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Supporting Strategy Providers on Sommelier

3 weeks ago, the first Cellar, The Aave Stablecoin Cellar, launched on Sommelier. Launching more strategies on Sommelier is key to building on this momentum. Active proposals [SIP 011] and [SIP 012] take the first step towards onboarding more strategy providers, a key strategic priority for growing the Sommelier ecosystem.

The goal of this blog post is two-fold:

  1. Provide an overview of two precedent setting governance proposals
  2. Explain the importance of these proposals, and strategy providers, to the broader Sommelier ecosystem

What is a strategy provider?

Sommelier cellars provide the functionality to execute strategies more sophisticated and complex than was previously possible in DeFi. At a high level, a strategy is executed through the Sommelier protocol using two “entities”: a Cellar contract and a strategy provider.

The strategy provider sends action-recommendations through Sommelier’s validator set to be executed on the Cellar contract. The strategy provider has the freedom to leverage any type of off-chain computation to arrive at these strategy recommendations. The only constraint is that the recommended actions are within the parameters of what the cellar contract allows.

Why are strategy providers key to growing the Sommelier ecosystem?

Sommelier’s mission is to develop a platform upon which strategy providers can make DeFi strategies available to all market participants in a decentralized way. Sommelier creates Cellar infrastructure which is the pipeline for strategists to connect with market participants non-custodially. Strategy creation & execution is the lifeblood of Cellars. Sommelier will thrive as Cellars proliferate, and strategy providers are a core component of this process. As such, strategy providers play a critical role in growing the Sommelier ecosystem.

What is Seven Seas?

Seven Seas, the team behind the inaugural Aave Cellar, is the first strategy provider on the Sommelier platform. Seven Seas worked closely with the Sommelier protocol team to bring the Aave Cellar to production and, in the process, aided in the design and implementation of the infrastructure necessary to run Cellar strategies on the platform (e.g. smart contracts, fee structure, and security mechanisms).

Seven Seas’ mission is to develop profitable strategies on Sommelier and support the onboarding of other strategy providers so that they may grow the ecosystem by providing innovative strategies as well.

Seven Seas has recently submitted two governance proposals requesting community spend in order to:

  1. Develop, implement, and operate profitable strategies
  2. Build foundational tooling and infrastructure and provide services to improve the ease of Cellar development by other parties. This will aid the onboarding of new strategy providers, which supports the business interests of the DAO and SOMM token holders

[SIP-011] Community Spend Proposal 1: Cellar Development

This proposal requests 1M SOMM tokens as seed funding for Seven Seas to support the development of 8 new Cellars over the next year. Since Sommelier strategies are not static, strategy development and maintenance requires ongoing analysis, coding, testing, and execution. This proposal is significant as it can serve as a template for future strategy providers to request funding for the general development of profitable strategies on Sommelier. Vote on this proposal here.

[SIP-012] Community Spend Proposal 2: Ecosystem Cultivation

This proposal requests 1M SOMM tokens in funding for Seven Seas to support general Sommelier ecosystem development. This includes tooling and infrastructure to facilitate easier Cellar development and the onboarding of new strategy providers for one year.

Seven Seas will extend the capabilities of the Cellar stack by developing Cellars on other chains, creating analytics & performance monitoring tools, and open-sourcing as much code as possible for others to utilize. Seven Seas will also provide onboarding support to, for example, traditional institutions that wish to run strategies on the Sommelier platform. Vote on this proposal here.

What these proposals mean for the Sommelier DAO and SOMM token holders

Sommelier as a platform benefits from a diverse set of Cellars and strategy providers. We believe that seeding strategy development teams for the express purpose of developing Cellars on Sommelier is a useful bootstrapping measure in the early stages of Sommelier. While the ecosystem is still in this bootstrapping phase, strategy providers can use [SIP 011] as a template to request funding. Cleargate has already taken this step with [SIP 013], applying for funding to become the second strategy provider building on Sommelier! Once the Sommelier ecosystem has matured, prospective Cellar development teams will be better positioned to raise funding externally.

Traditional firms interested in becoming strategy providers face the challenge of building data pipelines to DeFi protocols, connecting with the Sommelier chain to execute actions, and monitoring on-chain performance of Cellars for analytics as well as making real-time strategy decisions. Seven Seas will develop tooling and offer support to institutional parties that want to provide strategies on Sommelier. Seven Seas is already working with several institutional partners to bring their strategies into production as Cellars on the Sommelier platform. These services are crucial to increasing the number of strategy providers building on Sommelier and are a core component of what [SIP 012] will fund.

How to become a strategy provider

You can learn how to become a strategy provider here

Conclusion

Funding strategy providers to build on Sommelier is highly advantageous to the entire ecosystem. [SIP 011] and [SIP 012] set an important precedent in enabling funding for capable and motivated teams that will set the groundwork to increase the number of strategy providers, which will ignite the next phase of growth in the Sommelier ecosystem.

To learn more about becoming a strategy provide, please get in touch with Seven Seas

Use the Aave Cellar on Sommelier: https://app.sommelier.finance/

To discuss Sommelier’s proposals, please visit the Forum: https://community.sommelier.finance/

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