Activate Moonwell Protocol on Optimism

Proposals Community Proposal
1

Summary

I propose that the Moonwell DAO [WELL] votes to authorize the activation of the Moonwell Protocol on Optimism. By leveraging Optimism’s advanced scaling solutions, shared values, and robust funding opportunities, we’ll be able to significantly expand Moonwell’s reach and impact.

Activating Moonwell on OP Mainnet will allow Moonwell opportunities to (1) become the leading lending protocol on Optimism, (2) align with shared values and ecosystem goals, and (3) access the Optimism Foundation’s generous funding and incentives programs.

About Optimism

Optimism is an Ethereum Layer 2 (L2) blockchain network developed by OP Labs and deployed in 2021. Utilizing Optimistic Rollups, Optimism bundles transactions off-chain and posts transaction data (blobs) to Ethereum mainnet. It is designed to enhance scalability and reduce transaction costs while maintaining the security that Ethereum mainnet provides. The recent implementation of EIP-4844 and “blobspace” has further reduced transaction fees on both Base and Optimism, aligning with the Moonwell community’s mission of making onchain finance accessible to everyone.

Optimism shares foundational technological and philosophical principles with Base, which Moonwell was activated on in March 2023. Optimism and Base are both built on the OP Stack, a set of MIT-licensed open-source software designed to enhance Ethereum’s scalability and modularity. The OP Stack facilitates the creation of interoperable Layer 2 solutions, contributing to a larger “Superchain” vision where multiple Layer 2 networks can operate cohesively. Optimism and Base are both committed to the Retroactive Public Goods Funding (RetroPGF) model, which incentivizes the development of open-source projects that benefit the entire Superchain ecosystem.

Since its inception in 2021, Optimism has supported around 370 dApps and has a Total Value Locked (TVL) of approximately $884.81 million. The network has saved users over $1 billion in gas fees. Statistics on lending protocols on Optimism can be found here; as of June 16, 2024, the lending protocols on Optimism with the highest TVL are Aave v3 ($160.5m), Exactly ($10.08m), and Compound v3 ($6.32m). The recent exploit of the lending protocol Sonne Finance has created a significant gap in the Optimism lending ecosystem. This presents an ideal opportunity for Moonwell to step in and establish itself as the go-to lending solution on the network.

Optimism’s roadmap focuses on enhancing scalability and decentralization. A significant milestone was recently achieved with the launch of permissionless fault proofs on OP Mainnet, marking Optimism’s arrival at Stage 1 decentralization. This enables withdrawals without trusted third parties and allows users to challenge invalid withdrawals. Optimism is now working towards Stage 2 decentralization by implementing multiple proof systems, including zero-knowledge proofs. The fault proof proposal was approved by Optimism’s governance process, and additional proof systems will be rolled out on testnet to ensure reliability and robustness.

Activating Moonwell on Optimism aligns the protocol with a network dedicated to efficiency, accessibility, decentralization, and community-driven development, positioning Moonwell at the forefront of the rapidly evolving Superchain ecosystem.

Motivation

Activating Moonwell on Optimism offers a number of benefits to the Moonwell community, including opportunities to:

  1. Become the Leading Lending Protocol on Optimism
  2. Align with Shared Values and Ecosystem Goals
  3. Access Optimism’s Substantial Funding and Incentive Programs

Become the Leading Lending Protocol on Optimism

There is a massive opportunity for Moonwell to capture a large portion of lending TVL on Optimism, especially in light of the recent Sonne Finance exploit. Aave, the current TVL leader, is a low-effort deployment lacking a Safety Module and additional market incentives. The current state of lending on Optimism is available here on DeFi Llama. By deploying Moonwell on Optimism, we can tap into this established DeFi landscape, attracting a broader user base seeking efficient and cost-effective financial services.

Align with Shared Values and Ecosystem Goals

Moonwell and Optimism share a common vision centered on decentralization, security, and community governance. Optimism’s governance model, which includes the Retroactive Public Goods Funding (RetroPGF) initiative, aligns with Moonwell’s commitment to fostering an open, community-driven ecosystem​. See the Optimism Collective Constitution here.

The governance of the Moonwell Protocol on Optimism will be managed by WELL token holders, though note that xWELL (multichain native, xERC-20 WELL), the multichain vote collector contract, and the Safety Module will be activated in a later proposal following initial activation. Halborn Security is anticipated to conduct code reviews to verify all the deployment parameters. Moreover, Moonwell markets on Optimism will be safeguarded against price manipulation through the use of Chainlink oracle price feeds. Moonwell contributor and lead risk manager Gauntlet will conduct regular economic simulations to confirm that asset risk parameters are maintained at safe levels.

Access Optimism’s Funding and Incentive Programs

Optimism has well-known and extremely generous funding and incentive programs we can leverage to bolster liquidity in our markets and drive user adoption. In 2023, the Moonwell community successfully secured a Retro PGF3 grant of 54,658 OP tokens and we have also applied for Retro PGF4. In addition to RetroPGF grants, Moonwell contributors have been approached about an upcoming incentives program that will grant OP tokens to projects activating on Optimism. All granted OP tokens will be used as liquidity incentives, bootstrapping markets and further boosting the growth and adoption of Moonwell on the Optimism network.

Proposed Markets

I propose activating the Moonwell Protocol on Optimism with the following initial lending markets:

All proposed assets already possess Chainlink price feeds and their markets will be initially set to 0% CF to protect against the “Hundred Finance exploit”. Gauntlet will be able to update market risk parameters such as Collateral Factors following initial market activation in their monthly risk parameter adjustment MIPs. As with Moonwell’s Base deployment, Gauntlet will also be able to adjust supply and borrow caps dynamically through their Cap Guardian role, which will be included in the subsequent onchain activation proposal.

Voting

All Moonwell DAO members are encouraged to vote on this proposal. Voting options include:

  • Yes: Activate the Moonwell Protocol on Optimism
  • No: Make no change

Conclusion

Activating Moonwell on Optimism offers the opportunity to become the leading lending protocol on the network, align with shared values and ecosystem goals, and access substantial funding and incentive programs provided by the Optimism Foundation. These benefits will enhance our platform’s development, improve user adoption, and drive product innovation.

I welcome any questions, comments, or requests for clarification. I’m very excited about the prospect of activating Moonwell on another values-aligned chain, and I’m keen to move this forward for onchain voting next week if this Snapshot is successful!

6 Likes
2

I would be excited to see Moonwell expand to Optimism. This seems like a logical next move with its compatability with the Base ecosystem. Making moonwell more accessible across chains plays to the existing strength of the protocol and expands reach to new users.

I’m excited to see moves like this and continued expansion.

3 Likes
3

Expansion of Moonwell into top L2 chains are highly recommended. You are basically creating more bridges across chains which helps to improve liquidity movements. I would however, look at the contract carefully as to prevent exploitation.

3 Likes
4

Would this result in bridging WELL to Optimism? Total WELL supply would remain at 5B?

1 Like
5

This is a very good proposal and would be a big next step for Moonwell.

3 Likes
6

Totally support OP integration, need to growth and add new markets build like on Superchains.

3 Likes
7

If the community voted to activate an Optimism deployment, they could also vote to activate xWELL on OP. This wouldn’t affect the total supply of WELL though, just allow tokens to be bridged there natively from both Base and Moonbeam.

4 Likes
8

I’m definitely “FOR” this proposal. Few further ideas:

  • with OP’s Retro funding grants, I would like to see a portion of the grant (if not in entirety), be used as an airdrop campaign for those who stake their $WELL across the super chain (both BASE and OP).

  • After a successful launch, I believe it would be a natural next step to venture into MODE and displace their current leader which is Ionic (both on Mode and Base) and be qualified for their MODE airdrop/multiplier. Makes perfect sense as they are part of the super chain and their airdrop campaign 2 lasts until September and beyond.

2 Likes
9

I’m so excited that the offchain vote has passed unanimously! I have an update on timing for the onchain vote to activate the protocol on Optimism.

Instead of immediately going to an onchain vote this week, I think it would be prudent to wait until xWELL (multichain native WELL) is also ready to be activated on Optimism. Discussing with Solidity Labs, this will likely take an additional 2-3 weeks. This will enable us to have voting and staking live day 1, as well as enable the community to incentivize the markets with WELL, if they vote to do so.

Please let me know how you feel about this timeline and voice your opinions, thoughts, and comments below. I will keep this thread updated as we get closer to MIP submission!

5 Likes
10

Here is an update on where development stands for the Optimism deployment.

The market creation script has passed internal code review and now has been handed off to Halborn for review.

Work has started on the second governance proposal that will activate xWELL, the safety module, and cross chain governance.

To support the deployment to this new chain, the tooling for governance proposal calldata generation is being uplifted. We have added an additional set of integration tests so that as we are making these proposal upgrades, we can detect potential regression bugs with this tooling.

2 Likes
11

Hi Elliot,
What is the current update/status for the Optimism deployment?

1 Like
12

I am voting FOR this proposal onchain.

Personally, I find this proposal to be a nigh pure positive for Moonwell. There are opportunities for lending protocols elsewhere and capture some of the existing share of lending TVL on Optimism. There are minimal risks as Optimism is very well established and its ecosystem developed as well. Coupled with the incoming Superfest incentives, this will bode well for the growth of the protocol.

4 Likes
13

I believe the proposal to activate Optimism will be proposed within the next 24 hours.

14

Now that MIP-X01 has executed, WELL can be transferred natively between Base, Optimism, and Moonbeam!

2 Likes
15

Calldata has been generated and validated on this issue in Github. Once a community member proposes this to the DAO, the community will be able to vote on this activating the Moonwell Protocol on Optimism!