Planning for SoulSwap's long-term growth

SoulSwap is a DEX with a lot of potential within the Fantom ecosystem, but it faces a lot of competition, so I propose a plan to make SoulSwap one of the projects with more long-term projection within Fantom.

This is just an idea, a draft that probably needs improvement but can be a good starting point.

This planing is divided into three phases: Ending Yield Farming, Increasing the value/utility of the token and adding the functionality of Self-Repaying Loans.

Phase 01 - Ending Yield Farming

Problem: Renting liquidity to users in exchange for SOUL tokens puts selling pressure on token, driving down its price. In addition, many liquidity providers act as "mercenaries", with no attachment to the protocol, only for profit.
Solution: To be independent of liquidity providers, making the protocol control all liquidity. The main challenge here is to determine when the protocol has sufficient liquidity.
How to reach the goal: SoulSwap issues bonds (as it does right now) with which it obtains LPs in exchange for SOUL. When the protocol obtains sufficient liquidity, SOUL issuance stops forever. Yield Farming is terminated. In some way, bonds should be incentivized over Yield Farming. Perhaps by increasing the APR of the bonds and lowering the Yield Farming APR.

Phase 02 - Increasing the value/utility of the token

Problem: Define and increasing the utility of SOUL.
Solution: SOUL's utility will be "limited" to obtaining part of the benefits generated by the Exchange.
How to reach the goal: SOUL can be bought and sold for trading, but ideally it should be staked. If you put it in stake you get SEANCE and, every day (or from time to time), the profits obtained by the Exchange are distributed among the SEANCE holders. In order not to create a selling pressure on SOUL, the profits are distributed in WFTM. For example: A user exchanges USD for DAI and the Exchange keeps 1 USD as commission. This 1 USD is exchanged into WFTM and when the time comes, it is shared among all SEANCE holders.

Phase 03 - Adding the functionality of Self-Repaying Loans

Problem: Competition in Fantom among the different DEX is very high and will probably increase.
Solution: Implementing new functionalities that help to obtain returns.
A possible solution: Implementing Self-Repaying Loans using SEANCE as collateral. For example: A user has 10,000 SEANCE (e.g. 1,000USD). With that collateral, he can borrow up to 50% (similar to Alchemix limits), so he can borrow 500USD. The user does not have to pay back the loan, but the dividends he/she would get for having those 10,000 SEANCE are are used for the loan payment plus a commission.

I hope I have explained myself well and that my idea, at least in general, is understood.

Thank you very much to all the SoulSwap community.

2 Likes

Overall I think the 3 ideas are cool but I also think we need to discuss them a bit more to improve and fix some problems they may hide.

1- I think reducing yield farming is something that will eventually happen, but I don’t see it dying all together. This is because we cannot expect to quickly have enough liquidity for every new token we may want to support, unless we somehow design a path to get that running (i.e. using treasury founds to bootstrap new LPs, not really a good idea but just an example). In some future when Soul is a major DEX removing farming incentives may be a possibliity but we are far from there yet.

2- Profit sharing doesn’t have big impact right now so I wouldn’t worry much about it yet, lets focus on the important issues. That being said having them payed in FTM sounds like good marketing.

3- I love this, but we should only implement it while we have another big utility for seance, otherwise it may be too volatile and eventually pointless, with an ultra cheap seance you wouldn’t get much for the loan. IMO if somehow we got 3 digits non-compunded APR by staking seance we could have this working without seance price crashing.

Thanks for the write up! Lets keep the conversation going!

1 Like

Hi Gahen, thank you very much for your comments!

Taking into account all that you comment, here goes my updated proposal…

Ending Yield Farming

I understand that this is a very long term goal but we can start by removing the incentive for liquidity providers from some pairs where it is very difficult for SoulSwap to become competitive at some point. I am mainly referring to pairs that are accessible through Curve Finance.

On Curve it is possible to exchange stable currencies (we are incentivizing the pairs: USDC-fUSDT, DAI-USDC and fUSDT-DAI) and to exchange BTC and ETH (we are incentivizing the WBTC-WETH pair). The exchange of these pairs could be routed through Curve Finance similar to 1inch acts.

The screenshot shows how different protocols are used in the swap between DAI and CRV.

This way SoulSwap users can still exchange these coins and SoulSwap still makes a profit on these exchanges.

I will try to explain it better with an example:

Right now, a user who wants to exchange 1,000DAI for USDC on SoulSwap gets at the exchange rate 991.44USDC. The difference lies in the Price Impact (0.87%) and the SoulSwap fees (3DAI).

If the user performs the same operation in Curve Finance, he obtains 999.54USDC.

What could we do? If SoulSwap routes the transaction through Curve Finance, it can still apply a 0.3% (3DAI) fee, so the user would receive 997USDC (approx.) and SoulSwap would still get a pretty decent fee.

This way we don’t have to worry about having liquidity in stable currency pairs where (IMO) Curve Finance is always going to be more competitive. The same applies to the BTC-ETH pair.

Also, if we check the statistics, although the USDC-DAI and WBTC-WETH pairs have some of the highest LTV, the commissions they generate are minimal, so they are not generating money for SoulSwap.

Increasing the value/utility of the token

On this point I think we more or less agree. It's just an idea, I'm sure you have many more.

Adding the functionality of Self-Repaying Loans

You are right when you say that SEANCE is still very volatile and therefore not feasible to use as collateral.

IMO Self-Repaying Loans are going to be (if they are not already) the next DEFI revolution. So far I've only found them on alchemix.fi and I've struggled to find anything similar on any other platform, so if they were somehow implemented on SoulSwap I think we could attract a large number of users.

Alchemix uses stable currencies as collateral, so there is no risk of liquidation. In the case of using SEANCE as collateral, the liquidation risk does not disappear, but if the loan is repaid with dividends distributed to SEANCE holders, at least the risk goes down.

It is probably not possible to implement Self-Repaying Loans until the price of SOUL and SEANCE is more stable, but I think it may be an idea to work on.

Thanks again for your comments, best regards!

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+1000000 to only having 1 stable pair and overall to use other DEXs for some token trading with lower slippage, that could be a game changer although probably difficult to implement. What do you think @Buns? Once that’s working we could remove liquidity for some pairs of stable as you say.

Moving forward assuming we rock a few million TVL as PODL we could add temporary extra bonds with absurd APR until 500k or whatever reasonable amount is funded and then stop that bond and create a new one for other pair, until we cover all the tokens in the universe (?