$CGI liquidity mining - a suggestion
This isn’t a formal proposal yet, not even close, just an idea and a few polls to get a feel for peoples opinions on $CGI and liquidity mining (you could say I’m obsessed by the subject).
It is my understanding is that the $CGI fee split was agreed on the basis that INDEXcoop would not be providing massive liquidity mining support for $CGI. This is due to the market strategy being based on OTC / Exchange issue sales to institutions / DAOs/ Whales etc rather than on-chain sales.
I fully understand the logic behind this, I support it, and I don’t want to change it.
However, as coinshares are focusing on OTC sales, and are paying market makers to provide the initial uniswap liquidity, there is unlikely to be a further budget for on-chain liquidity mining.
When I see the circulating market cap settle at $500 K, and the Uniswap liquidity at ~$500 K, I’m a little sad and I start thinking about what could be possible.
So, what can we do to kick CGI a kick without changing the agreements around $CGI?
I would like to suggest the following for the coop to consider:
- The coop extends an interest free credit line (value TBC) of INDEX tokens to be used for liquidity mining $CGI.
- The loan would be denominated in $USD at the start of the agreement based on a 20 day TWAP [Currently $22.79].
- The loan would be repaid using the initial streaming fees due to coinshares. i.e. Coinshares would not receive any income from $CGI until the loan had been paid back in full.
In some ways, it’s an exercise in accounting wizardry, moving numbers from one place to another. However, many people familiar with corporations will realise that such approaches can be useful.
At $100 M AUV, and 0.36% steaming fee, $CGI would generate $360,000 pa to coinshares (and $240,00 to the coop). So a $100,000 loan would take ~100 days to pay back.
In the long run, the net cost to the coup would be zero. It could result in earlier issuance of INDEX tokens (which would depress the price). It would help diversify our treasury (we would effectively be selling INDEX for ETH, wBTC and wDLGD).
That is the basic idea.
The coop could decide to support the liquidity mining (i.e by selling the INDEX at a discount / including the coop streaming fee in the repayment calculations so both the coop and coinshares are repaying the debt). However, the simplest implementation is that we sell at market price (20 day TWAP) and expect repayment in full.
I would say that if the INDEX is sold at market price, then the coop would have no voice in how the tokens are deployed (uni / Sushi / balancer / Loopring etc). Likewise, if we decided to add coop INDEX tokens to the programme, we would expect to have a say in the implementation.
I would expect that, depending on the LM campaign, the coop may be asked to provide technical support for the implementation - e.g. staking contracts and website interface as per the DPI farms.
LM campaign size
So, how big a programme would we be talking about? I don’t think we need to duplicate the massive DPI campaign.
If we consider a 120-day campaign for $200,000 total:
- $100 k for 30 days (~145 INDEX per day @ $22.8)
- $ 50k for 30 days
- $ 35k for 30 days
- $ 15k for 30 days
If the market settles at 25% APY on the farm, then we could expect $4.9 M liquidity in the initial 30 days (and $2.5 M AUV). As the rewards taper the liquidity would drop, but hopefully, trading fees would grow and there is always the chance that INDEX price increases.
Ideally, this should have a defined strategy, that can be shared at the time of launch.
Some temperature check polls
I’ve prepared some polls to see what people think. If we get a consensus, and @mcgpetch agrees, I would propose an IIP based on Michaels preferences.
All polls are multiple options, please tick any AND all that you would find acceptable:
- Upto $500,000
- Upto $250,000
- Upto $100,000
- Upto $50,000
- 20 day TWAP, but INDEXcoop will use our share of the streaming fees to help repay the loan (effective coinshares and the coop are going 60:40 split on the liquidity mining in line with the fee split) - coop would expect input into liquidity mining.
- 20 day TWAP with 10% discount as INDEX coop recognise that the liquidity mining is to our ultimate benefit.
- 20 day TWAP with 0% interest.
- 20 Day TWAP with 5% interest.
I have discussed this idea with @mcgpetch and he is interested in it, however, there is no commitment (either way) at this time. If Michael wants to proceed we’ll prepare an IIP based on the discussions and polls.