About 1M $ is idle in the DAO treasury: over 400k GHST and 365k DAI. This proposal discusses the opportunity of transfering that treasury to the stkGHST-USDC pair on Quickswap.
Issue: GHST and DAI are sitting idle in a smart contract, they sleep there until the DAO decides how to distribute it. It neither helps GHST to be more liquid nor does the DAI in it accrues in value.
Solution: Convert the whole treasury to provide liquidity to stkGHST-USDC on Quickswap, farm FRENS & QUICK.
Why:
Getting the treasury to be an LP would help GHST to be more liquid, meaning it will be easier for big buyers to enter/exit (lower slippage)
Showing confidence in staking contracts may turn more people into staking their tokens
It would add FRENS and QUICK to the reward pool, while getting trading fees would grow the stack (IL risk though)
Getting the treasury on L2 sounds like the logical move if everything happens on L2
How: Uniswap to swap DAI for USDC, Aavegotchi bridge for USDC and GHST on Polygon, Quickswap and Aavegotchi staking contracts.
PERFORMANCE EVALUATION:
About 6M are currently providing liquidity in the GHST-USDC quickswap pair (https://info.quickswap.exchange/pair/0x8b1fd78ad67c7da09b682c5392b65ca7caa101b9), (only!) half of it is staked to farm QUICK (https://quickswap.exchange/#/quick/0x385Eeac5cB85A38A9a07A70c73e0a3271CfB54A7/0x2791Bca1f2de4661ED88A30C99A7a9449Aa84174/0xF235f75ea0F053037F5de99778aefae9c6AB9C84). Staking 500 000 USDC and its equivalent in GHST would cut current trading fees rewards by 1/6 (although there might be more trading as the pair has less slippage) and QUICK rewards by 1/3. Here are the estimated rewards if the solution was in place right now:
QUICK rewards : 12.5 QUICK / day
At current prices and IL risk apart, staking 1M would net close to 4k$/day.
QUICK rewards: Reselling QUICK to buy more GHST-USDC is tempting but may not be the best strategy (Quickswap could stop rewarding the GHST pools, while not selling it could improve QUICK value thus incentivizing GHST LP). We propose to send the QUICK claimed to the rarity farming contract to be distributed to players along with GHST rewards.
FRENS rewards: It can be interesting to start building a FRENS treasury, which could be helpful in a lot of ways. A few ideas: a rarity farming event paying only FRENS, minigames rewards, random FRENS airdrop when petting,…
RISKS AND CONCERS:
Technical risk: bug or exploit in a staking contract.
Market risk: Impermanent loss if GHST pumps or dumps hard (the bonding curve mitigates this risk)
Management risk: needs some human intervention (at least: restake weekly to earn QUICK, swap and bridge DAI/GHST as soon as a certain amount is in the contract,…), or needs to dedicate ressources to automate
Performance risk: the above performance evaluation is likely not sustainable on the long term, although it will likely keep a positive outcome, we will need to monitor performances through time
Whale risks: slippage while converting DAI to USDC (a few % slippage on L2 while almost no slippage on L1)
ALTERNATIVES:
Split the treasury and stake a third into each Aavegotchi contract (GHST, GHST-USDC, GHST-QUICK). More diversification may mitigate the IL risk, although the GHST-QUICK pair has shown to be very volatile so far
Just swap DAI for aDAI (10% APY 30d avg), and/or stake GHST on Polygon to farm FRENS
If the proposal gets enough interest, a snapshot will be created
If snapshot vote gets quorum + enoguh vote differential, the proposal will be voted again in Core Proposal
As far as the community show support to this proposal, it could be implemented pretty fast with manual interventions. Automating that strategy would require more time & ressources.
Happy to see a fellow bankless member go in-depth on the treasury topic!
I basically support everything that gives us the chance to experiment with the options that defi gives us, while we should maintain a very high security standard or our treasury will become a target to speculators. Dedicated treasury assets are trapped assets.
Therefore whenever we get exposure to third party tokens (usdc, quick, adai [aave not really 3rd party, but you get my idea]), we should deliberately limit the percentage of our treasury that is at risk in the worst case (eg exploit of the 3rd party token). Our ecosystem treasury is basically like the national treasury, therefore we need to be extremely thoughtful, conscious and clever in the execution.
I suggested Bitcoin exposure in the mentioned alternative, so I’d support a treasury strategy in which we have a certain % in the original DAI and GHST, a certain % hedged with a btc (/+eth) portfolio and a certain % reserved for liquidity strategies.
Or every idea that aims in the same direction that is better or more detailed than mine.
I feel like we shouldn’t do any fancy things with the treasury. The DAO will need access to those funds and has to be able to use them effectively. Staking the funds anywhere would add a lot of additional risk - especially with LPing on Quickswap - as well as make it harder to use them.
I do like the idea of converting some of it into BTC/ETH though. A lot of other projects also do this to hedge their risk and capture some of the upside of the two largest coins. How much is up for debate obviously, but I believe the majority of the treasury should always be in GHST.
I think a great baby step would be to put some (all?) of the funds into the GHST Staking contract pool to earn FRENS. Don’t need to get fancy with it, but it would be pretty neat if the DAO itself could play the game, earn FRENS, win wearables, and maybe even have its own dedicated Aavegotchis. (Would need to hire someone to pet it though!)
Edit: I’m referring to the GHST-only pool here. More advanced pools could be experimented with later.
I think we should consider having a more liquid pool on layer one. Currently to buy ghst you have to go through some major hoops for the average user. Additionally you have to keep your money on a fairly unproven layer 2 which scares many potential buyers away. Maybe we could use these funds to seed/incentivize a uniswap staking pool.
People who really like paying Ethereum gas fees could use the curve or a CEX such as Binance already. But yeah, maybe we should have a bit more liquidity on Uniswap, right now it’s extremely low.
I think this is a fantastic idea! I think a low risk solution would be the best way to start. Converting at least some of the DAI into aDAI to earn interest, and staking GHST for frens. If the DAO uses the FRENS to enter a raffle, any items won should be sold in the Maal, or in the open market with the proceeds being added to the treasury.
[This is basically copy & paste from a discussion on Discord]
I looked up our DEX liquidity on Ethereum and it is basically non-existant. Uniswap liquidity recently dropped below $100k… that’s absolutely insane for a 70 million market cap project.
Now I get that everything is happening on Matic and it makes sense to incentivize migrating from Ethereum, but I feel like we really need some incentives for liquidity on mainnet. It’s also not a very attractive investment for larger players, since they can’t buy without doing KYC or moving the market on Uniswap.
With $100k liquidity on Uniswap you couldn’t even buy something like 10k GHST without immediately losing over 13% to slippage. This means that there is currently no way to buy GHST without doing KYC or bridging your assets to a completely new ecosystem (Polygon) - that most people know very little about. I think we should at least give people the option to buy on an L1 DEX and we’d need some sort of incentives for that.
Here is where Bancor could come into play. Bancor is a DEX that provides impermanent loss (IL) protection after 100 days of providing liquidity. It is growing quite fast and has added a lot of new projects recently (including axie infinity (AXS)). If we were to use Bancor, It would immediately become the largest pool on L1, with all aggregators routing through it. That would mean that it could attract some decent volume which would result in high fees to LPs. This would of course create further incentives for complete outsiders to provide liquidity for GHST.
The problem with getting listed on Bancor is that (a) you need 25k staked BNT (vBNT), around 180k USD, to create a proposal and (b) we’d have to reach a quorum of 40% for BNT holders. I know that this completely contradicts my first comment on “not doing anything fancy” but I think it could be interesting to put part of our treasury funds into Bancor. This would allow GHST holders to provide liquidity on an Ethereum DEX while being protected against IL and only exposed to GHST price. Maybe this idea is too crazy but I’d love to hear some thoughts on it.
Share the same thoughts with you regarding providing liquidity with treasury funds, this could easily make us a target. By using only a predetermined % and diversifying as you suggested, we could minimise the risk. As for the initial proposal, this is very well thought through and a further discussion of this topic has my support 100%.
Had exactly that problem today.A 9000 GHST purchase had a 12% price impact, ended up having to purchase them on Binance. We need liquidity on Uniswap asap.
not sure it will really help pumping GHST price, there are already many ways to buy on L1 (curve, CEX, OTC,…)
not sure low DEX liquidity on L1 will be a long term problem. What GHST is facing now as a pioneer is going to be a problem for any dApp building on L2. Wen Zapper ETH L1 for GHST Polygon? Soon, bridge already stronk
The IL protection from Bancor seems interesting, it is a real risk. I think GHST-USD pool earn around 15% / year or so. If GHST gets within a year away from the +200% or -67%, there will be some losses.
I think there is a consensus to not let the treasury idle, but this early vote shows a 50/50 distribution between stkGHST-USDC & BTC diversification. Maybe we could do this in 2 seperate votes? 1st, vote if we want to stake GHST & convert DAI to aDAI, then vote to convert a part of the treasury to BTC / stkGHST-USDC?
As long as the mainstream DEXes (Uniswap, Sushiswap, Balancer, Bancor) aren’t on L2 with reliable bridges to Polygon, liquidity will definitely be a problem imo. We should make it as easy as possible for people to buy and that includes using L1 DEXes. That’s where the majority of all volume is after all. Most people just won’t bother with a project if there are 10 additional steps involved.
According to SimpleAnalytics around 29% of our users are from the United States and 5% from China. This means that at least a third of all Aavegotchi users need reliable DEX liquidity. They can’t use the curve and Binance US is really unrealiable. I agree that Bancor might seem a bit experimental but as your IL sheet shows, it is a real issue.
