existential14]

I’ve been saying we should have our own for a while now. I’m curious though as I read in the DAO discord that we would have to add a large amount of liquidity into the Dex in order to be used, which makes sense. Something also about this being basically UNISWAP which is open source and free. I hope there will be some real good conversation in here to help some people understand the pros and cons on this one. I don’t know enough myself, just that it’s something I thought would be good. Encourage people to hold mana and stake it and add liquidity.

[MetaDoge]

Thanks for your reply!

This is not to challenge, but may I ask from the user’s perspective, why should a user try to swap MANA within Decentraland X but not using Uniswap, Sushiswap or other famous DEX? The reason I brought up Staking or Liquidity Mining is that there is barely any such kinda product that exists that is legit in the market, so if you do that, I assume, you would attract a lot of liquidity and MANA, which in the end lead the liquidity to your swap business. However, if you just do swap functions and even if you try to promote it hard, I personally think it’s still quite less incentivised for people to swap here instead of other mature DEX. For normal users, its quite risky to use some new DEX, but with enough incentives, they will use, that’s why I think staking and liquidity mining might be a strong incentives for MANA holders to use your platform

It is good to see your Name! Cheers!

[alexm]

Hey @MetaDoge. Appreciate the feedback. We have many ambitions for increasing features and incentives for the community and users to interact with the platform. For now, we have focused on the swap functionality as we hope to deploy a simplified MVP that can add value to the ecosystem and be built upon. The features you mentioned are on our radar, and we look forward to engaging the community on determining what features will best suit the platform and community long-term should this proposal pass. Would love to discuss this more!

[MetaDoge]

Thanks for the reply!

I get that project needs to do step by step, maybe consider using wearables as incentives to swap in Decentraland X in the beginning. Release a wearable, set up a rule to airdrop it to those who swap MANA “X” times in Decentraland X, and empower the wearable holders with some VIP features (i.e lower commission rate). This might be a low-cost and nice incentive for players before you have a staking or liquidity mining feature. Just advice!

[MetaTrekkers]

Great job Alex! You been planning for this project for a long time! I love the patience, discipline and goodwill.

[ckbubbles]

I had originally voted Abstain on this proposal because this is beyond my knowledge and skillset, and I felt that I didn’t have enough information to put forth a proper vote.

But after reviewing previous conversations in the DAO Discord this morning, that brought up valuable questions around concerns for why this needs to exist, and to get more clarity — it was answered with nondescript answers, that didn’t ease those concerns.

I also do not understand why in the conversation it was offered to put 64k into the liquidity, when you are asking for a 64k grant. If that amount is available, then I do not see a need for this grant financially to come from the DCL DAO.

I changed my vote to NO.

I implore other community members to review conversations and to ask more questions.

[alexm]

Hey @ckbubbles , I think that this comment was taken out of context. This was a commitment by the team in saying that we would personally seed $64k in liquidity to kickstart the DEX as a show of our commitment to the growth and distribution of the DEX. I think if you take some time to dive deeper into our proposal and the value we are trying to bring to the sustainable growth of the DAO and treasury, you may feel inclined to change your mind. Happy to grab a chat and discuss further if there are any outstanding questions that you feel additional clarity would be helpful on. Thank you for the feedback.

[InJesterr]

@alexm

Happy to grab a chat and discuss

The more I see u chat the more you lose credibility

[Morph]

Hi all - I don’t think the math is adding up here.

Uniswap and other platforms have much larger liquidity because they have the most competitive fees, the idea that we would skim fees off the top means that we would not attract any significant LP providers and users would end up paying significantly more due to slippage.

It also opens us up to IL issues if we are to put the DAO or foundation funds into it, and is likely not worth the risk compared to using hardened and available platforms.

[dao]

Decentraland X Powered by Decentraland

This proposal is now in status: REJECTED.

Voting Results:

• Yes 52% 5,210,493 VP (70 votes)
• No 43% 4,407,120 VP (22 votes)
• Abstain 5% 607,429 VP (19 votes)

[dao]

Decentraland X Powered by Decentraland

This proposal is now in status: PASSED.

Voting Results:

• Yes 52% 5,210,493 VP (70 votes)
• No 43% 4,407,120 VP (22 votes)
• Abstain 5% 607,429 VP (19 votes)

[InJesterr]

I have taken a thorough look at your proposal for the Decentraland DEX, and honestly, I am coming across a few roadblocks. The first one, and it is a substantial one, is the lack of sufficient technical details and security precautions. This makes me question if we are perhaps overestimating our capabilities, do you see what I mean?

And, about that budget breakdown, my friend? I find it a bit perplexing, I must admit. Could you possibly simplify it for me?

In the Discord you mentioned a PR team but you did not include them in your proposal so that raises many questions about this subject In terms of your team’s experience, it is quite hazy for me. Could you illuminate a bit on their background, what they have done before, especially with decentralized exchanges? Trust is built on understanding & transperency, right?

Speaking of trust, how is the governance of this DEX going to be carried out? Who is going to make the decisions? It is like a puzzle without a solution at the moment. Can you clarify that for me?

Also, just pondering here, but banking our revenue expectations solely on trading volume… does that not seem like we are putting all our hopes in one place?

And hey, I do not see any strategies for managing potential risks. It is not like I am predicting doom, but it always pays to have a plan B, right? It is always better to be safe than sorry!

Lastly, I can not find anything solid on user acquisition and marketing. We need a plan to spread the word about the DEX. Any thoughts on that?

[Zino]

Dear Community,

The Grant Support Squad was created to support the grantees in achieving their goals and taking care of the DAO treasury.

After thoroughly reviewing this project, The Squad wants to communicate that we recommend revoking the vesting contract of this project.

According to our governance process, our recommendation will be analyzed by the Revocations Committee, the only body responsible for revoking grants. This triggers an automatic pause of Grant’s vesting contract, executed by the DAO Committee.

The arguments that opened this case are the following:

Timeline:

• The proposal passed the threshold.
• The onboarding process started.
  • The Grant Support Squad analyzes if the Grant complies with the Grant program requirements.
  • The Grant Support Squad went through the comments on the Forum and Discord to identify if a community member raised a concern regarding the project.
  • HP submitted a governance proposal to revoke the grant
  • A member of the community submitted a formal request to raise concerns regarding the project.
  • The Grant Support Squad has consulted with our advisors’ consultant. In this case, Agus Mendez from the Protocol Squad team -security advisor- and Henri de Royare, Heavy user Exchange - Buen Bit exchange.

Analysis.

The proposal for the Decentraland DEX lacks essential details regarding liquidity provision, open-source publication, documentation, and security which are crucial for the project’s success.

Based on the information provided in the proposal for the Decentraland DEX, the specific details regarding liquidity provision are not explicitly mentioned. The proposal focuses on the development of the DEX, its features, and the potential benefits it can bring to the Decentraland ecosystem and $MANA holders.

While the proposal does highlight the goal of attracting liquidity providers and mentions that the DEX will provide key trading pairs and competitive trading fees, it does not provide a detailed plan or strategy for liquidity provision.

In fact, if the core contract functionality of the project allocates 60% of all swap fees directly to the Decentraland treasury (as they mentioned), why would this be more beneficial than Uniswap or other DEX that pay more than the percentage mentioned of the fees to the liquidity providers? The project imposes no benefit over existing pools and UI provided by Uniswap, 1inch, 0x, and other DEX platforms.

Without further information, it is unclear how this fee allocation model would attract liquidity and incentivize trading on the Decentraland DEX.

To ensure a successful DEX, liquidity provision is crucial. It involves incentivizing liquidity providers to deposit tokens into the liquidity pools to facilitate trading. Strategies for liquidity provision may include offering incentives and rewards or implementing mechanisms like liquidity mining programs, but none of this was explained.

This grant was requested under the Category Platform, which has the followings Requirements and performance metrics:

• Requirements.

• Build in the public, publishing open source code and documentation.

• Performance metrics

  • The number of contributions made to the main repository of code.
  • Publish the tool or application to the production environment and provide usage metrics.

The concept of this category is to bring value to the Decentraland Protocol.

This proposal aims to create a tool to swap MANA over the SDK. However, this would trigger a big security problem because the translations could compromise users’ wallets and assets, because Native swap operations are, by design, not available on the SDK of Decentraland to protect the user’s funds. While greatly increasing the risk of fraud and losses for the community.

To mitigate that, they proposed auditing the smart contract created, but information regarding how they will perform this action is lacking. Also, the requested budget wouldn´t cover this action´s cost.

Something to highlight. The grantee mentioned that they would use a modified Uniswap V2 Core contract (open source) which receives no updates since the team is currently developing the V3 of the set of contracts and app.

Also, the project doesn’t explicitly mention how they will publish the code and the architecture documentation.

Last but not least, the proposal has another interesting point to mention. They Promise revenue to the DAO treasury, so it looks like the accelerator category would be more suitable for the project and not the category selected.

In conclusion, the proposal for the Decentraland DEX lacks details about a strategic plan for liquidity provision, open-source publication, architectural documentation, and security measures, necessary confidence in the project’s success and long-term sustainability.

For the reasons exposed, In line with governance procedures, we will elevate this case to the Revocations Committee (@dax @MetaDoge @maryana), recommending revoke the vesting contract. This recommendation will temporarily pause the grant’s vesting contract, which the DAO Committee will execute (@HPrivakos @Tobik ). This pause will allow time for the Committee to make an informed decision.

Regards.