Community Call #4 Recap — Developments and Future Plans
Introduction
In our latest community call, we shared updates on Horizon Protocol’s growth and sustainability roadmap. Over the past few months, we’ve shifted from a development-centered approach to a balanced focus on growth and strategic initiatives. This includes actively exploring partnerships with Layer 2 (L2) solutions to expand our reach and transitioning to a competitive multi-layer liquidity model to strengthen our ecosystem. We believe these initiatives are essential for attracting more traffic and scaling Horizon Protocol. Here are the highlights from our discussion:
Agenda
- Partnerships
- Liquidity Strategies
- zUSD Liquidity for On/Off-Ramp
- Tokenomics
- Q&A
- Looking Ahead
Partnerships
During our mid-year call, we identified going cross-chain as a top priority to address the high gas fees on BNB Chain, which remains central to our expansion strategy. We’re actively pursuing partnerships with promising L2 networks that bring resources and share our vision for sustainable, long-term growth. By positioning ourselves as early contributors, we aim to drive mutual success and establish a powerful foundation for growth.
Our roadmap starts with onboarding L2s through liquidity layer integrations, paving the way for a complete cross-chain transition via Layer Zero technology. This strategy enables us to highlight partnership value early on, minimizing the need for a full liquidity overhaul and reducing security risks from cross-chain. This phased approach will accelerate our integration timeline and allow us to collaborate on marketing, develop unique features that align with each L2’s strengths, such as AI-driven tools, and generate early revenue for Horizon Protocol. Partnering with L2s that emphasize user-friendly or AI-enhanced DeFi solutions aligns perfectly with our strengths. We are very excited about the potential L2 partnerships and the opportunities they bring to scale and enhance our protocol. Our upcoming collaborations will unlock co-marketing opportunities, joint initiatives, and deeper integrations to drive adoption and accelerate growth.
Liquidity Strategies
In the on-chain perpetual futures market, there are three major types of liquidity infrastructures, each with its pros and cons:
- Oracle-Based: Our current setup, where a counterparty liquidity pool backs trading positions. This model offers low slippage and zero spread, low fees, but has capital inefficiencies, requiring over-collateralization, additional on/off ramps.
- Order Book: Commonly used by centralized exchanges, order books allow quick, transparent trades. They provide deep liquidity and fast execution. Orderly Network, used by some of the L2s we’re engaging with, is an example that could ease our liquidity management and facilitate cross-chain integration.
- The Request-for-Quote (RFQ)/Intent Based: This newer model lets traders request quotes, which liquidity providers respond to with competitive pricing, offering access to 180+ asset pairs and a broader market, while allowing us to focus on our unique front-end and AI features. The downside is the latency when doing high frequency trading.
We’re in discussions with two promising L2 teams that align well with our ecosystem, and positioning Horizon Protocol as a versatile marketplace, offering tailored liquidity options for various trader needs.
zUSD Liquidity for On/Off-Ramp
Recent performance issues with Wombat pools have impacted the stability of the zUSD peg, prompting us to redirect incentives to the USDC pool; however, significant results have yet to materialize. This situation highlights ongoing discussions about the capital efficiency of automated market makers (AMMs) and the sustainability of incentivized liquidity.
Since our launch, we have incentivized liquidity for core tokens (HZN, zUSD, zBNB) with HZN rewards. While this model was effective for rapid growth, it lacks long-term sustainability and relies heavily on continuous external incentives. To enhance capital efficiency, we propose a gradual shift towards protocol-owned liquidity.
Our latest HIP proposes to launch a concentrated liquidity V3 pool on PancakeSwap, paired with an automated position manager through Cupcake Hop(by ICHI). This approach will allow a smaller pool to manage larger volumes effectively, optimizing yields while requiring a more active role from liquidity providers.
Initially, the Community Staking Wallet will allocate $20,000 USDC from the Pyth airdrop, paired with minted zUSD, to establish the new V3 pool. The community will have the opportunity to decide whether to continue incentivizing the USDC pool on PancakeSwap V3 or to redirect HZN incentives toward protocol-owned liquidity, potentially through bonds with protocols like Apebond.
In summary, this proposal aims to enhance zUSD liquidity while ensuring the sustainability of Horizon Protocol by reducing reliance on external incentives. We encourage everyone to share their support, questions, or suggestions.
Tokenomics
As we expand front-end capabilities and go cross-chain with different Layer 2 solutions, it’s crucial to ensure our tokenomics remain stable. Here are three key mechanisms we’re considering to support the value of HZN:
- Revenue from Fees: Users staking HZN will earn a share of the revenue generated by the protocol and the connected L2 networks, functioning like dividends from the protocol’s earnings.
- Buyback and Burn: Successful growth could pave the way for buybacks and burning of HZN, reducing supply and potentially increasing value.
- Future AI Revenue: As we develop our AI features, we’ll seek a revenue model for them, aiming to funnel that revenue back to HZN similarly to our fee approach.
Our focus remains on bringing value back to the protocol and community, without increasing inflation or technical inflation.
Q&A
When can we expect to go live with cross-chain compatibility, and will this solve our volume issues?
We anticipate the earliest timeline for going live with cross-chain compatibility to be by the end of this year (EOY), but it’s more likely to occur in the first quarter of 2025. Our team is working diligently on this, and it’s important to note that we don’t need to transition the entire protocol to the other chain. Instead, our focus is on rapid development that enables our Layer 2 partners to start marketing Horizon Protocol effectively. Both L2s have robust marketing teams and are excited to work with us.
As for whether going cross-chain will resolve our volume issues, there are no guarantees. However, we believe that building recognition for our protocol is key to improving trading volume over time.
How do we plan to address the low trading volume on Horizon?
Integration with Layer 2 networks won’t immediately resolve low trading volume. Our focus is on enhancing Horizon Protocol’s recognition, expecting gradual volume increases as we establish bridges to these L2s.
What are the plans to improve liquidity and the coverage ratio on Wombat pools? The on-off ramp experience has been unsatisfactory.
We acknowledge the current on-off ramp experience is lacking and are actively working to resolve these issues. Improving the on-off ramp functionality is a priority, and the plans we discussed earlier are specifically targeting this challenge.
What should we do if we have further questions or concerns?
We encourage you to reach out to our community managers with any additional questions. They are here to help and will relay your feedback to the core team for consideration. Click here to find our social channels.
Looking Ahead
We’re entering an exciting chapter as we work with new partners and integrate into their ecosystems. Both L2s are keen to collaborate with projects that can bring value to their ecosystem and be implemented quickly and seamlessly. We’re well positioned to meet their needs, making us an ideal fit for their ecosystems. This collaboration promises to drive substantial growth and innovation for Horizon Protocol.
Horizon Protocol is a decentralized derivatives AI-trading and liquidity protocol that provides decentralized access to the real-world economy through synthetic assets. Through Horizon Protocol, users can access swaps and perpetual futures of crypto and RWA (real-world assets), including, fiat (i.e. USD, EUR, JPY, etc.), and commodities (i.e. gold, silver, etc.).
With a peer-to-pool model where a counterparty is not required for trading, Horizon Protocol can offer DeFi traders low fees, deep liquidity, and zero slippage when trading borderless synthetic assets. Horizon Protocol sets itself apart with a strong focus on seamless UI/UX and educational content to help the community understand the power of DeFi derivatives.
