NOTE: This proposal has been reviewed and discussed on by the TFL BD team
Proposal is live on Terra Station: Terra Station
- Aurora/NEAR is a burgeoning DeFi ecosystem without a dominant stablecoin yet.
- Bastion is the dominant Stableswap + Lending protocol and by far the largest dApp on Aurora/NEAR, with $1.5B TVL (accounting for borrows and Stableswap liquidity) and $540mm in pure deposit TVL.
- Bastion will create UST lending market, and two Stableswap pools paired with USDT and USDC.
- Terra will provide $150k per month of UST incentives which will be match by BSTN emissions for the pools. Beyond $18mm liquidity in the pool, Terra will increase incentives to maintain a competitive 20% APR to drive adoption of UST on Aurora as opposed to users simply farming on Anchor.
- Note: Since Bastion is both a Stableswap and Lending protocol, the “bang for buck” of each dollar of UST incentives is doubled since Bastion uses cTokens (deposit receipt tokens) for the Stableswap. This means the same liquidity can be repurposed and double-stacked.
What is Bastion?
Bastion is a Lending and Stableswap protocol built on Aurora, NEAR’s EVM-compatible layer. Bastion is currently the largest protocol on NEAR, making up ~50% of Aurora’s TVL. We plan to be the Liquidity Foundation of Aurora, similar in spirit to Anchor Protocol (although vastly different implementation-wise).
The project innovates with novel features such as: isolated markets, interest rate swaps, increased receipt token utility, veTokens, gauges, and boosters. Building on Aurora enables Bastion to create an autonomous interest-rate engine with superior capital efficiency, low slippage swaps, fast transactions, ultra-low fees, precise liquidations, and harness the underlying UX benefits of NEAR.
We recently raised a $9mm Series A from key investors such as Three Arrows, Jump Crypto, and ParaFi Capital. Bastion has received $4mm in grants from Proximity Labs, Aurora, and NEAR Foundation so far. Almost all of these grants will be distributed to the community in the form of liquidity mining incentives.
The contracts are a fork of existing, battle-tested code from Compound and Saddle Finance.
What is Aurora?
Aurora is the EVM Layer of NEAR, similar to how C-Chain is the EVM-compatible layer of Avalanche. We believe Aurora will be the centre of value-accrual for the NEAR ecosystem and dominate DeFi on the chain due to the familiar UX/DevX for EVM devs, and the growth potential of large Ethereum projects bringing their TVL to Aurora. DeFi has its strengths in composability and it has been a lot easier to form cross-chain partnerships and integrations with other EVM projects who share the same underlying dev environment.
So far our thesis has been validated, with most on-chain activity occurring on Aurora within the NEAR ecosystem, and TVL being 2-3x higher than the NEAR native layer.
The path to sustainability for UST is to spread real utility/adoption on other ecosystems rather than farmers simply recursing on Anchor.
Out of all the dominant DeFi primitives, Stablecoins are most synergistic with Stableswap and Lending protocols. Bastion is the market leader in both categories on NEAR/Aurora.
Wormhole is now live on Aurora, and Bastion plans to make Wormhole UST the canonical version of UST on the chain.
Aurora/NEAR DeFi is still early, with financial structures, user behaviour and pool setups not set in stone. There is no dominant stablecoin on Aurora yet. Aurora/NEAR DeFi is now picking up and has a lot of growth potential over the next few months. Incentivizing UST at this stage is great timing and high impact, as it will likely have long-lasting effects on the foundational structure of the ecosystem and increase the chance for UST to become primary numeraire. (h/t Risk Harbor folks) $UST can grow hand-in-hand with the growth of the Aurora ecosystem and NEAR blockchain.
Listing UST on Bastion as a lending market initially will allow double ‘bang-for-buck’ as the incentives used will be deployed in an extremely capital efficient manner – each dollar spent on incentives means 2x the utility in terms of Stableswap UST liquidity and UST lending deposits.
Interestingly, Bastion is composed of both a Stableswap and Lending protocol. Our Stableswap is unique in that it focuses on cToken pools. For example, our current primary pool is cUSDT/cUSDC, as opposed to USDC/USDT. This means that liquidity providers do not have to choose between LP yield and deposit interest. Instead, users can stack the yields from both Stableswap and Lending. Due to Bastion’s unique cToken Stableswap design, it requires a base level of liquidity to function effectively.
Much of Terra’s cross-chain efforts have been driven by a clear goal: for $UST to be successful, there must be external adoption of $UST, and not just on Terra itself. Cross-chain partnerships increase awareness of UST and the broader Terra ecosystem, which self-reinforces the adoption and strength of UST. (h/t DK)
Time-boxing the incentives at 3 months allows both Bastion and the Terra community to evaluate the effectiveness of the incentives, and make adjustments thereafter.
Seeding the lending pool makes UST a cheap asset to borrow, increasing demand and utility of the token. Furthermore, incentives bootstrap a new healthy yield source for UST lenders once these markets are established enough to no longer require the community pool’s involvement.
Bastion will create a lending market for UST in addition to cUST/cUSDT and cUST/cUSDC Stableswap pools.
Terra will initially match Bastion’s BSTN emissions with UST incentives for the 2 pools and seed $5m liquidity to the UST lending pool to kickstart liquidity. This is estimated to be $150k per month, for a duration of 3 months.
If the pools grow beyond $18mm in combined liquidity, Terra will try to maintain a 20% APR by making up the rest of the rewards. This is necessary to ensure users have sufficient incentives to take on the switching costs, deposit, and trade UST on Aurora as opposed to just recursing on Anchor.
Note: Each dollar of incentives/seeding can be double-stacked, firstly by depositing into the UST Lending market, and then by LP’ing cUST with cUSDC or cUSDT. *cTokens are similar to the aTokens of Aave and receipt tokens of Aave.