Prime Protocol: Ecosystem Grant Draft Proposal

[colton]

Prime Protocol: Ecosystem Grant Draft Proposal

Prime Protocol Team

Supporting the Prime Protocol Launch with Ecosystem Incentives

Primary Goal

Building Connected Contracts Use Cases (using XCM and other message passing protocols)

Project Description

Prime Protocol is an xApp/Connected Contract which allows users to borrow across chains backed by their entire portfolio of cross chain assets. The protocol uses Moonbeam as a hub to allow users to deposit assets from any chain supported on the platform, and borrow assets from any other chain on the platform based on their overall account value. This technology is revolutionary in the crypto space, and it will comprehensively change the way users can get more value from their portfolios. Our vision is to facilitate the spread of wealth across the crypto ecosystem by reducing friction and fragmentation between chains. Prime users can utilize Universal Access to originate their transactions for any chain on Moonbeam, ultimately allowing users to save time and money while still borrowing assets between chains. The project has gained significant traction with the community, seeing over 31k testnet users.

Prime Protocol is the ultimate showcase for Moonbeam's connected contracts. To strengthen Moonbeam's position as a cross-chain hub, Prime Protocol has launched several community activities, including:

• Supported Moonbeam at crypto conferences such as Polkadot Decoded, EthDenver, and SXSW, highlighting Prime as an example of Moonbeam's next generation of cross-chain applications.
• Organized a cross-chain interoperability YouTube discussion panel with Derek, CEO of PureStake (core contributor to Moonbeam), and other prominent projects in the interoperability space such as ZetaChain, Axelar, and Connext to showcase Moonbeam and Prime to the cross-chain community.
• Published a blog post about Prime using Moonbeam as a "home base" for coordination between chains.
• Actively participated in AMA's with the Moonbeam and DotSama communities to engage with the community, attract users, and help them understand the intricacies of cross-chain technology.
• Collaborated with DTMB & Moonwell to launch Moonbeam’s DeFi Voyage NFT campaign, an initiative designed to increase engagement and promote activity within the ecosystem.
• Actively engaged with Moonbeam ambassadors and interviewed on Moonbeam Communities YouTube channel to engage the community and explain the cross-chain architecture of Prime, highlighting the use of Moonbeam as the nexus point for unifying functionality across the many chains.
• Ran the Prime Pioneer NFT giveaway with Moonbeam and offered a whitelist for Prime Pioneer NFT to all Moonbeam Ambassadors.

These initiatives aim to foster the growth and development of the Moonbeam community and its ecosystem.

Test the application on testnet here.

Read more about Prime Protocol here.

Track the latest Prime Protocol developments here.

Requested GLMR Grant Amount

Ecosystem Grant Maximum [2mm GLMR]

We plan to apply for grant maximums for every other chain we will deploy on. Because Moonbeam is our hub and first deployment, we are first seeking a grant from the Moonbeam Foundation.

Use of Grant

Liquidity incentives on Moonbeam to encourage healthy use of the protocol. Users who use Prime Protocol on Moonbeam will be incentivized to do so with higher yields on deposits, as well as subsidized borrowing rates. Specifically, the Grant will be used to incentivize borrows and/or deposits on the following markets, with percentages indicating what percentage of grant funds will be used on each market:

• USDC.wh - 40%, target TVL of 8mm
• xcUSDT - 35%, target TVL of 7mm
• GLMR - 15%, target TVL of 2mm
• xcDOT - 10%, target TVL of 2mm

These allocation figures are not final, because we cannot entirely anticipate demand curves for every pool. The TVL targets are assuming pools will have greater than a 15% yield (which is higher than many of the Moonwell pools), and if they are reached with lower yields then incentives will be tapered to extend the grant runway. Allocation to these markets may be adjusted to maximize the TVL, usage, and health of the protocol. While our conservative estimate is that this grant will be used over a span of three months, it is highly likely (especially for stablecoin pools) that lower yields will be sufficient to incentivize our TVL targets and we will be able to make the grant last for longer.

Motivation for Grant Amount

Cross Chain Connected Contracts are a main focus for the Moonbeam Ecosystem, and Prime Protocol is a leading implementation of a cross chain xApp. This grant will not only serve to supercharge liquidity on the Moonbeam deployment of Prime Protocol, but encourage the use of connected contracts on other chains to interact with the Moonbeam Ecosystem. Universal Access will enable non native Moonbeam users to directly access and interact on Moonbeam, creating transactional volume as well as drive new daily active users for Moonbeam.

Project Overview and Relevant KPIs

Our protocol has garnered significant attention in the space, accumulating 42k Twitter followers, 25k Discord Members, and over 31k unique users to date on testnet. We expect to gain significant traction on mainnet given the rapid growth and impressive engagement of our community. Much of our ecosystem and community is Moonbeam native, and we will drive direct attention to the Moonbeam ecosystem with significant co-marketing collaboration efforts during our launch. In short, a stronger demand for Prime will directly correlate to a stronger demand for the Moonbeam ecosystem.

Team

The Prime Protocol team consists of 6 engineers and two Ecosystem and Community builders. The team has a wide range of expertise in finance, software development, and crypto. Below you can see some of our team member’s impressive backgrounds:

• Colton Conley
  • Colton got his start in crypto in 2016 as an investor and trader. He built arbitrage bots to trade between various centralized exchanges, and became interested in the DeFi space with the advent of decentralized exchanges. He earned a B.S. in Statistics and Data Science and Economics at Yale University, where he was awarded the Tobin Fellowship for economics research, focusing on cryptocurrencies. He has experience working on macro desks at JP Morgan and Citadel, where he was a quantitative trader focused on interest rate volatility. As an avid DeFi user with traditional finance experience, Colton saw the need for Prime Protocol through his own trading activities. He is the Founder and CEO of Prime Protocol Inc., the software development company building Prime Protocol.
• Neeraj Kohirkar
  • Graduated from UC Berkeley. Engineering lead at Netflix for 4 years. Advisor for fintech seed-stage startups. Entrepreneur for 10 years. Crypto enthusiast, builder, and investor since 2017. Hobbies include singing Bollywood songs and producing music
• Marcin Pawel
  • Former member of the Vega Protocol's community team, Kitefin.xyz co-founder, entrepreneur, and advisor. Crypto enthusiast since 2016, BSc Computing & Business, OU Milton Keynes, England
• Noah Bayindirli
  • Noah is a fullstack engineer and crypto-native developer, with extensive smart contract and decentralized infrastructure experience. After honing his skills at Amazon, Noah shifted all focus to DeFi to join Prime and help develop the next generation of our monetary system.
• Francisca Moya
  • Francisca is a Data Science and Physics graduate from Wellesley College and an alum of the Bernard M Gordon MIT Engineering Leadership Program. She is a software engineer at Prime Protocol focusing on front end development. Francisca is passionate about building scalable interfaces that adapt to the rapidly changing business needs of DeFi. She believes these platforms should be accessible and easy to use by users with diverse levels of expertise in Web3.
• Tyler Galaskas
  • Former Digital Content Producer abc27 News, Crypto community organizing, Crypto enthusiast since 2017. Social Media Manager for Prime
• Thomas Baker
  • Thomas recently graduated from Georgia Tech with a major in Aerospace Engineering and a minor in Computing and Intelligence. After working on a MEV arbitrage team with students from Blockchain @ GT and helping to plan the Web3 ATL conference he joined Prime as a Blockchain Engineer.

Project Architecture

Hub and Spoke Architecture

Prime Protocol uses a hub and spoke architecture as a part of its connected contracts approach. Moonbeam serves as Prime’s hub, allowing for the protocol to connect with other major ecosystems through decentralized message passers, while also connecting with other parachains in the ecosystem. Every time a user conducts an operation – even if they are depositing or borrowing on a different chain – a transaction is executed on Moonbeam to certify that change of account state. The vast majority of protocol logic lives on Moonbeam, and most of the gas required to power Prime Protocol is spent on Moonbeam. As adoption for Prime Protocol grows, usage of the Moonbeam Network grows too. Furthermore, by leveraging Moonbeam as a hub, Prime Protocol can accept xcAssets as collateral and can deploy to other parachains leveraging XCM. Prime Protocol’s go to market strategy involves first bringing liquidity to Moonbeam and Polkadot through connections with external EVMs. Then, Prime Protocol can serve as the lending protocol for all of Polkadot as well.

Message Passing

Prime protocol utilizes generic message passing protocols to connect with chains outside the Moonbeam Ecosystem. A large advantage of using Moonbeam is that these message passers can easily connect with Polkadot through Moonbeam because of the EVM compatibility Moonbeam offers. To ensure robustness of the protocol regardless of what the future may hold, Prime Protocol features a router and standard messaging interface that can plug into any interoperability protocol. All user flows that may require a message to be passed – deposit, withdraw, borrow, repay, and liquidate – are packaged into a payload and sent to and from Moonbeam via a generic messaging protocol. Before a message is sent, a unique hash of that message’s payload with some metadata is stored on the sending contract. This ensures there is a record of the messages queued for delivery, so if anything were to go wrong with the message delivery, the tokens locked on the sending chain are not lost. For example, if the chosen message passer is paused or exploited, the messages could be routed over a different message passer to ensure delivery. On the receiving side, a queue of message hashes are stored to prevent replay attacks, and ensure every message received is processed exactly once. This means that a message that failed to deliver or was delayed could be re-sent over a different route. It also offers protection against one of the most common forms of bridge hacks. Currently, Prime leverages Axelar to securely deliver these messages and Wormhole as an alternative route. Both Axelar and Wormhole are excellent solutions, and the integrations with each have been fully audited. There has never been an issue with the consensus mechanism for either protocol, and the relayers they use are completely trustless. Prime Protocol does not rely on any token bridges, only the core message passing layers.

Money Markets

Prime Protocol will launch with pool based money markets, where users can deposit tokens and use them as collateral for other users to borrow against. What makes prime protocol different from any existing money market is how every pool is connected to one another regardless of blockchain. So, a user could deposit on ETH and borrow on Moonbeam, without sending tokens over a bridge. If a user has assets on both Moonbeam and ETH, all of those deposits can count as collateral for a single (or multiple) borrows on any chain in the network. This model of interoperability is revolutionary from both a UX perspective and a financial utility point of view, because the ability to use every asset in one protocol allows users to benefit from having a diversified portfolio.

CDP

Prime Protocol also has the ability to issue synthetic assets, pegged to the price of an asset such as USD. While these will not be made available right at launch while efforts are concentrated on building usage of the money markets, down the line USP and other synthetic assets can provide decentralized alternatives to tokens such as USDT in the Moonbeam ecosystem and beyond.

Sources of Revenue

Prime Protocol generates revenue in the following ways:

1. Interest
   • Like other borrowing protocols, Prime receives a share of the interest borrowers pay on the platform.
2. Liquidations
   • When a user is liquidated, a penalty is applied to the seized collateral in the form of a liquidation fee. Most of that fee is used to incentivize the third party liquidator, to ensure the liquidation is performed promptly. Part of that fee is reserved by the protocol.
3. Swap Fees
   • When the stablecoin goes live, Prime will allow users to swap USDC for USP through the protocol treasury reserves. There is a fee applied to these transactions, which generates a profit for the protocol. It is important to note that even in a depegging event for USDC, this would not affect the security of a user’s deposits because those losses would be entirely absorbed by the protocol treasury. We believe that given the move of USDC’s cash reserves to BNY Mellon, the risk of a depegging event due to insufficient reserves is extremely small compared to when those reserves were sitting in regional banks uninsured.

Costs to Users

Users will pay gas costs to use the protocol, as is customary with all DeFi protocols. Moonbeam users will have the unique advantage of not having to pay additional gas for message passing outside of Polkadot, which will significantly reduce both transaction costs and latency. This perk is specific only to Moonbeam users, because it is our hub chain. Other costs users will face include the aforementioned sources of revenue. A small portion of interest paid will be collected by the protocol, and liquidations also charge a penalty. These fees are consistent with industry standards and other liquidity protocols.

On/Off Ramps

We are working to make Prime Protocol as accessible as possible to new entrants to the Moonbeam Ecosystem. To that end, we will be working with multiple on-off ramp providers to build native integrations into the protocol, so users can deposit and withdraw directly from their bank account or credit card. These collaborations will be announced shortly, and are anticipated to be live a few months after mainnet launch.

Synergies with Moonbeam Ecosystem

There are multiple potential synergies with the other projects in the Moonbeam Ecosystem. On the Prime Protocol UI, we plan to integrate swapping and bridging interfaces, powered by Moonbeam native DEXs. Liquidators will also need to use Moonbeam DEXs to swap out of the Moonbeam native collateral they seize. In the future, once price oracles are available and security due diligence is complete, Prime Protocol could support LP tokens from projects such as StellaSwap and Beamswap as collateral, as well as the CTokens from Moonwell.

Sources of Real Yield

Incentives from ecosystem grants and native token rewards are a bootstrapping mechanism to assist in early acquisition of liquidity, but certainly not a long term plan for user retention. Prime Protocol is built to take a variety of collateral types, which will allow for users to earn yield from other protocols while simultaneously using that capital to collateralize a borrow. These use cases include liquid staking, Compound cTokens, AAVE aTokens, and LP tokens. Any such yield bearing tokens will be rigorously evaluated for security, use reliable price feeds, and included with appropriate risk limits to mitigate overall protocol exposure (explained below). Including these external sources of yield will bring overall rates higher on the Protocol, and allow for it to outcompete other protocols that have no plan to incentivize deposits when their token reserves run out.

Price Feeds

Prime’s default oracle is Chainlink for all tokens on the platform. To broaden the number of assets supported and offer support for a wider variety of interest bearing collateral, Prime will additionally support Redstone and DIA oracles. It is important to note that just because an oracle exists does not guarantee Prime will list an asset as collateral. Such assets must have a large enough liquidity base to support accurate prices, and be resistant to price manipulation attacks. The protocol additionally sets risk limits to prevent reliance on any single asset too much.

Risk Limits

WIthout proper risk mitigations strategies, a protocol is vulnerable to market gyrations and economic attacks. Liquidity protocols must ensure that the collateral used to back user borrows is always sufficient to protect users who have supplied liquidity. Therefore, Prime Protocol implements a number of risk limits to prevent risky borrowing behavior, both from an individual user and protocol wide perspective.

Collateral Ratios

Collateral ratios are the discount applied to collateral value when determining the amount a user can borrow. A larger discount is applied to riskier collateral, meaning that a user could borrow more against a stablecoin than against a network token. However, all assets have some discount applied because there is always the risk of a depegging or black swan event (see the USDC depegging). Prime uses the idea of maintenance collateral ratios, and initial collateral ratios to determine what a user can initially borrow, and when a user is liquidated. Initial collateral ratios (what a user can initially borrow) are always more stringent than maintenance because a user should not be allowed to borrow an amount leading to immediate liquidation.

Collateral ratios (the ratio a user must maintain to avoid being liquidated) because it would be bad for users if they received a borrow and were liquidated immediately. Initial collateral ratios can also be used to incentivize healthy use of the protocol while not harming existing borrowers. For example, if too many users are borrowing against a single token, the protocol can lower initial collateral ratios for that token to incentivize a more diversified collateral base. Every token in Prime Protocol has a maximum percentage of the collateral base that it can comprise, and if it exceeds that percentage then no new borrows against that token are allowed. This prevents an attacker from performing a Mango Markets style attack, where the price of a single, less liquid collateral token is pumped temporarily to allow for a user to take oversized borrows in other more liquid tokens. Additionally, requiring that the protocol stay diversified and limiting exposure to less liquid collateral types means that liquidations are easier to perform if many users need to be liquidated at once.

Loan Risk Premiums

While many protocols consider the risk of collateral, they often do not consider the risk of the loanable asset. This is a mistake, and leads to inefficiencies such as collateral ratios that are too low for stablecoin deposits. A large portion of the risk a user incurs when borrowing comes from the value of the borrowed token. If a user borrows GLMR against USDT, and GLMR rapidly appreciates in value, the user could be at risk of liquidation despite the value of their USDT remaining constant. However, depositing USDT and borrowing USDC is significantly less risky, because the risk for USDC is much larger to the downside (a depegging event). Therefore, the user should be able to borrow less GLMR than USDC against a collateral base of USDT. To account for these differences in risk, Prime Protocol uses Loan Risk Premiums. When calculating a user’s health score, riskier assets are assigned a premium which reduces the maximum allowable borrow size.

Liquidations

Liquidations on Prime Protocol are performed by third parties on a first come, first serve basis. The more risky an asset (the lower its maintenance collateral ratio), the larger the incentive is for a liquidator to seize it. Liquidators perform a liquidation by repaying a borrower’s debt, and selecting one of the borrower’s collateral assets to receive as a reward. Liquidators must repay bad debt on the chain it was issued, unless they are repaying a borrower’s CDP position. In that case, it is most advantageous to pay for the liquidation on Moonbeam. After a liquidation is paid for, a transaction occurs on Moonbeam to determine whether the liquidator overpaid or attempted to liquidate a solvent user. If the liquidator overpaid, their excess funds will be returned.

Black Swan and Exploit Protection

Even seasoned DeFi teams have suffered from exploits, whether it be of their own fault or a dependency on a token bridge. Prime Protocol has a multi-faceted approach to security to minimize risk to all our users.

1. Minimize reliance on token bridges
   • Prime protocol does not use token bridges internally and only relies on generic message passing. This reduces the protocol’s dependency on third party code and therefore minimizes risk from third party integrations. However, in some instances using a wrapped token is necessary (such as USDC.wh). Prime Protocol’s plan is to reduce reliance on these tokens as soon as a native representation is available. Assets such as USDC.wh are also given lower collateral ratios and risk limits than they otherwise might have due to the added risk of the token bridge.
2. Contract monitoring and emergency freeze
   • Prime Protocol has partnered with Sentio to provide custom real time dashboards and alerting for all our contracts. If any unusual activity were to be identified, the protocol can be frozen either entirely or just borrows can be paused to allow for investigation and resolution into the potential exploit. We are investigating a further partnership with another party to set up a sentinel, which will be able to watch for exploits and react in real time to freeze the protocol and allow for a fix to be developed and pushed.

Security Audits

Prime Protocol has undergone multiple audits by security firms Ackee Blockchain and Veridise Inc. Every part of the codebase has been audited, and we will release four total reports (two from each firm) with their initial audits of the protocol and follow up audits with more recent additions. We are in the process of completing the fourth audit and the auditors indicated to us that they should complete the audit within the next week or two. We received feedback asking about how we would navigate feedback that requires re-working of the protocol architecture. As of our most recent sync with the auditors on March 16th, there have been no vulnerabilities found that would have required a re-working of the protocol. If one should arise, we would dedicate all of our engineering resources to addressing the vulnerability as fast as possible, and conduct a further audit to ensure that nothing new emerged as a result. Security is our highest priority, and we will never deploy unaudited code or contracts without rigorous examination. If our timeline were to be impacted as a result, we would deploy the grant funds starting on a later date. All of the audits conducted will be publicly released with our mainnet announcement, along with contract addresses, technical documentation, and integration guidance.

Plans for Decentralization

We currently do not have a governance token, but in the future we will be taking steps to fully decentralize the protocol. While we have not publicized a token distribution plan, there will be steps taken to ensure users of the protocol are given the opportunity to participate in governance. Governance powers will include the ability to guide which assets and chains are added, risk limit adjustments (within pre-set guardrails), and use of protocol revenue. As the earliest users, the Moonbeam Community will have a special opportunity to become early stakeholders in Prime Protocol.

Timeline and Milestones for Use of Grant

We plan to start use of the grant end of April or early May, after the protocol has been launched and usage has begun. We will continue incentives through at least the end of June for the first tranche. Our vision of success would include:

• $16+ million of TVL on the Moonbeam deployment of Prime Protocol within the first three months of mainnet.
• We aim to see 1,000 weekly active users, with 4,000 users overall on Moonbeam within the first quarter of being live.
• The grant will be released in tranches of 200k GLMR, with the aforementioned ratios set to be the starting allocations. The subsequent tranches will be adjusted to ensure our TVL targets are met, and any extra GLMR will be allocated to the markets with the lowest yields (more TVL per GLMR spent)

Vision of Success

The grand vision of the protocol is to achieve billions of dollar value in TVL across every major EVM ecosystem, and position Prime Protocol as the dominant liquidity protocol in crypto. This growth will be made sustainable through the use of yield bearing assets as collateral, which will allow for yield to be exported from other ecosystems into Moonbeam’s DeFi landscape. Success for Prime Protocol would make every user across crypto a Moonbeam user, because every transaction they submit will be using Moonbeam in the background. The use of Moonbeam as a hub chain will also incentivize users to pay for their transactions using GLMR as gas for faster and cheaper execution.

Rationale

Prime Protocol is a pioneering example of an application building Cross-Chain Connected Contracts. We are the first cross-chain prime brokerage, offering spot margin to users backed by a cross-chain portfolio of assets. Using Moonbeam as a hub, Prime is an application that spans many chains but uses Moonbeam in the background for every transaction. This grant will bring users to the Moonbeam ecosystem and encourage higher TVL on the Moonbeam deployment of Prime Protocol. Ensuring that there is a deep capital base on Moonbeam will allow for more users to enter the Moonbeam Ecosystem through Prime Protocol. By offering more attractive yields on Moonbeam deposits and lower net yields on borrows, users will be incentivized to bridge their collateral to Moonbeam and take their borrows on the chain as well. By being a cross-chain application, Prime will also raise awareness of Moonbeam by bringing users from other ecosystems onto an application which prioritizes Moonbeam in the order of available assets and chains though our UI. These users can easily receive liquidity on Moonbeam and participate in the ecosystem. Additionally, liquidations for all synthetic assets issued by Prime Protocol (including an overcollateralized stablecoin) are performed on Moonbeam, which will attract more liquidity to the ecosystem.

Connected contracts are a main focus for the development of Moonbeam as a dominant chain in the wider crypto ecosystem. Ensuring that the leading examples of this technology are successful will attract many more builders to Moonbeam. To stand out as a leading blockchain to build on, we need to support innovative projects that further the goals of the ecosystem.

Steps to Implement

Implementing this proposal will require funds to be sent to a rewards contract responsible for distributing GLMR tokens to Prime Protocol users. These contracts will allow users to claim rewards for relevant participation in the Prime Protocol Mainnet. Costs associated with this include development and deployment of these contracts, and integration with front end user interfaces. Prime Protocol will be responsible for the development of these contracts. We would expect these funds to be transferred after mainnet has been deployed, the contract addresses are made publicly available, audit reports have been released, and all assets listed in this proposal are available on Moonbeam to deposit/borrow.

Updates:

Community engagement KPIs

More information on team

Security Audit Information

CDP

Money Markets

Costs to Users

Risk Parameters

Black Swan and Exploit Protection

Price Oracles

Message Passing

Sources of Revenue

Hub and Spoke Architecture using Connected Contracts

Liquidations

Sources of Real Yield

Synergies with Moonbeam Ecosystem

On/Off Ramps

Use of Grant

Plans for Decentralization

[turrizt]

Hey, Colton! Thank you for submitting your proposal. i’m excited about the launch of the PRIME protocol and wish you the best of luck with your proposal.

I have a few questions:

1. You mentioned that USDC.wh is one of the assets for borrowing that will be incentivized. based on recent events, is there a risk of liquidation if USDC.wh loses its peg again?

2. If I understand correctly, you plan to use the entire grant within three months. how do you plan to incentivize users after the grant period ends? will you apply for a second tranche and request the maximum amount again?

3. How do you plan to incentivize users in the future?

[GAMA]

Hey, pretty empty grant proposal without any clear indications on how and when the money will be used. Simply throwing in 2M GLMR to you and you throwing it in at people to gain “TVL” isn’t solving anything for Moonbeam or growing the chain.

We already have Moonwell that offers similar thing as you plan to.

[colton]

Thank you for your questions!

1. USDC.wh is treated like any other cryptoasset – there is a maximum LTV, and with our risk parameters the recent depegging event would not have been an issue. Some users may have been liquidated if they borrowed excessively against their USDC, and the chainlink feed used to tracked the price of USDC provided accurate prices. The protocol treats every token, even tokens meant to track the value of the dollar, as having the potential to go up or down in value. Solvency of the protocol is top priority.

2. We do plan to apply for the second tranche. However, I think it is highly likely that we make the grant last for longer than just the first three months. Our estimate was conservative and we will likely not need to spend the first grant entirely within the first three months. If more TVL comes into the protocol than anticipated, incentives will be turned down to stretch them out for as long as possible,

3. We plan to bring on interest bearing collateral that will provide sources of real yield which will make the protocol sustainable over time. Because Prime is a cross-chain protocol, we can offer opportunities for users to deposit yield bearing collateral on any chain, borrow from Moonbeam, and loop the position. With short dollar rates around 5% and potentially moving higher, this will provide sizeable real yield. Furthermore, we plan to apply for more incentives from every ecosystem we are a part of (not just Moonbeam), and should a Prime token be created in the future, that could be used as well. Our objective is to build a protocol that is self sustaining without incentives in the long run, but at launch we believe some bootstrapping will help build a foundation of TVL.

Please let me know if you have any follow up questions, I hope these answers help provide more clarity.

[colton]

Hi GAMA,

Thank you for your feedback. In our proposal, we indicated that the GLMR will be used for at least 3 months (likely longer) to incentivize use of the USDC.wh, xcUSDT, GLMR, xcDOT, FRAX. We believe this protocol has tremendous potential to grow the chain for multiple reasons: First, by being connected to other chains means that we can seamlessly onboard users from other ecosystems into Moonbeam. Allowing cross-chain borrows will reduce frictions to receive liquidity on Moonbeam to participate in the DeFi ecosystem and more. Second, even transactions that don’t involve depositing or borrowing assets on Moonbeam still cause a transaction to be triggered and processed on Moonbeam, which requires gas to be paid and usage of the network. If Prime is successful, Moonbeam will become a critical part of infrastructure supporting DeFi activity across the entire crypto ecosystem.

I hope this has addressed your concerns regarding how the grant will be used, and how this use case is both novel and grows the chain.

[turrizt]

Thanks for the detailed answer, Colton!

I have a few more questions, if you don’t mind:

1. • What security measures do you have in place and how do you ensure user fund safety?
     

2. • How would your development plan be affected if there were no incentives for your project?
     

3. • How often do you audit your code for vulnerabilities or weaknesses, and who do you use as an auditor? 
     

Moonbeam has established numerous HRMP channels with other parachains. I’m curious to learn more about Prime’s future plans in this area, as it’s crucial for Moonbeam DeFi to become a central hub for creating use cases for tokens from other parachains. this will enable these tokens to be utilized within the DeFi Moonbeam ecosystem, including for trading, farming, lending & borrowing.

I’m also interested in whether Prime intends to submit grant proposals to other parachains to receive liquidity incentives. This could create more opportunities for users from different parachains to interact and explore other projects within the dotsama ecosystem, thereby avoiding fragmentation and encouraging users to discover the advantages and opportunities of other parachains.

[colton]

Thank you for the follow up questions turrizt! Here are some answers:

1. We have completed multiple smart contract audits, and are in the process of a final audit right now. We used Ackee Blockchain and Veridise for the smart contract audits. Our lead auditor from Ackee also audited Axelar, which we use for generic message passing, and came highly recommended from their team. Both auditors used a combination of in house tools and manual review of the entire codebase. We decided on these auditors after receiving quotes from nine different auditing firms, including both large and small shops. We reviewed prior audits of other protocols, each auditor’s track record of exploits, and spoke with other projects which had experience working with the auditors. Rather than choosing the cheapest options, we chose the ones we believed would provide the most thorough examination of the protocol. Security is by far our biggest expense in developing Prime Protocol. Furthermore, when the contracts are live we will have dashboards and alerts set up to monitor the health of the protocol. Should a vulnerability be discovered, we have tools to quickly pause and patch the path by which the exploit is possible.

2. We built the protocol to work without any incentives. Our goal is to reach a mass of TVL such that we no longer need to incentivize, such as many of the AAVE deployments. However, to establish a defensible liquidity moat, we believe incentives will help us reach that point sooner. Incentives are distributed via separate contracts that are not core to the protocol, and our long term plan is to bring enough sources of real yield and usage to the protocol such that the interest on deposits will be enough to incentivize users to deposit into Prime.

3. Every line of code we publish has been audited. During Mainnet Beta, we will continue to perform additional smart contract audits. Once the code is open source and verified on chain, there will be bug bounties as well.

We absolutely plan to bring Prime to as many parachains as possible. We wanted to build the hub of our application on Moonbeam because Polkadot shares our vision of an interoperable, multi-chain future. We do plan to leverage XCM to not only bring liquidity to xc assets, but to bring deployments of Prime across the ecosystem. When those deployments are imminent, we plan to apply for the appropriate grant programs. The goal is to make Prime Protocol not just a gateway to Moonbeam, but a frictionless gateway to the entire Polkadot ecosystem.

As always, I would welcome any more comments and questions on your mind. Thank you for taking the time to thoughtfully engage with us!

[CryptoKichta]

hello moonwell is a bit like your project and has already benefited from several grants but I find that it does not really benefit the community there are a lot of whales who take advantage of these grants to farm all the glmr and in the end they go elsewhere it is not very constructive what is the benefit for the community knowing that there is already moonwell.

[GAMA]

I would like to see product being deployed on Main net and it’s growth without Moonbeam paying users to use it.

I think you should demonstrate what you can do and then ask for grant in next tranche.

Liquidity is already deep enough on Moonwell. Liquidations are not happening at all so people are just farming. Doesn’t help the network at all.

Protocols like AAVE never operated with ecosystem grants and they grew exponentially.

[Jim_CertHum]

Hi @colton,

First of all, I would like to thank you for submitting this draft proposal. After reviewing the submission and looking at your social media feeds, documentation, website, dApp and other sources of available information, I have the following questions and feedback. The intent of this feedback is to give you an opportunity to enhance your proposal so the community can vote in full transparency. The questions and feedback broadly fall into two categories: The format of the proposal itself and specific project feedback.

Proposal Format

Another committee member will provide feedback on this section.

Project Feedback

Security

You mention that your code is currently in a final security audit. When do you expect the final security audit will be completed, and will you make the result publicly available?

How will you handle delays if the result of the audit requires significant changes or rework?

User Costs / Project Funding

Will you please describe any and all costs associated with end users using Prime Protocol?

Please provide detail on how your project expects to earn revenue and become self-supporting.

Are you seeking or have you sought out grants from other chains to gain more traction and further incentive usage of the platform?

Moonbeam Ecosystem and Community Engagement

Please provide more information on how you are collaborating with other teams in the Moonbeam ecosystem.

How do you plan to organically grow a dedicated user base other than the grant or future token incentives?

Technical

At a high level, please provide more information on your implementation of cross-chain connected contracts through Moonbeam which enable the cross-chain functionality of Prime Protocol.

Please provide more information on high-level design of the platform – (i.e. price feeds, bridges, on/off-ramps, etc.)

Updates to Proposals

Please note that you have until March 19th 2023 11:59PM UTC to make changes to your proposal. A list of changes based on community feedback should be added to the “Updates’’ section of the proposal and any changes should be reflected in the text of the proposal itself.

[0x_thiago]

Hey Colton! Thank you for applying for the Moonbeam Ecosystem Grant Program. Very happy to see Prime making good progress and reaching this phase. As Jim highlighted, I’ll be covering some feedback over your grant proposal format and additional questions about Prime itself.

PROPOSAL FORMAT

As some members highlighted, it is imperative that your proposal expands on “Requested GLMR Grant Amount”, motivation, relevant KPI’s and more. Your proposal must be coherent with a $2m GLMR request. Below you may find some specific sections where I suggest some improvements, but please take some time to take all comments/questions in this forum into consideration.

Use of Grant: Please expand and detail how you will use the grant. Please review other proposals to have a better understanding of what’s required in this section. You will need to add milestones, the grant distribution within the pools and a timeline/schedule.

Vision of Success: Please describe what success looks like after the grant is completed. We could not find this section within your proposal and this is a very important topic. This is not necessarily the same as the milestones.

Project Overview and Relevant KPIs: Please expand this section to cover more KPI’s and successful metrics you’ve reached so far. It’s a good idea to expand on some of the questions made by Jim and/or me (below). I would appreciate it if you deep dive into Prime’s architecture, xcm connections they use and more.

Timeline and Milestones for Grant: I really enjoyed seeing weekly active users as a metric! I would take some time to improve this section to be more cohesive and visual. You may add a table with milestones or bullet points - whatever you feel it delivers a clear message to the GLMR holders.

Overall Structure of the Proposal: we noticed you had some targets and vision displayed under “Timeline and Milestones for Use of Grant”. I would highly recommend that you follow the mandatory proposal structure. You might have covered a few items within other sections, but it should be clearly separated, so it can be easily analyzed against other proposals.

BLACK SWAN, MARKET CRASH AND HACKS

We would like the team to make explicit comments on how you would respond to a ‘black swan event’, such as the Luna or Nomad hack. We would like the team to detail what is the strategy/tactical response in case of a market crash or other relevant events and potentially phase out the grant into stage-gate milestones.

Please consider the emergency tactics for the grant-related activities that will be adopted in case of a hack, market crash and/or other events.

PROJECT FEEDBACK

On top of Jim’s questions, I’d like to add the following:

1. Although allocation of the grant might be adjusted in later stages, please provide the breakdown to each pool and timeline to use based on your initial assumptions

2. What DEX is veins used to execute the swaps/liquidate positions?

3. Prime Docs mention The Prime’s Stablecoin, but the grant application does not mention it. Will the stablecoin be launched in further stages? Please expand on it.

4. Please detail how you plan to keep the protocol decentralized.

5. Does Prime have plans to launch a token? If yes, please highlight if you plan to launch during this grant period.

6. Jim asked for more information on your implementation of cross-chain connected contracts. This is imperative to be addressed by your team, since knowing how the connections are made behind the scenes give users confidence to use Prime.

Additional Notes

Although Jim asked about potential risks of not being deployed, I would like your knowledge that and consent that, even if your proposal is approved, the initial grant will only be deposited to Prime when:

• Prime is fully deployed on mainnet
• Assets listed in the grant proposal are available to lend/borrow
• Smart Contract addresses are publicly available and audit reports are also publicly available

[colton]

Hello ser, thank you for your question. Building liquidity on Moonbeam within Prime Protocol will offer an onramp into the Moonbeam ecosystem for new users due to the cross chain nature of the application. Therefore, the more liquidity we can build early on, the more users we can onboard to Moonbeam from other crypto ecosystems that might not have come over otherwise. This is different than single chain lending markets, which don’t have the same ability to bring in users from other ecosystems.

[colton]

Thank you for your thoughtful feedback! Please see the updated proposal where we have worked to incorporate your questions and suggestions.

[colton]

Thank you for your feedback! Please see the updated grant proposal for answers to the questions you had. Just a couple points I want to address directly here:

For liquidations, the third party liquidator determines what collateral they would like to receive as a reward. They also choose whether they would like to hold the reward long term, or sell it on a DEX. Therefore, it is up to the liquidator which DEX to use. We will base our collateral choices and risk limits off of liquidity on the DEX with the most liquid pool for a given asset.

We also acknowledge that the grant will not be distributed until mainnet deployment. It is also our intention to prove full functionality on mainnet before starting any token reward emissions. All audit reports, smart contract addresses, and asset pools will be publicly available. I included more details here in the updated proposal as well.

[colton]

Hello Moonbeam Community! We are pleased to give an update on the status of Prime Protocol since our grant application.

First of all, Prime Protocol had a successful launch on Mainnet! Our protocol began processing Mainnet transactions on May 9, and with the help of the incredible Moonbeam infrastructure, users are now able to access cross-chain assets seamlessly. Prime surpassed $1 Million of TVL in under 72 hours, with a majority of the TVL coming to Moonbeam. A large portion of the borrows were also on Moonbeam, and flowed into StellaSwap and Moonwell. We are hopeful about raising awareness with communities on other chains, demand to use Moonbeam will continue to increase.

In the following sections, we’ll go over some key components of the Prime Protocol Mainnet PR campaign, including a mainnet announcement tweet and the Prime Pioneer NFT Launch on Galxe. Both the PR campaign and the NFT launch brought many new users to the moonbeam ecosystem.

Mainnet Announcement Tweet

https://twitter.com/prime_protocol/status/1655954660820398083?s=20

The mainnet announcement tweet played a crucial role in creating awareness about the Prime mainnet launch. Here are the key metrics associated with the tweet:

- Impressions: The tweet received over 154,000 impressions, indicating a significant reach

- Video Views: The video embedded in the tweet garnered over 20,000 views, demonstrating strong engagement with the content.

- Engagement: The tweet received over 22,000 engagements (Retweets/likes/comments.)

Prime Pioneer NFT Mint:

Within 48 hours of announcing the mainnet launch, we successfully launched the Prime Pioneer NFT Mint, strategically designed onboard new users to the Moonbeam chain. The fast transaction speeds and low gas fees of the chain enabled our users to save time and money while minting a token of our appreciation. All Moonbeam Ambassadors were given the opportunity to sign up and mint a Prime Pioneer NFT of their own!

The NFT has currently been minted by over 6,000 unique users. **Over 3,500 of these users submitted their first-ever Moonbeam transaction!** Onboarding new users to the Moonbeam chain was our ultimate goal for this NFT, and the campaign has proven to be extremely successful in the first week and beyond. This achievement is a testament to the overwhelming support of the Prime Community, as well as opening new doors for these members to experience the advantages of Moonbeam for the very first time.

With respect to the grant funds, we are very excited to turn on incentives in the next month. Once the tokens are transferred from the foundation to the protocol, community members using the protocol will be eligible to receive the incentives. We are excited to see growth supercharged when this happens! In the meantime, you can get a head start using Prime, earning points and real yield at https://app.primeprotocol.xyz/