Proposal #6: Seed GEAR/ETH Liquidity

Summary

Create new GEAR/ETH liquidity pool on SushiSwap and seed it with $25k GEAR from treasury + $25k of ETH bought with DAI from Wells Fargo business loan ($50k of liquidity in total).

Description

Quick recap of what GEAR is for newbs: GEAR is a liquidity pool token on Balancer that currently represents 70% ROBOT and 30% ETH. When you deposit ROBOT and/or ETH into the pool you get back the GEAR token representing your shares in the pool just like Uniswap LP tokens. GEAR holders dont have DAO voting rights yet because of the Balancer subgraph doesnโ€™t support smart pools but GEAR is probably going to be the only token for playing the Curation Game

Why sushiswap > uniswap? Because theyโ€™re the homies and their Onsen menu will provide liquidity incentives for GEAR/ETH pool.
Why GEAR/ETH instead of another ROBOT/ETH pool? Right now the DAO has powerful levers for influencing ROBOT economy by controlling parameters like the swap fee onfor trading against the GEAR pool. By creating a separate ROBOT/ETH pool outside of GEAR we would be losing a lot of power to control our community economy with mostly negative benefits to our community (higher impermanent loss, lower LP fees). ~20% of all ROBOT in circulation is sitting in GEAR unincentivized with almost none on uniswap or sushiswap so itโ€™s safe to say we like it how it is.

Pros:

  • Start establishing $GEAR as primary utility token in MetaFactory ecosystem
  • Keeps control of $ROBOT economy with DAO through Balancer pool parameters
  • Increase volume and LP fees for both ROBOT/ETH and GEAR/ETH pools from arbitrage traders.
  • liquidity mining rewards from Sushiswap Onsen menu for GEAR/ETH LPs
  • Easier access to joining MetaFactory community by listing on a major DEX
  • (indirect benefit) Workaround to get GEAR LPs voting power by using Sushiswap subgraph

Cons:

  • Way more impermanent loss and less fees compared to ROBOT/ETH pool on Balancer
  • Higher exposure to $ETH than $ROBOT for GEAR/ETH LPs
    (because GEAR is 30% $ETH)

Balancer v2

GEAR is currently on Balancer v1 and we would like to migrate liquidity to the v2 that just launched but they donโ€™t have smart pools yet. If we do create a GEARv1/ETH liquidity pool we will have to remove that liquidity, migrate GEARv1 to GEARv2, then create a new GEARv2/ETH liquidity pool.


Inspo <3 :point_down:


P.S. If itโ€™s too much work for the multisig to create GEAR/ETH pool + add liquidity I can create the pool first and then MF adds liquidity

  • Sell $25k DAI to ETH and seed GEAR/ETH pool
  • Do nothing

0 voters

5 Likes

(Update after community call on 04/29)

Since we donโ€™t really know what the effects of having GEAR liquidity will have on the market weโ€™re going to reframe this as an experiment. First we will run this experiment with GEAR/ETH run it again with ROBOT/ETH and compare the results of distribution and volume.

Experiment Parameters:

  • DAO will seed each liquidity pool with $50k for 1 month
  • First experiment liquidity pool is remove immediately after time period ends
  • 1 month wait between the two experiments to establish new control variables
  • First pool is GEAR/ETH, second pool is ROBOT/ETH
  • Both experiments will occur on Sushiswap

Primary Hypothesis

Providing liquidity on a tier 1 DEX will increase demand/distribution of ROBOT token

Comparison of token distribution of similarish new/small DAOs (feel free to propose others to look at):

DAO Liquidity # of Holders
ROBOT $3.2M 651
GEAR $0 56
NFTX $11M 5,005
YAM $3M 7,587
HAUS $563k 1469

As you can see we have comparable liquidity but much lower distribution to other alt DAOs. This could very well be because of the high swap fees and higher slippage which weโ€™ve intentionally placed but it could also be that we are the only token not listed on a a tier 1 DEX on their home chain (Honeyswap is the best on xDAI afaik).

Obviously we want to keep the vibe and all these new token holders might not be about the MetaFactory life. While this isnโ€™t quantifiable for the experiment we probably want to factor in dopeness of new DAO members when evaluating results of this experiments.

By making wider distribution of GEAR the goal we are saying we want the DAO to sell off GEAR and accumulate ETH. We can use this to calculate the Customer Acquisition Cost which would be CAC = Impermanent Loss on GEAR + gas fees / # of new GEAR holders - 1 (exclude SLP). We could get fancy and incorporate the price increase of ROBOT and treasury balance over the course of experiment into CAC calculation to see if this is profitable move for the MetaFactory as well.

Goal: Increase total ROBOT holders by 50% over the course of the experiment
(GEAR holders are included in the total since they implicitly hold ROBOT)

Secondary Hypothesis

Listing GEAR/ETH on Sushiswap will generate more volume for the GEAR pool than listing ROBOT/ETH on Sushiswap

Since GEAR is mostly denominated in ROBOT there is an arbitrage opportunity between GEAR NAV and the price on Sushiswap. If the Primary Hypothesis is correct there should be higher prices for GEAR or ROBOT on Sushiswap that will need to get arbed providing swap fees to GEAR LPs. Current daily volume on GEAR is ~$75k and we need $300k on the GEAR/ETH pool to get it listed on Onsen so we need a 300% more volume on the new GEAR/ETH pool than we have on GEAR today.

Goal: Average daily volume for last 7 days of experiment is 60% higher than 1 month before the experiment.

Thoughts on experiment design

  • Since our numbers are so low, I donโ€™t think using a % for hypothesis is an issue. Even with 50% compounding over both experiments we would still only have 1,500 token holders and $192k volume in GEAR pool.
  • We should wait to start until the dust settles after the upcoming announcement this week to see what new token holder and volume numbers are
5 Likes

Just because I keep forgetting. GEAR/ETH started at 2021-05-06 @ 04:00 UTC so will end 2021-06-03 @ 04:00 UTC

LP creation tx: https://etherscan.io/tx/0xbe0fa1a60e13cc916731ead649aa7bfbb209e528ba6fbb66a2f45db8f92372ba

1 Like