[LRFC] Deploy Lyra on the Avalanche C-Chain

Lyra Request For Comment (LRFC)
1

[LRFC] Deploy Lyra on the Avalanche C-Chain

Simple Summary

This is a proposal to deploy Lyra on the Avalanche C-Chain with initial AVAX, WETH.e and BTC.b vaults.

Abstract

We believe that Lyra has an opportunity to expand its user base, liquidity and the selection of assets and vaults it can offer by expanding to the Avalanche C-Chain with the support of the Ava Labs team.

The Avalanche DeFi ecosystem is home to a variety of protocols that can either be integrated by Lyra (eg. GMX and other perps exchanges for delta hedging) or act as integrators, deploying strategies built on top of Lyra vaults, which would create demand and funnel liquidity to the vaults. There is still an opportunity for an on-chain options protocol to consolidate itself as a leader on Avalanche and there is considerable appetite for options in the ecosystem. This is why we believe that the Avalanche C-Chain would be a prime candidate for a deployment of the Lyra protocol.

About Avalanche

Avalanche is a blockchain platform that utilizes three separate blockchains, the Platform Chain (P-Chain), Contract Chain (C-Chain), and Exchange Chain (X-Chain), to improve scalability and interoperability. These three chains compose a consortium of validators called the Primary Network, which is responsible for Avalanche’s security.

Avalanche operates with the Avalanche consensus algorithm, which is designed to be more efficient than alternative consensus mechanisms while supporting custom virtual machines. The consensus mechanism is akin to a gossiping protocol and checks validators’ transaction confirmations by randomly sampling subsets of primary network validators over a number of rounds, thus allowing all nodes to work in parallel while guaranteeing instant finality. The C-Chain leverages the Snowman consensus protocol, which mimics Avalanche consensus but is optimized for linear blockchains (such as the EVM). Therefore, most Avalanche dApp activity currently transpires on the C-Chain.

In comparison to other smart contract platforms, Avalanche touts sub 2s time-to-finality, faster than any of its peers, which makes it a good fit for DeFi applications that require low latency and fast execution. Avalanche also allows for an unbounded number of validators without sacrificing block time. This allows for an increasing degree of decentralization over time.

The Avalanche architecture allows for scalability through subnets, which are subsets of validators that can deploy and validate fully-customizable and interoperable blockchains.

Avalanche’s DeFi ecosystem has seen significant growth since mainnet launch, with over 300 active DeFi protocols across categories.

Motivation

There is significant demand in the Avalanche ecosystem for a liquid on-chain options protocol and many DeFi protocols on Avalanche are looking to integrate such protocols, which creates a number of opportunities for Lyra. The Ava Labs team can also help with onboarding market makers and liquidity providers that have signaled interest in option strategies and vaults.

Potential integrators include:

  • DeltaPrime

  • Benqi (sAVAX)

  • Steadefi

  • Auto Hedge

  • CIAN

  • Aperture

  • HedgeFarm

  • StakeDAO

  • Struct Finance

  • Opportunities to integrate additional perps exchanges on Avalanche for hedging (Aboard Exchange, Hubble, EMDX) on top of the existing GMX integration.

Specification

We recommend the deployment of 3 vaults on Avalanche:

  • AVAX vault
  • WETH vault
  • BTC.b vault

There is liquidity available on GMX to hedge against exposure for these pools. GLP on Avalanche is a basket of AVAX, ETH, BTC and stablecoins with over $65M of liquidity.

AVAX is an obvious choice as it is the native token of Avalanche. ETH and BTC are also widely used in DeFi on the Avalanche ecosystem, with over 600k WETH.e available on Avalanche. BTC.b, the native version of Bitcoin on Avalanche, has significant advantages over other wrapped versions of Bitcoin on other EVM chains as it is non-custodial and can be bridged back and forth between Avalanche and Bitcoin at a fraction of the cost.

Rationale

To reiterate, we believe that there is currently demand in the Avalanche ecosystem for option vaults, both from protocols that would be integrating them and funds / users that are looking for on-chain exposure to options. The presence of GMX on Avalanche makes it a very easy deployment as this is already what Lyra is using for hedging on Arbitrum. We encourage feedback and discussion in this thread and will be posting a snapshot vote soon to gauge the community sentiment around the proposal.

Test Cases

N/A

Copyright Waiver

Copyright and related rights waived via CC0.

3 Likes
2

Interesting proposal

Would Ava Labs provide any kind of incentives or liquidity for the vaults?

Concerned about trading and liquidity fragmentation and their impact into the vault efficiency if we launch on a new chain when we are still growing vaults on Optimism and Arbitrum.

2 Likes
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Thanks so much for the proposal, I would love to see Lyra expand to Avax to meet users demand for options there. In order to deploy, we would need some parameter specifications included for the LEAP to be complete. Maybe @mjs can shed some light on what else is needed here?

I would second @AlvaroHK on concerns over liquidity fragmentation and incentives, hopefully we can work with AVAX to get some sort of a grant to ensure there will be ample liquidity in the pools. I do think ETH markets might make sense if there are unique users to AVAX that want to trade them but I would encourage separating the proposal by product as I think an AVAX market might pass while ETH and BTC might be more contested here.

2 Likes
4

Lyra on Avalanche makes sense as a battle tested ecosystem that has withstood stressful market environments with zero issues for users. WRT fragmentation there are users of Avalanche who prefer to stay on Avalanche and more exposure to this community is great for more awareness that Lyra even exists as a project.

3 Likes
5

Thanks for the post and welcome to the community! A few notes from me:

  1. Make sure the headings conform with this template. Also move the post to this category.
  2. Provide more information about what technical work is required. For this proposal to pass it needs to include everything that is needed for the protocol to be launched. What code needs to be deployed? What initial parameters should be set?
  3. What configuration would be launched? Feel free to check out some example configurations from this post.

I also support the comments made by @AlvaroHK and @ksett about fragmentation and believe that targeting a market that doesn’t exist anywhere else (Avax) is more likely to garner support from token holders.

2 Likes