Presenting Sunder Protocol x Sushi Integration
Sunder Protocol is the first framework that allows for utilities of Governance tokens to be mutually inclusive, allowing for participants to remain exposed while being able to bear interest via strategies, without sacrificing on voting rights. By exclusively integrating with Sushi Protocol, we’ve enabled a solution under which participants can enjoy both DAO participation and earning yield on governance tokens in an efficient manner, as well as new forms of pricing/speculation over the above-mentioned isolated utilities.
Prelude
Since inception, self-sovereign protocols serving as financial applications, built on top of distributed environments such as Ethereum have aimed to offer a variety of products.
From money markets alike Compound & Aave, to derivative solutions such as Synthetix or Hegic, decentralised trading environments & AMMs like SushiSwap, insurance protocols such as Nexus Mutual or Nsure Network, and countless iterations of aggregation infrastructure like Yearn Finance & 1Inch, besides other infrastructure that improves verticals in the DeFi landscape, from interoperability to efficiency.
While the industry has grown into a vast variety of solutions and applications, all share one same value proposition: offering an alternative, (semi) non-custodial framework for participants, under which code replaces central party-authority. For the first time, users of an application construct ownership & management rights over the product which they are utilising.
Decentralised Governance has been a key factor to allow for such constructs to rise, offering a voice on deciding the future of the application, managing rights over core features and functions, as well as influence over incentive layers that hold these environments together; not to ignore development and iterations in a community-effort style. DAO implementations have been part of the backbone of what DeFi has become today.
Regardless, these governance rights, represented by protocol/governance tokens have found a solution on economically incentivising participants with additional incentive layers from staking to farming, even opening the doors to third-party yield bearing environments such as money markets.
Even if utilities are clearly defined, one aspect of these tokens besides additional interest-bearing solutions is undoubtedly the reason for speculation, exposure to this new format of fractional ownership over an organisation.
As DeFi has sailed it’s path towards maturity, the incentives for ownership on governance tokens remain fractionalised. Whether speculation, governance participation, or economic incentives, different users have diverse interests on why keeping ownership on such tokens.
Up to today, these cemented utilities for protocol governance tokens remain mostly excluded from each other. E.g. If being a holder of interest-bearing COMP/DAI LP tokens on SushiSwap, the participant is benefitting from additional revenue sourced from trading fees. However, if wanting to engage in a governance proposal/vote, given the nature in which DeFi is constructed, the voting rights are at mercy of the contract holding liquidity, instead of the owner of the governance token. If wanting to engage, the user is forced to withdraw liquidity, restoring custody of the underlying tokens back to its wallet in order to participate and execute his rights over DAO governance. Logically this dilemma is inversely applicable: Holders looking to remain with speculatory exposure together with governance interaction are excluded from utilising their governance tokens for bearing interest and acquiring yields.
If wanting to engage simultaneously, the owner is left with having to actively manage these tokens, depositing/withdrawing from interest-bearing products on demand, resulting in a sunk cost for transaction fees with every interaction.
This has presented one of the core challenges to attract higher conversion rates when it comes to DAO-related interaction, resulting in marginal participation, hurdles on reaching quorum, and higher degree of centralisation when it comes to active participants.
So herewith rises the inevitable question:
Should the verticals of DeFi and DAO be mutually exclusive?
We believe not. For Decentralised Finance to reach a next level in its stages of maturity, participants should not have to go through the exclusive choice of either executing their voting rights or exposing themselves to additional revenue streams of passive income like interest bearing yields. Regardless of the cost of execution in terms of transaction fees, both utilities should not bear a sunk cost for the user that intends to enjoy both benefits.
Value Proposition
Whether preserving a mutually inclusive environment for governance rights and interest bearing products, or opening the doors towards new and more concrete ways of speculation over these same utilities, the core concept of Sunder is to offer a new solution to the industry that breaks down one of the last unresolved dilemmas of exclusion.
Bridging two of the core features of DeFI, participants will now be able to benefit from financial strategies with revenue-generating outcomes while not needing to sacrifice their right of participation in governance on the protocols they hold partial ownership of. Eliminating sunk costs of having to actively manage governance token allocation, leaves room for binding a closer symbiotic relationship between both Decentralised Finance applications and their respective DAOs.
In addition, given the approach taken, participants are given the opportunity of isolated speculation over each feature.
For the first time, the market will be able to determine concrete pricing over single utilities, whether its voting rights over Governance, or the opportunity of earning yields over any underlying.
The importance of creating a free market for the DAO and Earnings component enables a solution for users to define a set price for voting rights as well as future earning rights in an isolated manner. Bringing the industry one step further in finding an answer over how Governance Tokens can be utilised and priced in a more efficient way.
In essence, the vision of Sunder Protocol is to allow any user to extract full value of governance tokens through Sunder Protocol.
Participating in governance while earning yield to be simultaneously achievable, without excessive overhead cost spent on fees.
Governance Participation should not be an excluding factor for alternative utilities, left available to fewer large holders.
Infrastructure
The key component that allows for executing such a value proposition, is the architecture of splitting (ergo sundering) any governance token into isolated tokens to represent Governance vs Earnings. In order to trigger minting of these, the Sunder Protocol requires depositing of underlying governance tokens e.g. COMP, providing decentralised vault services.
•Vaults optimize exposure to bearing interest vs. allocating governance participation.
•Participants seeking for isolated exposure can directly purchase dedicated isolated tokens for their desired use (e.g. DCT or ECT), at a fractional cost of its underlying.
• Participants exposed to both can now participate in governance while bearing interest without requiring expenditure on additional fees. Vaults facilitate gas optimization for users
Infrastructure Overview:
Governance participation through DAO Isolated Tokens:
Dtoken holders can vote on any proposal mirrored from an original proposal executed by the underlying DAO. Sunder will use its snapshot based software to collect voting participation from Dtoken holders as an input to ‘For Contract’ and ‘Against Contract’. Any participant can trigger the transaction to execute the needed rebalancing of both contracts, by moving collateral from the earnings vault to the voting contract, and hereby delegating underlying governance tokens to be used for voting accordingly.
As this process is triggered via Snapshot, simply needing a signature message originated from users wallets, the outcome for Dtoken holders results in zero cost of executing governance participation rights.
Earning strategy with Bento box:
Similar to how Yearn Finance executes strategies on yield optimisation, Sunder allows for community engagement to determine strategies for optimising earnings over governance tokens under management of the Sunder Vault. Strategists can suggest strategies via holding SGT and obtain returns structured as strategist fees. These are deployed via 3 core smart contract structures:
Vault contracts will determine where tokens from Sunder vault will be allocated.
The Controller contract will set strategy accepted by SGT holders, while the strategy contract will execute these with available tokens from the vault.
Products like Bentobox will play an important role to generate yield for collaterals from the Sunder Vault, as one of the potential environments to deploy on.
As BentoBox becomes more versatile, Sunder will grow in integration possibilities with its strategies.
Sunder Governance Token incentive layer
In addition to execution of the core isolated utilities, as seen above, participants have the added choice of engaging with liquidity provision on the dedicated pools on SushiSwap for both DAO and Earnings isolated tokens. Besides fee acquiral over trading volume occuring on the pools, if LP tokens are staked within the Sunder Governance Vault, participants will hereby engage in mining the Sunder Governance Token via farming distribution:
Rewards for different protocol’s governance tokens will be determined by the Sunder Governance Module Proposals.
By providing liquidity which is incentivised at a protocol layer, individuals can herewith choose to buy or sell Dtokens on SushiSwap. A novel way for people to value Governance in the defi landscape.
External players that wish to specifically obtain exposure to a Governance token in order to participate on a specific proposal could now acquire exposure and voting rights at a marginal cost, given the isolation of it’s utility.
Sushi Integration: The solution to offering a viable product
The key role that Sushi has in achieving this value proposition, has been stated in multiple points above. From allowing liquidity for Isolated Governance and Earnings Tokens, to deploying strategies via BentoBox, Sushi is, for Sunder, the one-stop shop that offers a full-fledged framework under which all functionalities can be enabled.
Besides these, the aligned value proposition of both protocols, Sushi’s multi-chain environment and comprehensive features of its AMM & adjacent products, turn this collaborative effort into a symbiotic relationship between both protocols, benefitting from each other at scale.
Find us here:
Telegram: https://t.me/SunderFinance
Github: https://github.com/Sunderfinance
E-mail: contact@sunder.finance
Twitter: https://twitter.com/SunderFinance
