Bop boop, beep boop. The purpose of this topic is to further the discussion, that originally started on Discord, regarding how the Conic DAO can best grow liquidity in the Curve CNC-ETH pool. At the time of this writing there is around $475k worth of liquidity in the pool. After the claim period for the CNC airdrop has concluded, the Conic DAO will gain control of a significant allocation of unclaimed CNC. Of which, a small portion can be used strategically to grow CNC liquidity and further protocol growth. Listed below are three different strategies for CNC liquidity provision. Each option has its own pros and cons and we encourage community members to share their thoughts.
1. Direct liquidity provision
Simply swap a portion of CNC for ETH then provide liquidity directly into the Curve CNC-ETH pool. In order to execute this efficiently it would need to be to be done over a time weighted average. A con of this method is that it forces the DAO to swap large amounts of CNC.
2. Liquidity mining rewards
Increase the CNC rewards pool for Curve LPs. Currently the rewards APY is more than adequate so this would most likely be the least effective option.
3. CNC bonds
Issue OlympusDAO style CNC bonds. Where users can swap Curve CNC-ETH LP tokens for CNC at a discount rate. An advantage of issuing bonds is that we can easily make adjustments when and if they are needed.
To reiterate, the purpose of this topic is to get a community consensus on which method of liquidity provision is most suitable. The subsequent descriptions for each option are arbitrary and a new proposal will be needed when it comes time to actually start allocating CNC. Furthermore, future liquidity provision strategies of DAO owned CNC are not limited to the above three options. If you have a suggestion for another method of liquidity provision or strategy, please share!
Hey guys, Figue from Paladin.
These methods have vastly different underlying consequences.
This is a bad idea as effectively you would be dumping on LPs to then re-stake the ETH, basically you would just be transfering ETH from LPs to the DAOs, pumping the price, but not increasing the liquidity.
Agreed, unless you start using bribes, as mentioned above, but I would recommend Quest, since it enables you to have more calculated approach (shameless shill).
This might the most interesting one, as it would enable the DAO to accumulate external resources (ETH) in the form of POL. This combined with bribes would allow Conic to start stacking some CRV, which is never a bad option when building something like Conic.
As an LP and DAO operator, I have to admit I prefer option 3, but do take into account that LPs are currently farming ~2.5% / week with the current LM program.
For such an unknown pair, I’m not sure bribes will attract actual liquidity as much as they’d attract mercenary veCRV voters. Any liquidity might also be temporary.
CNC-ETH LP bonds you might struggle to get traction on; current LP’s will be reluctant to abandon their positions; new LP’s face the same lack of liquidity as any current bidder; are people really going to drip-feed into a new LP position for an unknown token in order to get a 5% discount (for example)?
Would opening a public, trustless OTC deal offering x-amount of CNC (for ETH) beneath market price and trying to attract a few new, larger buyers be an option? With the market turning bullish around the merge, and positioned smartly across channels as a micro-cap Curve Defi Lego etc, I think you could potentially move a significant amount, get the required ETH directly and enter the LP manually. Just be very tranparent about the purpose of the offering, i.e for liquidity provision (or POL if you like) from unclaimed airdrop funds, not a new raise.
Via OTC you remove some barriers associated with LP bonds IMO, you also open a temporary very liquid market for CNC itself and could quite possibly attract a new group of holders too, who may have missed the Community Sale.
EDIT: I’m also against options 1 and 2, should have mentioned that.
For (3), I think it might make existing LP providers more sticky, but I am unsure as to its effectiveness in attracting new liquidity.
But for the team’s statement that the rewards APY for liquidity mining are more than adequate, I would have opted for (2). I think the most attractive proposition for Conic is when it attracts sticky deposits for its Omnipools, which would in turn create actual demand for CNC (from protocols etc.) to absorb the price effects of inflation from the liquidity mining rewards when it begins. I don’t think (3) sufficiently tackles the demand side of things.
Perhaps we could use the airdrop leftovers to boost the CNC rewards for Curve LPs for a period of 3 to 6 months to attract initial liquidity. IMO, the most important thing at launch is to attract liquidity to Omnipools, which will then help to set the flywheel in motion (CNC becomes attractive, demand for CNC increases, liquidity mining rewards are sold increasing liquidity).
Absolutely against this approach, selling to the pool and then LPing later does not make sense to me, also this approach can be easily frontrunned by buying/selling before/after the team.
Keep in mind that any apy > 100% is already very good to attract farmers, current rewards are already enough to bolster liquidity with the downside of attracting mercenary yield farmers, don’t forget that a healthier inflation rate to any token is 2%/month with the current CNC LM program we’re at >10%/month…
bonding as a service is the interesting one in this list, POL is what makes the protocol independent and can have so many advantages:
permanent liquidity/DAO control over liquidity
reduction in Token incentives aka inflation
trading fee accumulation for the protocol treasury (can be used for to bolster growth over time…)
avoiding mercenary capital taking advantage of the current liquidity mining program
instead of bribes I would advise the team to use CRV/CVX bonds with attractive discounts - don’t forget that bonds can be used also to non LP pairs
My advice:
Use bonding as a service as soon as possible with good discounts from the beginning, keep in mind that this system is not a silver bullet and needs Community engagement to align with the goal (an idea that can help is to build discord bots to track the discounts)
Retire the current LM program to get rid of the negative aspects of inflating CNC at a 10% a month & attracting mercenary farmers
Use the POL to attract strategic assets like CRV/CVX
Integrate this system in a seamless way for the end user (use Mac browser app for example…)
What about burning the unclaimed airdrop allocations ? This will also help to make CNC scarcer & reduce inflation if the end result is to keep the current LM program
The intrinsic value of CNC token is the utility of the protocol, the utility of conic is crystal clear, this is what should attract users liquidity and not inflated APYs.
Strongly against retiring the current LM program, seems antithetical to the point of the discussion and is already accounted for in overall emissions/tokenomics.
Looks like three but with all of the negative side effects
Increasing liquidity mining rewards now will probably have little to no impact as rewards are already attractive. However, if this were executed at the launch of omnipools I would think it could have a large effect of pulling in liquidity when people can look and see a working product. I also like @discrete’s idea of using CNC rewards to bootstrap initial liq to curve LPs.
I think this is a better option. If a user is exchanging LP tokens for Conic at a small discount, it is likely that they are bullish on the protocol. It’s worth researching this option more to see how successful bonds have been for other protocols; although, looking at the Olympus Pro marketplace looks like protocols have been able to secure anywhere between $100k - ~$5mm in POL. However, @Quixote raises great points, it would be a challenge for bonds to gain traction given existing conditions. OTC is a good idea, I think Treasure DAO did some type of OTC with 1kx (not sure if for liquidity purposes or another use of proceeds).
I was thinking the same when reading through the options, personally I’m not in favour of 1 & 2 as you’ve already mentioned i.e dumping on existing LPs and as @bb8 mentioned LM rewards already adequate.
Bonding is quite an interesting one though and I’m definitely in favour, excluding the obvious OHM ponzinomics from last year, the actual underlying bonding mechanism that they introduced works and it works well, discounts can be reasonably low and still be lucrative. I’m definitely a fan of using it for both liquidity and as an opportunity to start stacking CRV or CVX.
Hey, 0xShual here. Read the discussion and here are my 2 sats:
You’d be effectively selling equity to finance liquidity. Not the way to go. Very costly according to the project’s aspirations.
If the current LM program didn’t manage to attract enough liquidity, I don’t see how boosting the rewards will achieve that result. Not a huge fan of pool 2s these days, although they have some merit and are effective, to a degree.
Why would Conic want to own its liquidity tokens? You’d effectively be market making your own token, which is very costly and carries with it significant financial overhead. In general, the model doesn’t make sense unless you foresee gargantuan amounts of trading volume for $CNC specifically.
My immediate thought is: why not bribe via Votium or other mechanisms and direct liquidity that way? It seems to be the most cost-effective path, not to mention it fits the entire mandate of what’s being built here between (Or on top of) Curve — Convex — Conic.