by 0x8b257b97c0e07e527b073b6513ba8ea659279b61 (Morph)
Proposal:
Deposit up to 50% (170 Ethereum) of the current eth (340) held by the DAO paired with mana into decentralized exchange LPs in the polygon and ethereum network. (TBD exactly which networks/exchanges within the draft process discussion)
Reasoning:
A key component of any decentralized economy is liquidity depth; without decentralized exchange liquidity, many people lose access to the DCL economy or are unfairly punished via high slippage despite using the decentralized system as intended.
By providing a sustainable and permanent liquidity well, the DCL DAO will earn a native Eth & mana income to strengthen the economy, while also reducing the total slippage as we sell MANA for grants - protecting our treasury as less price depreciation occurs and reducing overall fee-extraction (sandwich bots/CEX arbitrage etc.).
Logistics
I would recommend placing the mana/eth into the following LPs - this is up for debate:
50% Uniswap on Eth mainnet
40% Quickswap on Polygon ZK network
10% Quickswap on polygon PoS network
On Fees:
Fees will become a crucial income for two reasons, the first is that they will accrue both in eth and in mana, enabling us to grow the LP further for free - or to accrue Eth/Mana for the treasury itself.
On Impermanent Loss:
Impermanent loss is the event where simply holding the tokens provided to the LP long term (Eth & Mana) would provide a better USD return even after accounting for fees due to the changing price ratios. This may occur and is entirely dependent on market activity.
I really see there being two core outcomes on a spectrum here:
If we continue to succeed, and mana at the least can retain a majority of its value from here, or hopefully, increase in market cap relative to Eth, then we stand to gain great value overall from fees as well as increasing our ratio of Eth available in the LP that can fund the DAO without solely relying on mana’s liquidity.
In the opposite case that Mana goes down from here, or that eth greatly appreciates in value vs mana, we are likely to suffer losses from our overall treasury value, in which case securing long term yield that does not rely on vesting/market-activity as well as rebuilding the MANA treasury is an equally beneficial use case, the risk of IL is not zero, but we are heavily weighted to betting on ourselves, and at the least, providing a permanent liquidity net that earns us a diverse income.
This makes a complex discussion of IL a weighted argument, even in a scenario where we lose market value and suffer from IL in lost eth, we have at least captured more fees and a return of mana to the DAO long term should we at any point succeed again.
On Execution:
The current multi-sig signers should feel comfortable with a one-time LP deposit into well-known and reputable decentralized exchanges - as this does not require selling any MANA on the open market, we do not need to worry about speculation and execution strategy on conversions. The multi-sig signers themselves should feel free to address this directly if necessary or if it is considered not a feasible request of their duties.
Closing Thoughts:
I believe the DAO has a fiduciary duty to provide a LP that the community can rely on, we stand to benefit in multiple ways and it would provide a healthy function that strengthens both mana and the DAO. Even should IL occur, the net benefit to the overall economy in the long term can be appreciated should we at any point succeed as a metaverse ecosystem - in any outcome, we will either end up with more mana, or more eth - earning an income in both along the way with a positive impact on mana price.
- Convert 0% of the Ethereum held
- Convert 10% of the Ethereum held
- Convert 25% of the Ethereum held
- Convert 50% of the Ethereum held
- Invalid question/options
