Proposal to Deploy a DEX Pool on a Low Cost Chain (Part 1)
Cornelis Theodorus van der Klooster
I
On-chain
28.03.2024
Title
Proposal to Deploy a SHU/USDC DEX Pool on a Low Cost Chain (Part 1)
Proposal
We propose Shutter DAO 0x36 deploy and fund a SHU/USDC pool on a DEX on a low cost chain.
Note that anyone can deploy DEX pools, but we recommend Shutter DAO 0x36 focus on one chain to reduce liquidity fragmentation.
Parts / Process
Part 1: Select a low cost chain (Snapshot Vote) (current proposal)
Part 2: Select a DEX (Snapshot Vote) (if Part 1 passes)
Part 3: Deploy and fund a SHU/USDC pool on selected DEX / chain (Fractal) (if Part 2 passes)
Motivation
Deploying and funding a SHU/USDC DEX pool on a low cost chain could possibly bring the following benefits for Shutter DAO 0x36, its members, and the broader Shutter community:
Community members could enjoy lower gas fees when buying and selling Shutter DAO 0x36’s SHU tokens
Community members could enjoy protection from malicious MEV when buying and selling SHU (in case the DEX and/or the chain integrate Shutter)
Community members could enjoy potential arbitrage opportunities, which could also create an increase in volume for both or either pool(s.)
Shutter DAO 0x36 could earn income from DEX trading fees
Shutter DAO 0x36 could earn income from DEX rewards and/or chain revenue sharing
Shutter DAO 0x36 could deploy sub-DAOs on the same low cost chain
Shutter Network community could deploy Shutter Nouns DAO on the same low cost chain
Options - And Explanation
Arbitrum One - Most DEX trading volume, financial incentives from Arbitrum
Base - Growing extremely quickly
Gnosis Chain - Longtime partner, first chain to integrate Shutter
Mode - Degen focused, second chain (first rollup) to integrate Shutter, revenue sharing coop model
Optimism Mainnet - Grant provider, RetroPGF
Reject All - Do not deploy a DEX pool on a low cost chain
Background
Shutter DAO 0x36 voted to deploy and fund a SHU/USDC pool on Uniswap v2 on Ethereum Mainnet:
Hey @Cornelis, thank you for this proposal; we are thrilled to see such an initiative at the DAO. The L2s are gaining popularity ATM, and we should focus on onboarding more Degens native to these L2s to the Shutter ecosystem.
This proposal is more like defining the L2 strategy of the SHU token rather than opening Dex pools. SHU should be deployed, and bridges should be made using a canonical chain. Furthermore, the DAO lives entirely on the main net, so we can’t trustlessly control any L2 pools now.
On the L2 selection
DAOplomats are governance participants on Arbitrum One and Optimism, so we are biased in our preferences. That being said, let’s dig into some facts.
If you sort the table for the TVL, you will quickly realise that Optimism is the only chain with > 1B TVL and Shutter integration. The OP Defi ecosystem is maturing with support from all significant dexes.
While Optimism feels more natural to go to seeing our integration, Base will probably have more volume, less incumbents, and the chance for this to become a first step in the relationship with Base. If we want SHU on Coinbase one day, that’s the way.
Also, be careful in the vote to specify that “Reject all” will only win if more % than all other options, otherwise it might be confusing.
There is nothing my mates up there haven’t said that it is wrong. Bigger TVL means bigger liquidity accessibility. Even the argument for initiating relationships with the Base ecosystem makes sense.
There is a huge concern on my side about the nature of these chains and their effects in the global decentralized ecosystem, though. I consider Optimism and Base (and Arbitrum and Mode) centralized trust domains with clunky, unproven anti-censorship capabilities. Centralized trust domains imply very poor resilience to governmental/regulatory action and imply concentration of power onto those with a say in the direction of the particular trust domains.
Falling into the trap of concentrating liquidity into centralized trust domains gives more opportunities to centralizing forces - and it’s worth noting that these forces do not stay within the confines of a particular chain or rollup - they affect the Ethereum ecosystem as a whole by reinforcing power dynamics and enriching centralizing players through generating cross-domain MEV opportunities.
We should be heavily supporting systems that are resilient to capture, to monetary/MEV reinforcement loops and actively discouraging players that do not have a strong bias towards decentralization (yes, decentralization is the cure to these malaises described above).
Hence I will vote for Gnosis Chain, who is maintained by a large base of decentralized validators.
An argument to be made agains gnosis chain is the smaller TVL. A counter-argument is that following this argument reinforces it. Plus with the size of the pool we probably don’t need 4b+ exposure JUST YET?
Arbitrum, OP or Base. Arbitrum is my fav because they have the most volume. Gnosis is out of the question because it is a dead chain.
kyudo -
Arbitrum would be perfect because it has the highest TVL, many protocols to use SHU in DeFi and easy to send stables from CEX. Pls do it on L2 that ppl actually use, not ghost chains like gnosis or mode.
Mode because they will be the first chain to integrate rolling shutter, which will start making revenue for Shutter DAO 0x36. Mode is going to be a heavy defi focused chain which will attract a lot of defi whales. Makes sense to push that chain and grow with them and SHU will be a big fish in a realtively small pond there.
proteinpowpow -
I choose Base first. I think either Base (open to coinbase investors with their new wallet), Arb (a high use chain, RobinHood lists Arb tokens), or OP (a chain that incentivises dev)
nazeefiq -
Base because it will be huge.
shea.10x -
Arbitrum because ease of use and on chain liquidity but the whole eco there is so dead in terms of price appreciation - nothing pumps there. Base because SHU can be one of the very few legit tokens there.
I am very happy to see the active thought processes coming about here and evolving into proper discourse. Considering there are a fair few differing opinions on what chain to target, I will be putting this up for a vote on Snapshot on the fourth of April (coming Thursday). I would not necessarily say there is a wrong outcome out of this (so don’t be too disheartened if your preference does not end up going through → as the project matures so will the active venues we’ll be trading on expand).
AFAIK From the ecosystem aligment perspective the closest chains to Shutter are
Gnosis
Optimism
Base (based on optimism)
Shutter core developers should comment this better.
However, as commented above, Gnosis trading activity is low compared to other chains. From the perspective of attracting speculative traders and mindshare, Gnosis might not be the best bet to deploy.
What comes to mind share, Base is killing it at the moment. Base might not need Shutter though, as the centralised sequencer is run by Coinbase, and it’s printing money for Coinbase at the moment.
Polygon mainnet seems to be on a downhill, what comes to the new projects launching, and it is currently losing mindshare to L2s. We can expect this decline to continue, Polygon mainnet could become more expensive, and people moving to trade somewhere else (although Polygon mainnet is very cheap today).
This is my subjective view of things, not number backed facts.
I am supportive of a dex pool and would definitely prioritize a chain with which we are closely aligned and that is likely to integrate shutter. Unless I have missed it, there are no ongoing efforts to integrate with Arbitrum or Base currently so they would be my lowest priority for deploying to. We should support the chains that are supporting us.
The optics of Shutter deploying on Arbitrum when Optimism are the ones integrating wouldn’t look good.
At Kleros Labs, we will support this proposal as we believe that having liquidity on an L2 is essential, especially in a bull market where fees can be very high. We also think that it presents a good opportunity for the DAO to generate income. One interesting feature the DAO might consider implementing is the Zodiac Connext Module which allows for connections between Safes on different chains.
We believe there are no perfect choices, and most of the chain proposed could be relevant. We will vote for Gnosis Chain as our first option. As it has been already said we think the fact that:
Long-term partnerships with Shutter Network
Alpha Keyper Network
Community and values aligned (cf SHU airdrop)
Large base of decentralized validators
Lower overall TVL can also means opportunities for ShutterDAO
However, the other chains proposed can be relevant and we appreciate all the valid points made by the community.
