IIP-54: BED:ETH liquidity - Direct provision by Index Coop

This is now queued for Snapshot vote that will begin tomorrow, July 12

https://snapshot.org/#/index-coop.eth/proposal/QmU22KuNvzr289Pd5K2wo97hkiE4m24R1D6GF3hQ1tAotJ

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Reposting from the #delegates channel in discord (Index).

While generally supportive of this IIP, will not be voting until either the authors (@overanalyser @Matthew_Graham) or someone from the GTM team (@LemonadeAlpha ?) can give a concrete answer on whether or not Bankless Inc or Bankless DAO will be providing launch liquidity and if they are, what the details are.

This information is essential for an informed vote and I look forward to it being posted here and in the #iip-054 channel in Discord.

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Since drafting this forum post, I have learnt that there is a need to do a bit of home work on the legal front to determine if Index Coop risks attracting regulator attention by being a market maker for its own products.

Neither @overanalyser or I have sufficient knowledge to know if Index Coop by being a market maker of its own products would be an issue or has the potential to be an issue later on.

From my point of view, I don’t know enough to draw a conclusion on the legal ramifications and therefore, I believe it would be prudent to seek some advice before progressing further with this proposal.

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Does this mean that I should delete the proposal from Snapshot? cc @overanalyser

it goes live in a few hours (11:00 am PT // 6:00 pm UTC)

Bankless community does plan to provide between $100k-$200k in liquidity at launch.

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So basically nothing. I provided almost as much initial liquidity for MVI and that’s not even my own product nor do i see a direct benefit from supporting the product. We should be asking for minimum $500k

Hello,

Some notes from the weekly call:

  1. Bankless will also be providing liquidity on uniswap v3. (~$100 to $200 k).
  2. Legal concerns:
  • Not hugely different to the provision of governance token (i.e. INDEX balancer pool).
  • Other protocols provide liquidity for governance tokens
  • There may be legal considerations for the multi-sig signers.
  • Overall, no regulatory clarity.
  1. We don’t currently have a Bot planned, one option would be to contact Flashbots so they can build one.
  2. Liquidity will be on v3, so more effective (but more management) than v2 used for MVI.

@gregdocter based on the discussions in that call earlier, and the notes I’ve put in this reply, I think we have all the information INDEX holders need to continue with the snapshot. Therefore I want to proceed.

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@kiba I know you have been advocating for liquidity minting for a while, and I am a big fan of the idea and am anxious to find the place at the Coop to implement - but in this case wouldn’t it be more profitable to not mint liquidity as the alternative isn’t mining, but rather direct use of treasury which will then be brought back into treasury? I guess it depends on how well we manage the position? Correct me if I am missing something, though.

As far as the general proposal - I am FOR, but we should not underestimate the effort it will take to manage this position, and while this proposal doesn’t require a specific “strategy” per-say, it would be great to start hashing out specifics as to ranges and positions that are getting deployed, what our the triggers for re-balance, how often are we monitoring, who is it that is monitoring, and what is the process for re-balancing…

Thanks for the work on this so far @overanalyser and @Matthew_Graham - please let me know how I can help out here!

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This is the exact kind of direct liquidity provision we need to start moving towards as a DAO. ETH <> BED will be one of the lowest IL pairs on the market and is a good safe place to start.

I would rather have us get a quality rep in with direct liquidity provision for a low-risk pair like this. The majority of the learnings here will come from the actual execution. There will always be open questions here - especially around range management - but I would rather implement and solve than do nothing.

This is a major step away from liquidity mining and IMHO a step in the right direction.

@Kiba is right - we probably don’t have the experience in-house right now to do this perfectly. But the only way to build that experience is through planning and executing. The only way we will become proficient in direct liquidity provision for v3 is to directly provide liquidity for v3 and iterate based on learning.

Regarding regulatory clarity - we could spend months/years trying to get regulatory clarity from lawyers and the best we will get is an “I dont know”. Either we are a DeFi protocol that fully leverages the power of the ecosystem and our treasury or we are not.

We need to move away from this mentality where every time something is innovative or creative the regulatory boogyman rears its head. We are years away from any cohesive or applicable regulatory framework. If we want to drive the discussion on regulations it would be far more valuable for us to develop an internal regulatory/cultural/value framework that ensures the holders of our tokens are protected from bad actors.

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Hi @overanalyser @puniaviision @dylan @ncitron

Currently, the Operations Account holds all the constituents to min BED but is unable to do so via the TokenSet website.

Can we please get an update as to when users can expect to be able to mint BED tokens via a multi-sig transaction using the TokenSet website?

I am conscious we committed to providing BED liquidity some time ago. With other products coming to market that could need seed capital, it would be great to recycle capital from one product to the next minimising the communities exposure to LP positions.

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I am not sure when the tokensets website will be fixed, but if you would like me to guide you through how to mint BED using etherscan (which currently works via WalletConnect), I would be happy to help. @Matthew_Graham

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@dylan is on the multisig, so perhaps he can do the transaction and others approve. Would that be an easier solution ?

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We completed this transaction today:
Uniswap Pool
Transaction

This deliverable is later than planned, but complete. A quick recap:

  • 13 Aug: 1750 ETH2xFLI transferred to Operations Account: trx
  • 8 Sep: 1750 ETH2xFLI swapped for ~78.96 WETH trx
  • 8 Sep: 13 WETH swapped for ~0.96 WBTC trx
  • 8 Sep: 13 WETH swapped for ~124.09 DPI trx
  • 8 Sep: UI issues prevented minting of BED (see posts above)
  • 15 Oct: Dylan assists with minting via Etherscan. Approve WETH | Approve WBTC | Approve DPI | Issue | Approve | Add Liquidity

The deposited amount is slightly larger than planned as a result of the delay between when we swapped the assets and when we deposited the liquidity, but the amount was decided by maximizing the DPI we already had from the 8-Sep swap as the end result was relatively close to the originally planned amount of $250k.

Because we are past the originally planned deposit date and the planned time to keep the liquidity active (thru 30 Sep) we will keep this position for a similar amount of time as originally planned, likely 30-60 days.

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@overanalyser @prairiefi

The GOWG is seeking clarity around the planned execution of this IIP. The end date is originally noted as 30SEP21 with delays in deployment causing adjustment. Please advise re the currently planned target date for removal of the deployed liquidity position, along with the specification for the resultant treatment assets once removed.

Snapshot

cc: @sixtykeys @Lavi @Mringz

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Planned date for removal is on or around 14 December which would be 60 days of liquidity. We also plan to swap the BED back to ETH or WETH.

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Just a quick note to say that the coop liquidity for BED, is right on the edge of being effective.

And we dropped out of range for about a day this week.

Looking at the liquidity profile, most is off centre, and we are ~50% of the current depth.

(Note, the TLV omits the $BED value, the actual TLV is ~ $1.5 M).

Current Price impact:
1 ETH (Buy or sell BED) 0.17%
2 ETH 0.34%
3 ETH 0.51%
4 ETH buy BED 0.66%
4 ETH sell BED 0.80%
5 ETH buy BED 0.82%
5 ETH sell BED 1.11%

Basically, the liquidity loses symmetry for trades above 3 ETH, and selling BED results in more price impact.

The liquidity POD will prioritise this and (likely) recommend repositioning the coops liquidity in the near future.

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Hey @prairiefi , any updates on the removal and swap of the liquidity position. Noting that we are past the 14th December date that you specified above.

cc: @mel.eth

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Hi @sixtykeys,

I believe the liquidity pod is now overseeing this. The Finance Nest is now awaiting instruction from the Liquidity Pod on how to manage this position. I believe we are running a $15K loss at time of writing.

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Agreeing with Matt, and noting that sCoop notes on today’s PWG call confirmed this also (though I was not in attendance to hear the full context): [Link]

Liquidity Pod Lead @overanalyser said that BED-ETH and ETH2x-FLI-P has decreased in value since entry, and the pod will look at pulling that liquidity soon.

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Great! Hey @overanalyser , could you please update this space when the liquidity is pulled from this position, so as to bring finality to this IIP. I understand that this liquidity will go towards the budget requested here, so reference to this IIP on your budget request would be much appreciated.

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