Proposal: Expanding ZKSwap's reach to Solana

Summary :

Expanding ZKSwap’s reach to Solana

This is a follow-up to the proposal for building out ZKSwap on Solana.

We’re really excited and humbled to see both the success of Raydium so far, and the general support of the idea of a partnership in the ZKSwap community to support the building out of many key ZKS features on Solana and Serum.

We’re also grateful for the feedback received on the initial proposal and during the recent conversation at the ZKS Forum on Discord. We’ve heard a lot about what the community would like to see and have worked out additional details on the partnership and what execution would look like.

Key areas are outlined below:

Bonsai: The addition of ZKSwap pools on Solana

ZKSwap and Raydium partnership

Bonsai pool structure and incentives

Fees, performance and protocol dynamics

Platform integration

Bonsai: The addition of ZKSwap pools on Solana

The purpose of this partnership is to allow ZKS to expand its reach and community to Solana and Serum, with the initial and primary feature of creating new ZKSwap liquidity pools (LPs) on these ecosystems in addition to existing Ethereum based LPs.

The key point here is that LPs built out by Raydium will be an addition to Sushi’s current pools. This is not a liquidity migration, but a method for ZKS to create new pools which are able to leverage the speed and efficiency of Solana, interact with the liquidity of Serum’s central order book, and expand to reach a wider community and project base. ZKS’s Ethereum based pools will remain untouched and as is.

As the objective is to extend the reach of ZKSwap, Bonsai pools aim to focus on projects on Solana and Serum. Bonsai could be thought of similar to Onsen, as a way to branch out to Solana-native assets and grow along with the projects in the ecosystem.

For the ZKSwap user, these Solana based pools would appear as a new page on the ZKSwap UI, named Bonsai. This page would have similar front-end functionality and GUI to current ZKS Farms and Onsen pools, but would simply connect to Raydium’s backend for execution. A similar ZKSwap page would also be implemented on Raydium’s front-end. Mockups for proposed pages can be found on the original proposal

ZKSwap and Raydium partnership

With the objective of ensuring a long-term partnership where both teams are on the same path, it’s important to align incentives. In order to achieve this:

ZKS and Raydium would agree to a token swap to ensure mutual commitment

We propose an exchange of 1% of the total RAY supply (5.55m tokens) at a favorable price of $0.325 per RAY for an equivalent value ($1.8m) of ZKS at market price.

At $0.325 per RAY, this indicates a FDV for Raydium at $180m, while the RAY would hold a current market price of approximately $55m at the time of writing

These favorable terms are put forward in order to maintain the integrity and price of a previously discussed token swap with the Sushi team and to further show long term commitment to the relationship from Raydium.

RAY tokens would come from Raydium’s Partnership & Ecosystem reserve.

Tokens on both sides would be locked with a one year cliff and vesting linearly over the following 24 months.

Bonsai pool structure and incentives

The vision for Bonsai is a branch of ZKSwap that extends and focuses on key projects on Solana, and this would initially focus on Solana-native assets such as SOL, SRM, and FIDA for example. As the ecosystem grows, Bonsai would grow alongside it and incorporate additional relevant pools into ZKS’s offering which would otherwise be a challenge for ZKS to include.

1 - ZKS incentives

We propose a ZKS incentive structure for Bonsai similar to that of Onsen, which relies on 2,000 allocation points (AP) distributed to each pool relative to the project’s total market cap.

Maki edit: 2000AP is currently not possible without hurting the Onsen and Permanent Menu significantly we can provide up to 300 AP for the Raydium partnership and based on the results upgrade to 500 AP.

However, instead of a tiered system based on market cap, we propose tiers based on Total Value Locked (TVL) for Bonsai. This would mean that APs are allocated based on the pools’ TVL on the Bonsai platform, which then determines the ZKS incentives distributed to LPs.

By using a TVL model for the AP tiers, this structure encourages greater liquidity on Bonsai and naturally selects for higher quality projects.

2 - Expected Total and ZKS TVL

While we expect Bonsai to start out with a smaller number of Solana focused pools, it’s important to set a maximum cap for the number of pools. We propose this to be capped at 40, a significantly smaller number than Onsen’s 58, to ensure that pools and ZKS incentives are reserved for high quality projects. We also propose that 10 of the 40 pools be reserved as ZKS pairs to further incentivize and lock ZKS liquidity. This means that approximately 12.5% of all TVL on Bonsai will be in the form of ZKS.

As a function of the tiered pool structure, the relative TVL, and the APs assigned, we estimate that overall TVL for Bonsai will amount to between $180M and $620M when the max pool cap of 40 is reached. This translates to between $22.5M and $77.5M of ZKS TVL in the pools.

3 - RAY incentives (Double Yield)

With both ZKSwap and Raydium working together, Raydium would incentivize Bonsai pools with the native RAY token. Total RAY incentives would be equal to or greater than the total ZKS rewards distributed to Bonsai LPs. This means attractive double yields for farms on Bonsai, similar to what is discussed in the ZKSwap MIRIN article for franchised pools. We see this as an immediate value add for the community and a strong competitive advantage which is likely to increase reach and liquidity for ZKS Bonsai pools.

Raydium would work alongside the ZKSwap team to determine appropriate double yield rewards for specific pools that the community wishes to incentivize.

4 - Incentives for gZKS holders

In line with ZKSwap’s ZKS staking rewards, 0.05% of fees will be collected from Bonsai trades as rewards for gZKS. These fees will be used to buy ZKS from Bonsai pools and then that ZKS will be sent over to ZKSwap on Ethereum to reward gZKS holders. This is a clear method for gZKS holders to benefit from the expansion of ZKS.

Fees, performance and protocol dynamics

How will fees be split between LPs, ZKS and Raydium?

How do Serum fees work and how is Raydium able to earn 30bps per trade for Bonsai?

So why trade on Bonsai or Raydium if the cost is the same?

Won’t competition from other liquidity providers impact Raydium’s volume and profits?

How do you deal with arbitrageurs in a fast moving and low fee environment?

So if traders get better slippage, LPs capture more profits while arbitrageurs can still make their share, then who’s losing?

What is this Fibonacci sequence you’re talking about?

Platform Integration

Upon passing of the proposal, Raydium will commit the majority of resources to working alongside the ZKSwap team to start building out support for Bonsai pools on Solana, with a proposed plan for estimated timing and resources as below:

Raydium has all front-end JavaScript connections already prepared for use by ZKS. Ideally, Sushi would be able to provide a front-end developer and/or designer to connect these in line with ZKS UI standards. However, Raydium is also able to go ahead and produce this page within 4-5 days.

Raydium would need 3-4 days to make sure that all of ZKS’s functions are properly recreated

At least another 3-4 days is recommended for comprehensive testing from both teams before launch.

Setting up of a parallel page on Raydium for ZKS Bonsai pools could be done in 2-3 days.

The entire process could likely be completed within a couple of weeks, however communication, finalizing of details, and testing may add to that. Following the completion of the initial Bonsai pools, Raydium would continue to work closely with ZKS to provide full support on Bonsai as well as for additional features wherever it seems most valuable for the community.

Pros :

Expand our multichain reach

Unlock the MegaSerum grant

Token Swap (Diversification of treasury)

More revenues for gZKS holders

Cons :

Not maintained by the ZKS Core team

Raydium might work with other DEXs (no exclusivity)

  • Yes
  • No

0 voters

This blank is useless,without regist with gZKS

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