The DeFi Flywheel: Bootstrapping Liquidity Across Curve, Pendle, and Beyond

This article outlines a fairly standard DeFi strategy for projects building in the DeFi space. We outline the pools you can setup and how they link. This strategy is not a one size fits all solution, but showcases how you can take advantage of existing DeFi stacks.

Strategy Draft

1. Set up a pool on a DEX

-Curve seems ideal regarding partnerships and integrations, but uniswap might also do.

2. Launch IAMs on Royco

Deposit assets into Curve

-Encourage Action Providers (APs) to deposit assets into the newly created Curve pool.

-Royco campaigns offer rewards (tokens, points, or both) to users who provide liquidity, which could boost the TVL and deepen liquidity.

Vote on Curve Gauges (optional)

-Offer incentives to APs who vote on a Curve gauge to increase the pool’s APR.

-Royco’s IAM can reward users who lock CRV or veCRV in favor of the projects pool, elevating its gauge weight.

Why? The projects pool achieves higher APR from Curve emissions, attracting more deposits which can power the flywheel naturally.

Trade tokenized yield on Pendle

-After users hold LP tokens, incentivize them to trade or tokenize the yield from these LP tokens.

-Royco offers rewards for depositing LP tokens (or yield-bearing derivatives) into further protocols (e.g., Pendle or Yearn).

-This could create a secondary market for yield, encouraging more complex strategies and layering.

Nevertheless, there are limitations mentioned below.

3.Pendle pool creation

Deploy a Pendle pool for project or for the Curve LP tokens.

Why?  Pendle splits LP tokens into principal and yield tokens, enabling advanced yield-trading strategies.

Limitation (aforementioned) project isn’t naturally yield-generating, so the pool itself may have to consist of another token which already contains project and generates yield.

4.Other integrations

Lending

-Euler, Morpho are ideal, but ZeroLend and Gearbox are also an option.

-Users may lend or borrow against their LP tokens or yield tokens, increasing capital efficiency.

Perps:

-Contango

-Looping strategies or leveraged trades on project pairs become possible, with “funding” effectively determined by the underlying lending protocols.

Yearn Finance

-Additional yield on top of the Curve LP tokens or project assets.

Strategy to consider

Another example of how participation on Uniswap/DEX pools can be incentivized is what Usual did with Lombard LBTC

They opened a USD0/LBTC pool on Uniswap

The pool

offered

users daily rewards in "Pills" and potential access to Usual's

$USUAL

TGE which was nearing

Usual is a protocol that grew in popularity. Similarly, project can leverage upcoming projects and set up strategies with their tokens

Note regarding requirements

While the protocols mentioned on this list don’t provide the requirements (TVL, volume, etc.) explicitly, they might have different requirements especially once the protocol grows.

Note that for example, Euler requests the deployer to bring in external audits, increase internal reviews, and tighten security measures once a vault reaches a TVL of $50M

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