Liquidity mining strategy - starter for 10

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Great debate guys, love all the data and seeing your thought processes. I’m not going to give an opinion on overall LM because you all are way deeper in the data than me but i do have an alternate solution to propose.

So far you all are basically proposing the same thing - selling assets (INDEX) for liquidity - just on different platforms (uni vs sushi) with different numbers.

What if we sell debt for liquidity?

Instead of paying $1M / month in straight INDEX, what if we take out an uncollateralized stablecoin loan on Iron Bank and use that to add liquidity as the Coop? This is similar to Aave Credit Delegation except we dont need a counterparty, its purely smart contracts. Lets assume a pretty bad interest rate of 30% APY (current is ~3%), we can take out a $40M stablecoin loan, add that to DPI/ETH pool, and still be paying the same $1M / month as today with almost the exact same amount of liquidity ($40M vs $48M now).

I call this Liquidity Minting instead of Liquidity Mining because it’s coming from “nothing” instead of extracting resources.

We can even kill many birds with one stone.

  1. Put this liquidity in Sushi to form that partnership
  2. Diversify treasury
  3. Farm SUSHI with DPI/ETH to payback interest over time
  4. Iron Bank might require us to purchase insurance instead of putting up collateral which is something thats been discussed already

This plan might be more suited to bootstrapping new products like CGI than established products like DPI. Curious to hear your guys thoughts on it. This somewhat overlaps with Smart Treasury discussion (cc @DarkForestCapital) so might want to move this idea to a separate post.

Pros:

  • Less expensive than current programs on a spent per of liquidity basis (depending on variable interest rates)
  • Less debating, governance overhead, and comms about LM programs
  • Diversify assets on balance sheet
  • Retain INDEX in treasury
  • More sustainable
  • Increase TVL more reliably

Cons:

  • Acquire debt
  • Potentially high interest rates
  • New team to manage position(s)
  • Less community driven
  • Coop price exposure to DPI and ETH
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