JLH Ventures: Market Making Proposal for Shutter DAO 0x36
1. Overview
JLH Ventures is a boutique investment fund and market-making firm with a deep commitment to the Shutter Network and its DAO. As an early contributor to the Shutter Network, we have actively supported its growth and development since its inception. Our long-standing involvement ensures strong incentive alignment, as we have real skin in the game.
As an active participant in various DAO initiatives, we are dedicated to advancing Shutter DAO 0x36’s long-term objectives and also incentivise to do so. Our expertise spans both on-chain and centralized exchange (CEX) market making, leveraging algorithmic strategies to enhance the DAO’s token market structure and overall sustainability. We aim to provide transparent, community-aligned liquidity solutions that directly support Shutter DAO’s token operations.
2. Technical Capabilities
JLH Ventures utilizes proprietary algorithmic market-making technology, ensuring continuous liquidity provisioning across trading pairs. Our infrastructure includes:
- Automated Order Execution: Strategies optimizing spreads and order book depth.
- Latency Optimization: High-frequency trading integrations to maintain tight spreads.
- Multi-Exchange Connectivity: Decent contact with various of CEXs and API integrations with CEXs for seamless liquidity.
- Real-Time Market Monitoring: Continuous performance assessment and parameter adjustments.
- Risk Controls: Automated circuit breakers preventing adverse trading conditions.
We will provide selected community members real-time market-making access if required and approved through a DAO process.
3. Liquidity Commitments
Our proposed market-making commitments include:
- Maximum spread: 50 bps (0.50%), except during extreme market volatility (defined as BTC or ETH price movements exceeding 2 standard deviations)
- Liquidity depth: $100,000 within a 10%-15% price range (can be increased to $200,000+ with additional float fund), with potential adjustments during periods of significant market volatility (BTC or ETH price movements exceeding 2 standard deviations)
- Market uptime: 99%
- DEX liquidity support: Active participation in create pools to provide on-chain liquidity and advise on allocation cross different chains or CEXs
These parameters are designed to optimize token trading efficiency while providing flexibility during extraordinary market conditions
4. Risk Management
We employ a comprehensive risk management framework to mitigate market volatility and safeguard DAO assets:
- Inventory Balancing: Actively rebalancing SHU and USDC reserves to prevent too much inventory risk.
- Adaptive Spread Management: Adjusting spread widths based on market demand and volatility.
- Liquidity Scaling: Adjusting liquidity provisioning based on trading volume trends.
- Hedging: If the market profile allows and the DAO decides to proceed, we will explore options to hedge the DAO’s directional risk.
5. Reporting & Communication
We ensure full transparency through:
- Bi-weekly asset balance and market performance reports (shared with the DAO community).
- Monthly governance calls to discuss market trends, liquidity health, and strategy refinements.
- Real-time Telegram support for immediate queries and feedback from question posted by DAO.
Reporting data will be accessible via DAO-approved channels.
6. Float Fund Requirements
To facilitate liquidity provisioning, we recommend a 100,000 USDT(C) and $100,000 worth of SHU float fund. This capital will remain under DAO ownership and will be fully returned at the conclusion of the engagement, minus transaction fees and other operational costs. This approach ensures the maintenance of optimal liquidity depth.
7. Payment & Revenue Sharing
To align incentives, we propose the following compensation structure:
- $5,000 per month in USDC
- 20% revenue share on asset appreciation, applicable only if positive appreciation occurs in either SHU or USD stables
8. Alignment with Shutter DAO Ethos
JLH Ventures is committed to decentralization and DAO governance principles. Our proposal ensures:
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Transparent Operations: All data and liquidity movements will be reported, and general direction can be addressed during the call as long as it does not facilitate market abuse and complies with applicable regulations.
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Community Participation: DAO members can ask questions, request consultations, and discuss general direction.
– DAO-Controlled Liquidity: The DAO retains control over SHU and USDC reserves, ensuring no undue influence with DAO’s asset.
By aligning our incentives with DAO interests, we ensure that our liquidity provision efforts enhance SHU’s long-term market sustainability.
9. Liquidity Initiatives
To further support SHU’s market presence and liquidity, we propose the following initiatives:
- Expanding Market Access: Establishing additional trading markets for SHU to enhance accessibility for a broader community.
- Improving Liquidity Conditions: Strengthening order book depth and market resilience to facilitate efficient entry and exit opportunities for traders.
- Optimizing Float Fund Utilization: Implementing strategies to minimize market-making risks while maximizing the value of DAO-owned assets.
- Exploring Advanced Strategies: Assessing and deploying additional liquidity strategies if market structure permit.
10. Why Choose US
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Commit to put DAO’s interest in the first place: We commit to uphold DAO’s and its token holders’ interest and not merely charge a fee but commit to achieve its objective with best effort. This hopefully can also be seen from our DAO participation in the past
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Know the project: We have observed the Shutter DAO 0x36’s development in the past 2 years. We are familiar with its unique project nature and its objective.
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Execution good liquidity provision but yet practical with market structures
11. Next Steps
We welcome further discussions on a call with the Shutter DAO community to refine our approach and align on key parameters.