SuperStacks for Sustainable DeFi Liquidity on the Superchain

Key Points

• The SuperStacks program achieved $58.0M in net TVL inflows** during its implementation period, with **$53.7M retained 30 days after the program concluded. This translates to $23.2/OP and$21.5/OP after costs, respectively.
• Findings supported the theory that strong demand-side activity can lift post-incentive equilibrium levels, though a more rigorous analysis is still needed.
• Incentivized lending pools generally demonstrated higher liquidity retention.
• However, TVL retention in DEXs appeared inflated by Uniswap's concurrent Gauntlet campaign. Specifically, when the two co-incentivized DEX pools were excluded, retained TVL inflows dropped to $48.2M, revealing a significant divergence between the lending and DEX verticals.
• Metrics for measuring demand-side traction included trading volume per TVL for DEX pools and utilization rate for lending pools. For DEX pools, a moderate correlation was observed between peak net TVL inflows and trading volume per TVL, hinting at possible synergistic effects.
• A key limitation was that isolating the program's causal effect alone was extremely difficult due to numerous confounding variables, such as external co-incentives and broader market volatility.

Background

SuperStacks was the Optimism Foundation's first proactive DeFi incentive pilot program. It was designed with the goal of increasing liquidity for interoperable assets (e.g., USD₮0) across the Superchain. At its core, the program aimed to help these assets overcome the cold start problem and test new mechanisms for establishing sustainable DeFi growth loops.

The program's design was based on a theoretical framework suggesting that a two-pronged approach, focusing on both supply-side and demand-side activity, could initiate a sustainable flywheel effect for interoperable assets on the Superchain, ultimately catalyzing lasting liquidity growth.

This theory is broken down into three phases:

1. Supply-Side Growth: Available incentives attract deposits into DEX pools, which creates deeper liquidity and improves the execution quality for trades. On the lending side, an increase in lending supply reduces the borrow rate.
2. Demand-Side Growth: Improved trading conditions draw in more trades that are routed through the incentivized DEX pools, which increases trading volumes and generates more fees for LPs. Similarly, more competitive borrow rates attract more borrowers, which raises utilization rates and generates a higher yield for lenders.
3. Sustainable Traction: Once incentives are switched off, a portion of the TVL (Total Value Locked) and net liquidity leaves the incentivized pools, but due to higher fee and yield generation for LPs and lenders, liquidity settles at higher baseline levels compared to the pre-incentives period.

Analysis Method

Dataset

The datasets and methods used for the SuperStacks analysis were:

• Period: 76-day incentive period (April 16 – June 30) and a 30-day retention evaluation period after program end (through July 30).
• Data sources: 25 pools and vaults targeted by SuperStacks incentives.
• Metrics:
  • TVL (Total Value Locked): Net TVL inflows during the program and retained inflows after program end.
  • Trading volume: Indicator of demand-side activity in DEX pools.
  • Utilization: Indicator of demand-side activity in lending pools.
  • Cost efficiency: Net TVL inflows per OP token ($/OP).

Intervation / Explanatory Variable

SuperStacks Program:

SuperStacks was the Optimism Foundation’s first attempt at a “proactive DeFi incentive,” designed as a pilot program to increase liquidity of interoperable assets across the Superchain. The program was built on a two-pronged approach targeting both supply-side and demand-side activities. Specifically, incentives were provided to encourage supply-side actions (deposits into DEX pools, increased lending supply), which in turn aimed to stimulate demand-side activities (higher trading volume, increased utilization).

Dependent Variable

Establishing a sustainable DeFi growth loop: Testing a new mechanism for interoperable assets to overcome the cold-start problem and achieve sustained growth.

Identification Strategy

• A pro-rata model was applied to disentangle the complexity of overlapping incentive programs, attributing impact based on each program’s share of total USD incentives.
• To evaluate pool-level performance, incentivized pools (treatment group) were paired with comparable non-incentivized pools (control group) on the same chain and protocol. One-sided t-tests were conducted on changes in TVL and trading volume.
• The analysis focused on DEX pools (9 pairs) that passed statistical filtering.

Results

• Theoretical Support: The analysis confirmed the theory that strong demand-side activity raises the equilibrium level after incentives end. The program was designed to test new mechanisms by which interoperable assets on the Superchain could overcome the cold-start problem and establish a sustainable DeFi growth loop.
• Mechanism Validation: The two-pronged approach targeting both supply-side and demand-side activities supported the theoretical framework that sustained liquidity growth of interoperable assets on the Superchain can be promoted. The hypothesis was that incentives would increase TVL (supply side), leading to higher trading volume and utilization (demand side), and ultimately these metrics would settle at higher equilibrium levels even after incentives stopped.
• Challenges: However, more rigorous analysis of this theory is needed. While trading volume per TVL emerged as a potential predictor of net TVL inflows, its explanatory power was inconsistent, requiring further careful analysis.