This proposal outlines a revised approach for our liquidity mining efforts that combines ongoing liquidity mining incentives with a concerted effort to control our own liquidity. This would effectively extend and modify the current phase, which ends in late-February.
The strategy entails maintaining liquidity mining rewards near or at current levels for an additional 4.5 months, while at the same time aggressively increasing the DAO’s Olympus Pro bond LP token purchases. This could reduce the effective cost of liquidity mining, while also jumpstarting a program to put the majority of the DAO’s liquidity in its own treasury.
The Big Picture
Currently ShapeShift is spending a substantial amount of FOX in order to maintain our liquidity mining program. This plays an important role in both ensuring that FOX has a presence on Uniswap and throughout the DeFi ecosystem, as well as expanding the universe of FOX holders.
At the same time, the DAO is operating in an environment where various newer DeFi protocols have enabled protocol treasuries to hold their own liquidity. This new paradigm allows projects to enjoy the best of both worlds, ensuring that there’s sufficient liquidity while avoiding typical downsides that arise from liquidity mining–for instance, “mercenary” liquidity providers who quickly head for the exits and sell a token soon after they earn those rewards.
The two steps contained in this proposal would effectively allow the DAO to engage in both behaviors: continuing its liquidity mining rewards while also using its ample FOX reserves to begin purchasing its own liquidity via an Olympus bond.
What this proposal would do:
1.) Continue our current liquidity mining rewards in the Uniswap FOX/ETH pool for an additional 4.5 months, targeting a 75% APR or higher (funded with 13.5 mil FOX over the period). This mirrors our current approach.
2.) Utilize our current FOX/ETH Olympus Pro bond in order to aggressively purchase our own liquidity. Specifically, the DAO would fund an Olympus Bond program over the following 4.5 months (concurrent with the ongoing LP program) to purchase FOX/ETH LP tokens, targeting $40 million worth of liquidity. $50 million worth of FOX would be earmarked and deployed for this purpose over the course of the 4.5-month period.
Note that the strategy outlined here doesn’t speak much to how exactly we’ll implement the LP repurchases via Olympus. This ambiguity is intentional; it leaves our team enough flexibility, with respect to both position sizing and timing, to react to market feedback. For instance, If our bonds are not selling and/or liquidity starts rapidly declining (and not just because of markets in general dropping), this would suggest that we should adjust the strategy.
That said, it’s likely that we’d begin the program very aggressively, perhaps with 10X to 20X our current purchases, in order to quickly increase our Protocol Owned Liquidity.
With respect to management of the revised bond program’s parameters, the existing FOX Bond Committee would be a logical choice; it already had competency and knowledge around these operations. The Committee’s current term expires at the end of the current bond program. Should it be amenable to renewing for another 4.5 months under the modified proposal, its ongoing work would be invaluable in executing this proposal’s strategy.
What exactly does this vote do?
YES:
1.) On February 22nd at 9am MST (48 hours before the second round of FOX/ETH liquidity mining ends), deploy a third round of liquidity mining rewards for the Uniswap v2 FOX/ETH Pool of 13.5M FOX rewarded over 4.5 months (targeting 75% or higher APR).
2.) Fund an aggressive Olympus Bond program over the following 4.5 months (concurrent with the ongoing LP program) to purchase FOX/ETH LP tokens, targeting $40 million worth of liquidity. $50 million worth of FOX would be earmarked and deployed for this purpose over the course of the 4.5-month period.
NO: No changes are made. (In this case, the DAO will need to pass another proposal if it wants to extend its liquidity mining program past late-February).
