ZooDAO: A leap forward in our strategy
“Great ideas are worthless without execution”.
As we continue building bridges between NFTs and DeFi, it has become clear that the demand for NFT utility and cross-chain solutions are greater than we anticipated. Soliciting guidance and input from peers and project leads in the NFT and DeFi space, the team identified a series of pain points users and projects face, which continue to inform our priorities for ZooDAO’s development.
In this article, we share our thinking behind two key challenges we’re currently facing, and request the support of the community in adopting our proposed solutions to drive ZooDAO forward.
Challenge 1: A single-chain solution
Deploying a complex solution like ZooDAO on a single chain (Ethereum) comes with its own challenges. Ethereum is the most obvious foundation upon which to build ZooDAO, given that the majority of NFT projects and many DeFi solutions share the same foundation; however, the Ethereum network presents a unique set of limitations and risks to scaling which must be mitigated.
First, the Ethereum chain is plagued by issues of high transaction fees, limiting the comfort of users as they interact with and enjoy the benefits of NFT staking. As the incumbent solution in the market, many users have learned to live with high gas fees to secure the benefits of decentralization and transactions in a proof-of-work environment. However, most users have no choice but to use Ethereum, given that most NFT projects live on Ethereum.
Second, DeFi protocols on Ethereum have encountered the consistent challenge of providing compelling returns to users staking assets, without increasing the level of associated risk. With users increasingly seeking lower-risk options to generate returns (APY), and lower rates of return being offered in exchange, users need to diversify options. Adopting solutions deployed on alternative chains may provide a broader range of possible methods to generate passive income, tailored to the level of risk each user is willing to accept.
DAO Proposal 001: A multi-chain vision for the future
In line with our commitments to building accessibility for all users, we have investigated the potential for ZooDAO to deploy solutions for an even broader user base by adopting a multi-chain approach to NFT utility.
This approach is especially critical for the future of NFTs, given that while the majority of NFTs are currently hosted on Ethereum, ERC-721 projects are consistently being launched on other chains. Integrating other chains effectively places ZooDAO’s approach to utility as the first cross-chain, cross-platform and cross-community solution to NFT utility.
In practice, deploying ZooDAO on multiple chains means we’ll be able to provide even more options for users. No longer limited by a single-chain approach, users will be able to secure more predictable, higher, and stable returns on their NFTs and assets while participating in ZooDAO’s NFT Battles, with the added benefit of exceptionally low gas fees.
Adding additional features to ZooDAO’s solution presents the challenge of ensuring that users aren’t overwhelmed with choices. To address this challenge, we have narrowed down potential options to a core group of solutions that meet our stringent criteria for adoption:
- Any layered solution must align with our values of decentralization, trust, non-exclusion, and fairness;
- Solutions must be capable of being integrated directly into ZooDAO’s dApp to enable the platform to remain a single contact point for users;
- Any third-party technology must meet stringent security and audit standards;
- Solutions must enrich the user experience, provide additional functionality, and complement existing solutions.
Having evaluated the multitude of various on-chain solutions on the market, we have arrived at a landscape of solutions that meets or exceeds all of the conditions above. The first of these solutions is Fantom Chain, a modular smart contract platform, deployed on a mainnet called Fantom Opera, which is compatible with Ethereum. The modularity of Fantom enables a great deal of flexibility for development: ZooDAO’s Tech team can port existing Ethereum-based dApps to Fantom Opera with a few clicks, upgrading performance and speed with lower costs.
The advantages of Fantom’s network are primarily in speed and extremely low transaction fees. Recently, in a test run on the Fantom network by the ZooDAO Tech team, running a series of complex transactions to simulate a battle cost less than $0.04 USD. In turn, users can expect to see low transaction fees, enabling smoother transactions without gas fee anxiety.
Why we’re confident in this solution:
The dynamics of NFT Battles on Fantom chain do not change from those deployed on Ethereum: users deposit $DAI in support of their preferred NFT and earn yield in the same way they would with traditional battles. The only aspect which changes is the reduction in transaction fees, alleviating the pressure on both the community and the ZooDAO treasury in compensating gas fees users encounter.
Challenge 2: Securing compelling rewards for users
ZooDAO’s NFT Battles act as a vehicle by which users may secure compelling returns and passive income by leveraging their most valuable assets, in a gamified environment. In NFT Battles, NFT Voters and other community members deposit DAI in ZooDAO’s smart contract to generate votes for their preferred NFTs and influence the outcome of the battle. Deposited DAI is in turn staked in Yearn.Finance for the duration of the NFT Battle to generate the rewards which are distributed to NFT Voters and NFT Holders at the close of the battle. Given the consistent demand for DAI on the open market, Yearn.Finance is capable of generating modest, somewhat predictable returns during the 14-day window of NFT Battles.
However, the challenge of adopting DAI as a single stablecoin solution is twofold: first, the current mechanics of NFT Battles rely on all voters holding DAI, or trading other assets to DAI to submit votes. Users without DAI are therefore at a disadvantage, as they incur fees to trade other stablecoin assets to DAI to engage in submitting votes.
Second, staking exclusively DAI in yearn.finance limits access to potentially higher returns available in other stablecoin-specific vaults hosted on Yearn.Finance. With multiple competing stablecoin solutions on the market, there is a relatively high degree of variance in the yield available in alternative stablecoin vaults. Failing to leverage the opportunity to secure higher yields
DAO Proposal 002: A multi-vault solution
In order to generate compelling returns and take advantage of varying market conditions, the team is proposing to build more agility into defining the target vaults for staking stablecoins during NFT Battles, by adopting a multi-vault solution. Instead of being limited by the use of a single vault (i.e. DAI), this strategy would enable staked assets to be deposited into a broad range of stablecoin vaults, selected based on the highest available APY.
This proposed change has implications for the dynamics of NFT Battles. Instead of focusing solely on DAI as a stablecoin to generate votes, users would be able to vote with any of the stablecoins in the list below. This would remove the barriers to participation by avoiding costly transactions for users who hold alternative stablecoins, and enable broader engagement from community members who hold any sum of an eligible stablecoin. Stablecoins staked during an NFT Battle would be converted automatically in the ZooDAO smart contract to a single asset to be staked in the vault with the highest available APY.
To determine the most relevant staking strategy, the ZooDAO team has built a function to monitor the yield available from over 10 available vaults and defined the conditions under which the yield generation strategy would be adjusted. At present, we foresee the yield generation strategy being adjusted on a monthly basis, with re-directs funds to the most profitable vault. Any user can trigger the re-direction of funds from the ZooDAO interface.
A security factor considered by the team in proposing the adoption of this strategy is the recent market volatility in algorithmic stablecoins, namely the de-pegging of UST. Our due diligence efforts to safeguard users’ assets include continuous monitoring of the performance of these stablecoins. Vaults proposed for adoption have been carefully reviewed and vetted by Yearn.Finance.
Why we’re confident in this solution
This dynamic yield management strategy enables the team to seek the highest possible yield available on the market, allowing re-balancing should the available yield decline, or in case of a security concern. With NFT Battles open to alternative stablecoins, we expect users to experience fewer obstacles to participation and higher motivation to engage.
Adoption of the two strategies described above is subject to the approval of the ZooDAO community. In line with our values of inclusivity and decentralization, the team is seeking a vote of approval from all community members for:
- Adoption of a multi-chain strategy for ZooDAO NFT Battles
- Adoption of a multi-vault solution to generate higher yield in ZooDAO NFT Battles
These proposals have the unanimous support of the ZooDAO team.
We are requesting the support of the community to critically evaluate these proposed changes through a vote hosted on Snapshot.
$ZOO holders can vote on the proposals using the link below:https://snapshot.org/#/zoodao.eth/proposal/0xb7644249a747fe7a021a48c7c3bd4f53f01e91ebd1b11308584bd111dbfd51f2