dForce has been active in the crypto since the 2019 bear market and has successfully navigated subsequent bull and bear cycles. It has developed a range of protocols, including a native stablecoin (USX), lending, bridge, and trade aggregators.
Our mission is to vertically integrate across DeFi protocol stacks, improving capital efficiency and coordination. We were the first DeFi protocol to implement such integration strategies, and now more and more DeFi protocols are converging on this path. For example, Aave and Curve have expanded into stablecoins (GHO, crvUSD), and Maker has introduced multiple subdaos (Spark, SummerFi) to further integrate the broader DeFi ecosystem.
At the core of this evolution lies the first principle of DeFi as a liquidity network. The more liquidity a DeFi network can capture, the greater its capital efficiency and network effect.
However, this approach has led to coordination and alignment problems among different protocol communities. It is challenging to align the focus of communities around several different primitives (e.g., stablecoins, lending, DEX), despite the shared liquidity and obvious capital synergy. These different primitives cater to different communities, leading to friction and misalignment.
DeFi projects are taking various routes to address the friction between the aggregation and integration of features and liquidity, and the alignment of interests among different verticals.
Curve has “incubated” a massive ecosystem of projects built on top of its core primitive, with a complex bribing/voting mechanism. Each project operates independently but is tightly integrated with Curve’s tokenomics and liquidity pools.
Synthetix has spawned several ecosystem projects that built on top of sUSD liquidity.
Maker’s Endgame is to incubate a complete set of protocol verticals, including lending, trading, yield aggregation, vault management, and RWA origination, etc.
Their idea is to build an interlocked but independent ecosystem, with each project having its own token to tackle interest misalignment.
dForce has been a pioneer in the protocol matrix and has built an integrated DeFi protocol centering around DF token. We have observed the success of such strategies but have also noticed misalignment among different stakeholder groups.
To address these problems, I propose the dForce X Plan. This plan aims not only to improve integrated efficiency but also to realign interests among key stakeholders across various verticals.
At a higher level, the dForce X Plan aims to:
- Spin off and build multiple primitives from dForce’s existing and future primitives (lending, stablecoin, trade, bridge, RWA, etc.).
- Assign each primitive its own token and tokenomics.
- Achieve synergies through shared liquidity and coordinated governance across both dForce and its ecosystem projects.
- Interlock tokenomics between these projects and dForce, utilizing shared liquidity pairs, treasury management, and funding alignments.
The first step is to spin off several primitives from dForce’s existing portfolio, starting with lending. I propose to rebrand the lending protocol, and the new lending protocol will inherit all of dForce’s lending features and smart contracts. Going forward, all liquidity mining on the lending side will be provided through a new governance token for the lending protocol.
The new lending protocol will be hosted on a separate domain and run on its own governance. Additionally, there are plans to separate other protocols into distinct projects with different token models. DF token will gradually cease providing liquidity mining incentives.
The dForce X Plan will introduce a more competitive and interlocked tokenomics model for the new protocol and DF token, focusing on sustainable capital.
The X Plan represents the most significant DF tokenomics revamp since the introduction of staking.
Currently, DF’s role is primarily focused on governance and staking. The revamped tokenomics will greatly enhance DF’s value capture capabilities by introducing token pairing and liquidity interlocking between dForce and ecosystem projects.
Notably, DF will no longer be used as liquidity mining incentives in the lending protocol. This change is expected to significantly reduce DF emission and put it on the deflation trajectory. Here are the highlights of the revamp:
- DF will become the governance token for dForce and participate in ecosystem governance.
- Each ecosystem project will create and incentivize DF/EcoToken or EcoToken/USX pairs to ensure alignment of interests.
- DF holders will capture value from the ecosystem projects through staking, enabling them to receive governance token distribution from ecosystem projects.
- Protocol fees and fee splits across the ecosystem projects will be distributed to DF stakers.
- DF or LP tokens will be included as reserve assets in ecosystem project treasuries.
- DF will incentivize the development of ecosystem protocols but will not be used for liquidity mining.
- Any specific of the X Plan will need to go through DF governance.
- DF governance will decide risk parameters of ecosystem projects until full transition.
Next steps are to have community inputs and discussions on our forum and formalize specifications, particularly regarding the lending protocol specific for governance approval.