Hi Mel, you raise some great questions, and I don’t have good answers to all of them, but this is my best shot:
INDEXcoop Multisig (recipient of INDEX from vesting contract, and streaming fees) is 0x9467. and contains $46 M. This is currently controlled by SET team members. Part of this proposal is to transfer the $250 k to the Treasury Operations Multi sig (detailed in IIP-46) which will manage the liquidity.
I’m not sure about whether we will have an arb bot using issuance running for launch.
For MVI, there are bots running that issue and sell / buy and redeem MVI. This recent trade was ~6.25 ETH ( ~$13 K) trade and captured ~ $95 profit. The exchange issue and trade cost 1,706 k gas at 12 gewi ($43 fee).
When MVI launched, I don’t think there was direct arbitrage. However, watcher bots would copy some exchange issuance (including one of mine) and then sell in a single transaction to capture premium. E.g.:
- This trade minted 118 MVI from 5 ETH. @ 165 gwei
- Was front run 2 blocks earlier by this trade (@265 Gwei) which burnt CHI, copied the mint (118 MVI from 5 ETH), and did a simultaneous sale to capture ~0.6 ETH profit.
So at launch there was premium to NAV worth multiple ETH at times (I think I saw the uniswap pool sitting at a +20% premium).
Non-copy trade issue arbitrage appears to start with this trade @08:04 on 07APR21 (~1 day after the uniswap pool was created) : which looks like a bot targeting the MVI pool.
Arbitrage bots will only strike when they can make a profit which is related to both the depth, and the % premium to NAV. So we need bopth depth and a premium. If it takes $10,000 to move the price 1% off NAV, then there is less than $100 available to arbitrage. (Actually, I think it it’s linear over short ranges, it could be ~$50 as the first $1,000 of trade will only yield $1 as it’s 0.1% price impact). So, gas costs will make it hard to keep clost to NAV.
Following this logic, I think that a $50,000 trade with 5% price impact (i.e. five x $10,000 per 1%), will have $1,250 profit available.
Not at this time, but getting trade aggregators to include exchange issuance is something the BD team are working on.
Lots of people still use the uniswap interface directly, andI don’t see us ever getting Uniswap to integrate exchange issuance (we have lots of educating to do).
| MVI Exchange issue and sale (x15) | ~1,800 K |
|---|---|
| DPI Exchange issue (x14) | ~900 k |
| CGI issue /redeem (x3) | ~200 k |
V2 Uniswaps are ~100k (and my memory tells me that additional tokens for exchange issuance are ~80 k). So, I would say we are looking at 400 k to 500 k for Exchange issuance of ETH to BED. At 14 Gwei we are looking at $15 to issue.
I’ve discussed liquidity mining with BanklessDAO in their forum, but I’m not involved in the goto market discussions. Hpowever, it’s my understanding that Bankless are planning to provide liquidity via the same Uniswap v3 pool. So what we are proposing should be the minimum liquidity available. If we implemnet this IIP, then I would plan to talk to them to discuss our plans and co-ordinate.
I’m a fan of having multiple liquidity pools available so such an approach is attractive. (There is no reason not to include INDEX and MVI in such a pool). However, I think we need a single main (deep) pool on L1 for the issue arbitrage bots to target (and the other bots trading between pools). The last tiem I looked DPI issue arbitrage was via the v2 pool only, thenthe other pools mathed that pool.
For the moment, everyone looks to Uniswap first so that is the simple route to market.
I should note that this approach does have risks. If the BED:ETH price moves out of range, then we will be holding the lower performing asset, and to reposition we will need to buy the other, so we could easily lose 10% of the value compared to just holding 50% ETH and 50% BED in a cold wallet.