Proposal for Loan Swap of OSMO to Levana's $LVN

Proposal Discussion
1

This proposal was inspired by a suggestion from Sunny on a twitter spaces with Levana:
https://x.com/Levana_protocol/status/1735012877390483759?s=20 (50 min into the Spaces, Sunny discusses that Levana needs to do a loan swap)

The text of the proposal comes from a previous proposal: https :// commonwealth.im/osmosis/discussion/6875-proposal-for-loan-swap-of-osmo-to-axelar

And subsequent on chain proposal which passed:
https:// wallet.keplr.app/chains/osmosis/proposals/332

Proposal for Loan Swap of OSMO to Levana

Summary

Levana Foundation, Osmosis’ most successful leverage trading platform requests ~$1m worth of OSMO, in the form of a loan to bootstrap the liquidity of the LVN/OSMO pool after the LVN token launch. The loan will be repaid in ~$1m worth of LVN tokens, 3 months after the projected LVN/OSMO pool launch.

By voting Yes on this proposal, Osmosis stakers voice their support for a loan of OSMO to Levana.

Proposal Details

LVN/OSMO will be a CL pool on Osmosis, with 0.2% swap fee and no exit fee. We are requesting 1M OSMO (~$1m at current prices, the amount may be adjusted before the on-chain proposal based on the latest OSMO price) to be delivered to an address controlled by Levana Foundation and Osmosis Community Members.

The loaned OSMO, together with LVN tokens contributed by Levana Foundation, will be used to bootstrap liquidity in the pool LVN/OSMO for at least 3 months after LVN token launch.

This proposal was modeled after Stargaze, which was positively received by the Osmosis community. Assuming the proposal passes, the USDC price of the OSMO loan will be determined through the 24hrs TWAP based on the OSMO/USDC pool. The TWAP calculation starts the moment the on-chain proposal passes.

The loan will be repaid in LVN tokens, where the USDC price of LVN is determined through a 30 day TWAP during the last 30 days of the loan. The price calculation will be based on the LVN/OSMO and USDC/OSMO pools.

The LVN repayment value (in USDC) will match the OSMO loan value (in USDC) based on the TWAP calculations. The validity of the TWAP calculations and the LVN repayment amount will be verified and approved by the Osmosis core team.

Common Questions about this proposal:

Q: How much is Levana asking to borrow?
A: $1M of OSMO

Q: What will Levana repay?
A: $1M of LVN tokens

Q: How will the price of LVN be determined?
A: Through the average price on Osmosis DEX over the last 30 days of the loan

Q: What happens to the OSMO after the loan is repaid?
A: After the loan is repaid, the OSMO will be used to ensure the best user experience for Levana users on Osmosis, this could be by leaving it in the LP position, depositing it into Levana’s LP/xLP pools, provide superfuid staking rewards on Osmosis DEX for the LVN/OSMO pool, or other activities inline with the goal of increasing the health and sustainability of Levana on Osmosis.

Q: Why is this a sweet deal for the Osmosis community?
A: After the loan repayment, the OCP will have significant skin in the game with Levana, which is the most popular dapp on Osmosis. As Levana, grows, the Osmosis community will directly benift, and when on chain governance is enabled, the Osmosis community will have significant control over the future of the Levana Protocol.

Q: How will liquidity be provided to the CLP?
A: The liquidity will be provided to help maximize prize discoverability with full range for the 3 month period

Q: What will the ratio be when the liquidity will be added
A: The liquidity will be added roughly 1-2 weeks after the pool is live, thus it will be added at whatever the pool deems current fair market value

Post approval;

  • OSMO tokens will be sent to the Levana Foundation and Osmosis Community Member DAODAO address: TBD
  • LVN tokens will be sent to the Osmosis community address: TBD

No restrictions or lockups will be imposed on the LVN repayment amount. The Osmosis community is free to decide how to best utilize the funds. For example, the funds may be used to provide protocol owned liquidity on LVN/OSMO, LP incentives, or be distributed to the Osmosis community.

Levana Foundation reserves the option to repay the loan with a flat 1.6m USDC.

About Levana

What is Levana?

Levana is a decentralized leverage trading platform deployed on Osmosis since July of 2023. It allows traders to engage in leverage trading across various crypto assets while ensuring solvency through its uniquely designed perps system.Trade on Levana’s OSMO market here:

Read more about the Levana design here: Introduction to Levana Perps v2. TLDR: Levana Perps is awesome and has a… | by Levana Dragon Rider | Levana Protocol | Medium

Read and watch more about Levana’s growth since launch here:

Fee Analysis - https://twitter.com/ario_57_/status/1707023000040575092
User retention - https://twitter.com/Abbas_ra21/status/1707324929501180323
https://x.com/Abbas_ra21/status/1707664235147194400?s=20]
https://twitter.com/0xham3d_eth/status/1708226803599302906

Trader Behavior - https :// twitter. com/Abbas_ra21/status/1706986083018293693
Scaling Perps - http s: // x. com/Cryptodreams8/status/1707710200126284255?s=20
Open interest analysis - https :// x. com/ario_57_/status/1708173902013194452?s=20
General Performance Overview - http s://twitter.com/ario_57_/status/1706355915350217049
Youtube Interview with Jack Zampolin - https ://www.youtube.com/watch?v=8F5fRMBw990

MetaMask Snaps Spaces - http s://x.com/Mystic_Labs_/status/1707062448203726895?s=20
Interview with The Interop - http s://twitter.com/TheInterop/status/1707748120573219139
Levana’s Metrics on Osmosis to Date

In December 2023, Levana launched the Levana governance token (LVN), which will be used to drive ecosystem adoption, incentives and security of the network.

This loanswap is designed to get a huge chunk of Levana tokens into the hands of the Osmosis community

More information on Levnana on our website and join the Discord and others

17 Likes
2

I like this. I see it as a win win.

1 Like
3

For me this is a true no-brainer. Levana is already tightly linked to Osmosis through the app integrated on app.osmosis.zone.

Via this route we will also diversify the community pool a bit more.
And history has shown that some loan swaps are not so good (WYND anyone?), but we also did this with MANTA and STARS which were both beneficial.

Regarding the receiving address of the funds; it will work like a multisig using DAODAO if I read it correctly? (this part might need to be worded a little bit better imo)

And the right to repay with 1.6m USDC should be more flexible imo. We are talking about repaying the loan in at the very least 90 days from now (and probably even longer) which makes it impossible to predict the OSMO value or the LVN value. Having a 60% penalty of not using LVN but USDC is a bit excessive if you ask me. I like the penalty part, but I would surely be ok with less tbh.

4 Likes
4

Very supportive of this.

This ended up working really well for the Axelar token swap, and should be a great way to foster further alignment between Osmosis and Levana.

Also helps with getting enough depth to encourage healthy price discovery for an Osmosis-native token that’s sure to be actively traded! I think it’s helpful for incentive-aligned builders to know that if they choose to launch their protocol’s token natively on Osmosis, they can count on some level of support to help foster price discovery!

2 Likes
5

Levana has helped lead the next wave of the Osmosis movement, bringing many eyes from around the Cosmos back to its greatest dex, and has even caught the attention of traders outside of our ecosystem.

The professionalism of the team has been demonstrated in public presentations and many recent community calls where complex questions were answered on the fly with detail and yet a refreshing clarity surrounding complex ideas and computations.

The leadership of Sunny in suggesting this loan swap is prescient and we as the Osmosis community would do well to heed this call.

A strong yes vote would send a message that Osmosis rewards those projects that prove themsleves and help bring both attention and trading revenue to the project.

1 Like
6

Also support this.

Thank you to the Levana team for listening to my feedback given elsewhere! For transparency this was:

  • Specifying that it will be a full range position for the minimum period (Something not needed in the STARS proposal since CL didn’t exist)

  • Specifying when liquidity will be added - one to two weeks sounds good to me, we should start to see a reliable price established with airdrop dumpers exiting almost immediately. My concern was that it gets bootstrapped at initial price levels and the value of the loan drops substantially which is bad for everyone involved.

  • Extending the payback TWAP substantially from 24 hours, ten days after launch, to 30 days, 3 months after launch! This is far more than I suggested (7 day, 50 days after launch). While @RoboMcGobo says the Axelar loan swap went well, and the value has bounced back since, I remember people being rather disgruntled that the value crashed in comparison to Osmosis for a period.

I have literally no other feedback for improvement that wasn’t taken on already. Loan swaps are somewhat of a trust exercise between the Osmosis DAO and the receiving protocol since we are providing liquidity in exchange for something that does not yet have a confirmed valuation for repayment, but these terms minimise that as much as possible,

To me, it seems obvious that the Osmosis DAO should want to obtain a reasonable interest in an established and popular application that is planning on tokenizing its governance model.

4 Likes
7

Supportive of this sentiment

Some questions I have

  • Will the Levana foundation use its LVN to vote on Levana Governance?
  • Have there been discussions yet on LVN and the value driver? Will it be similar to $DYDX and 100% of revenue is given to LVN holders? Or Is this a discussion to be had later when governance is available?
8

The initial airdrop is 14m if i am correct and of that 14m, 10m is airdropped to non osmosis users. Eg legacy users as u called it. Seems like osmosis users get to pay for the pool but receive not a lot of the airdrop.

9

Thanks for your feedback!

I think its important to have the correct framing here. The pool funds into Levana is not a gift, its an investment into Levana.

Levana is the most popular app on Osmosis today. It brings in new users and a new revenue stream.

If you think a small % of the Community funds should be used to help boostrap liquidity on an LVN/OSMO pool on Osmosis DEX, in exchange for a large allocation of LVN tokens being delivered to the Osmosis Community Pool, then vote yes.

If you think that the Osmosis community should control a large stake in Levana, vote yes.

If you think it’s best that the largest liquidity pool for LVN should not be aligned with or based around OSMO, vote NO.

10M tokens airdropped to the legacy users, are all airdropped on the Osmosis, to the large amount of users that Levana has already brought to Osmosis. This has already helped Osmosis in recent months as you can tell by the massive adoption Levana has participated in.

10 Likes
10

Discourse says I need more than 3 characters so…

LFG

2 Likes
11

i like LVN and please make it increase

12

I’m in. Btw it could be worth showing a clearer tokenomic to understand where the value is going

1 Like
13

Fully support! I think this is a no brainer for Osmosis; Levana is already battle tested for several months and the success so far is evident. Success of Levana = more volume/liquidity/fees to Osmosis stakers and protocol users.

14

I echo these comments. I look forward to seeing this prop pass

15

Can I take loan with my Staking $Osmo as guarantee?

For example I have 1000$ Staking Osmo which equal 1500$

And I want loan 1000$ to use in Leveana

16

Let’s do it, def love what you built on Osmosis

17

I like this. Yes for Levena and Osmos

18

This will strengthen the collaboration between the leading defihub and leading perp dex which will boost adoption for entire Cosmos ecosystem. I will 100% pro and vote yes.

19

As a osmo staker I would more than welcome this proposal , surely a win for both communities. So yes from my side

20

The proposal is the right step forward for both platforms IMO.