[Discussion] Current deployment strategy on EVM compatible Layers 1-2

This post was co-authored by @Dimsome

Following on the deployment strategy post, this one aims at narrowing down on Avalanche, Arbitrum & Optimism value proposition to the ecosystem. Indeed, the important traction these projects are receiving as well as the quality of the protocols deploying on it makes them the most relevant to mStable scaling strategy.

mStable market fit

As a reminder from the initial post, what can be considered as a mature environment for mStable:

  • Minimum of 3 Stablecoins pegged to USD to constitute an mUSD basket
  • Established lending market for those assets

AVAX image

Rationale /Thesis: Catching the momentum

  • AVAX is one of the fastest growing EVM protocols. So far, it has nearly 300 projects built on top and handles over 1bn API calls per day (clients interacting with Avalanche through APIs calls to nodes)
  • Established ecosystem with DeFi darlings aping in: Aave is live since yesterday & Curve just launched today. These are strong market signals.
  • Ambitious project with an established team, backed by mutual investors (3ac, DeFiance) which gives mStable a certain proximity with the team.
  • Opportunity to grow the mStable community beyond Ethereum with the Avalanche Hub
  • Attractive ground powered by the Avalanche Rush $180m Program (potential token swap as a partnership incentive)
  • Interesting Feeder Pools opportunities with native AVAX Stablecoin projects

Scaling value-proposition

Avalanche’s C-Chain is a smart contract chain that uses the EVM and is 100% compatible with existing Ethereum tooling.

The Avalanche consensus protocol has all nodes work in parallel to check other validators’ transaction confirmations randomly. After enough repeated random subsampling, a transaction is probabilistically determined to be true. This improves transaction throughput to >4500 TPS and provides a sub-two-second finality time.

Cons

  • Lack of established stablecoins (Only USDC & USDT here) which could hinder mUSD basket creation
  • Network effects are pretty much in favor of Ethereum
  • Transactions may be delayed if validators are not in agreement on the status

ARBITRUM

Rationale /Thesis: Securing Layer-2 integrations

  • Between the 6th of September and today, Arbitrum TVL went from $ 87m to $1.55 Bn. This is a 19x growth in less than a month, driven by ArbiNYAN, the first farming platform in Arbitrum
  • Most used layer 2 with an impressive ecosystem with most blue-chips of Mainnet deploying on Arbitrum
  • Strategic need for mStable to migrate to a Layer 2 & create some kind of first-mover advantage ensuring its products can be used for potential future integrations
  • Blooming lending market & Stablecoin ecosystem (see below)

Scaling value-proposition

Arbitrum is a Layer 2 scaling solution powered by optimistic rollups technology. In a nutshell, it computes data-off chain as well as bundling transactions submitted on the L1 mainchain, drastically increasing transaction throughput.

The average gas fee for a token swap is reduced by 12x on Arbitrum compared to Ethereum L1.

Cons

  • Still an early lending market ecosystem

OPTIMISM

Rationale /Thesis: Early mover advantage

  • Stablecoin ecosystem and liquid trading on Uniswap, with frequent sUSD demand spikes
  • Currently, the majority of usage is with synthetic assets and options
  • Strategic need for mStable to migrate to a Layer 2 & create some kind of first-mover advantage ensuring its products can be used for potential future integrations
  • No lending market deployed yet, but very likely that Aave is looking to deploy
  • Strategically getting in the queue of the whitelisting process

Scaling value-proposition

Similar to Arbitrum, Optimism computes data-off chain as well as bundling transactions submitted on the L1 mainchain, drastically increasing transaction throughput and reducing transaction cost.

Optimism was the first to launch an optimistic rollup. It is the most tested optimistic rollup solution with Synthetix pioneering its usage and Uniswap V3 joining later. Optimism recently is implementing EVM full support making integration for dApps easier. The deployment of this L2 is still permissioned, but once it is open to everyone, it is very likely to gather huge growth.

Cons

  • Not available to deploy yet, only whitelisted protocols can
  • Aave and other lending markets not deployed yet

Discussion

mStable is leaning towards deploying on Avalanche, Arbitrum & Opitmism.

Please let us know which deployment you think make sense for mStable and your opinion on the aforementioned strategy.

2 Likes

Personally, I think all 3 make sense. Deploying a smart contract on a platform that is EVM compatible is not a big task. The resulting operational cost is, but the operation only increases if demand on these chains also increases. So hence I don’t think there is a big risk in doing all 3.

My personal favourite is Arbitrum, I think the Ethereum L1 ecosystem is slowly moving there. Optimism is a close second, just because they have a more guarded approach and it’s not as open yet.

Avalanche is an interesting outside bet. It has been growing good and it is yet to be determined if other L1s can stay relevant in the long term. But with big players moving there, it’s a good chance for us to try it out as well.

In any case, the more deployments we have, the higher the value we can potentially capture and divert it back to stakers in the near future.

Keen to see this moving forward

1 Like

Just wanted to give a slight addendum to the post I made in the main thread about this:

My main stance remains unchanged, but something was said by JS in the last call that made me more aware that newcomers to the system who might no be even conscious of different EVM technologies might be captured quite easily by Avalanche, so I would revoke my previous statement and say that there is indeed a use case that might benefit Ethereum bulls in the long run, even if it is with a few extra corners implemented along the way.

I’d still prefer an Arbitrum release before Avalanche nonetheless, simply to make a point, and a stance towards the most decentralized and native option first :blush:

2 Likes

mStable needs to find ways to capture value from emissions on these L2 before deployment otherwise we’d just give out more token emissions to incentivise liquidity which gets dumped mercilessly

e.g.

  • buyback and make/burn
  • buyback and bribe
  • buyback and seed liquidity
  • fee capture and distribution to L1 MTA stakers

In terms of personal preference, Arbitrum makes most sense long-term

1 Like

Would love to see mStable in Celo someday. They’ve got little stablecoins but the ecosystem is growing rapidly and they got cEUR as well.

2 Likes

I truthfully don’t prefer either of the optimistic rollups, and I admittedly know next to nothing about Avalanche. However, given the constraints listed in the OP I can’t say ‘deploy on zkSync’ because the conditions aren’t met.

My preference would be to wait for the testnet phase of zkSync to wrap up, try to partner with Argent wallet (I see an ‘Invest’ button at the bottom of the app in the screenshot) in the meantime to become a ‘recommendation’ or something, and then deploy when the conditions are cleared.

I guess that’s not realistic though. As such, I would implore the core team to go all in on one optimistic L2, in order to concentrate efforts, marketing, and collaboration with other projects.

1 Like

Not sure Celo has been that widely adopted yet, as far as I know there is only cUSD and cEUR and only one lending market. So with the current mStable’s protocol we wouldn’t add enough value. Maybe that ecosystem will grow in the future hugely and the ecosystem established, then we could revisit this.

The reason I propose to keep Celo in mind is because they are very focused on stable coins (as mStable is) so I figure that it can be a good integration someday.

There is cUSDC and cUSDT already (I think it’s still under tests/experimentation phase), since there are a couple of bridges to mainnet now.

BTW, There is an AMA today in the Sushi AMA Stage.

zkSync is also having an AMA on reddit right now.

Right off the bat: