Proposal to Deploy a DEX Pool on a Low Cost Chain (Part 2)
Cornelis Theodorus van der Klooster
I
On-chain
08.04.2024
Title
Proposal to Deploy a SHU/USDC DEX Pool on a Low Cost Chain (Part 2)
Proposal
We propose Shutter DAO 0x36 deploy and fund a SHU/USDC pool on a DEX on Optimism Mainnet.
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) (DONE - see links below)
Part 2: Select a DEX (Snapshot Vote) (current proposal)
Part 3: Deploy and fund a SHU/USDC pool on selected DEX / chain (Fractal) (if Part 2 passes)
Motivation
Shutter DAO 0x36 voted in favor of deploying a DEX pool on Optimism Mainnet in a recent ātemp checkā on Snapshot.
Now we propose that Shutter DAO 0x36 selects which DEX pool to deploy and fund on Optimism Mainnet. There are 3 options (listed in order of trading volume / market share):
Hey @Cornelis, thanks for making this proposal progress without much delay.
Uniswap has always been my favourite dex when it comes to making a new pool; this is not because of the Lindy effect, but because of the innovative model they provided in V3 and eventually in V4.
What do I think of the other two?
I donāt have any specific feedback on Beethoven X, but I would like to get more info as they are a Balencer Fork.
However, using Velo could attract us some liquidity in the short term if we provide incentives, but this will dry out as soon as the incentives are over. Furthermore, active management of liquidity through ranges isnāt available in that DEX.
The Pool selection
Can you please give your rationale behind choosing the pool with a stablecoin? The UNI pool uses a version of x*y =k, this is mostly true for all the UNI forks and AMMs.
Where x is the price of SHU and y is the price of the pair.
In these pools, we will risk of Impermanent loss and loss of funds, which isnāt realised.
Itās pretty challenging for me to explain all the concepts in a forum, so let me give you a scenario where we could get IL.
If SHU has a significant price increase/decrease and the price of USDC stays the same.
IMO it is highly likely that there will a significant price change for SHU.
I would consider choosing ETH as the second paid as the price action of Altcoins is heavily correlated with that of ETHās
Furthermore, investigate weighted allocations, as Balancer pools allow you to put tokens in non-50/50 weight, and a pool like 80/20 will give us a lot of leverage in liquidity.
fan of Uniswap too, Beethoven has a nice team though, very friendly and responsive guys, fork of Balancer i believe. Velo would be the last choice for me.
First all, to clarify, the Balancer / Beethoven X joint deployment on optimism is NOT a fork, it is the official Balancer deployment and fully integrated into the ecosystem (including veBAL gauge and the liquidity layer Aura on top balancer pools).
I also second the advantage of IL in terms of weighted 80/20 pools, which is imho perfect vehicle for protocol owned liquidity.
Hey @Cornelis Iām from the Velodrome team - thanks for considering making Velo your liquidity hub.
Firstly, Velodrome has almost 2X the TVL of Uniswap and almost 8X the TVL of Beethoven X on Optimism. Weāve maintained this leadership position on Optimism for over a year because of how effective our model is at helping projects bootstrap liquidity in the early stages as well as sustain/maintain liquidity when more mature.
Currently for every $1 in fees generated by pools on Velodrome, LPs receive almost $2 worth of rewards which means getting twice as higher APRs for the same TVL on Uniswap.
We are also working with Chaos Labs to boost native USDC on Optimism by matching incentives deposited by partners with 12.5K OP tokens per week - if you decide to go ahead with a SHU/USDC pool.
We can also offer white glove support to build a program to achieve the DAOs TVL targets and take into consideration any priorities around ROI of spend.
Helping protocols bootstrap liquidity is our bread and butter and there is a reason why 90% of defi protocols choose Velodrome. FYI we are also the same contributors behind Aerodrome which is the largest protocol on Base with almost 700m TVL. It uses the exact same model as Velodrome.
Curious to know - how much Protocol Owned Liquidity does the DAO have that could be put to use on Optimism?
very nice to see you put some rationale behind the different options. Just like with the initial proposal as to the chain it should be on, Artis does not really have a strong opinion on where this should take place. It is more so related to the benefits of you all here as youāre going to be the core decision makers in what the pool should inherently be doing both from inner workings as well as to public facing interference. Having the flexibility of a different weighted pool is very nice from Balancer but the overall usability and interference with UNI V3 also has its benefits. To each their own and I almost hate to say it but there are no real wrong or right answers here.
When talking about the counterpart to trade against we are a bit on the fence for trading to a volatile counterasset. Yes it pays off in the bull phase but would inevitably have to be swapped over to a stable counterpart when the times change. The calling of this particular trading venue was first and foremost targeted at making sure people can participate with SHU to stable for better rates (as opposed to paying an arm and a leg for smaller trades). The real driver of price will be the established V2 pool though.
We are not against setting up ETH now but the early stages of SHU are somewhat of a worry to set it up against a more volatile counterpart. That reasoning also sides with āMethodicā from Velodrome who sees the benefits of the early stage bootstrapping element + maturity sustainability for the long run. Then the nifty addition of matching incentives makes it rather interesting.
Just to nail it down: ETH would currently be an interesting pick but inevitably has to change over in due time to make sure the potential benefits are gained and in turn the negatives are negated in the future.
Iām sending out the proposal on Snapshot now to get the ball rolling for the DEX first off.
Thanks. As a professional delegate representing token holders, Iām responsible for conveying how and why we at DAOplomats vote; you can expect more brain dumps from me.
Iām now more lenient towards Beethoven because of their relative advantage when it comes to how you can structure pools.
My voting choices will be 1. Uni v3, 2. Beethoven if you are going with 50/50 SHUUSDC
The higher rewards from velodrome sound good however whilst the TVL is higher than uniswap, it looks like Uniswap has almost 8 times the trading volume:
Happy to be corrected if the above is in error however based on this I would vote for the dex with the higher usage in order to maximise visibility (which looks like uniswap).
Well, everyone of course is entitled to their opinion, but there is no doubt that Velodrome is the first choice of most projects and LPs on Optimism ā by a rather significant margin.
Youāll have the optionality to choose your ideal AMM type, get a 2x-3x multiplier on any incentives, gain mindshare from OP native users, and qualify for $OP bonuses via our āTour de OPā.
Incentives can help you all bootstrap liquidity that you could transition to a Slipstream pool once our ALM is live if that is the preference. Could also use POL to farm back VELO, lock it, and support liquidity that way.
Either way, you wonāt find better efficacy than a program on Velodrome.
Higher usage for key Optimism pairs with univ3 style pools will not somehow automatically maximise visibility for Shutter DAO anyway (sounds like your main motivation to choose uniswap), if youāre looking for the most visibility, partnering with the largest DEX in the ecosystem with and a more efficient and proven model, Velodrome is a no brainer.
UniswapX is more-or-less direct competitor of Shutterās MEV solutions - although it might not seem it like today, this is where the on-chain world seems to be evolving - less centralised intents and opaque order flow we have, the better
Based on the discussion here and asking my DeFi friends, Velodrome is a raising star
Uniswap has a lot of regulatory uncertainty being US-based
https://snapshot.org/#/shutterdao0x36.eth/proposal/0x6f5ffa38a7a4840bb5ac1115b29ae7caffba975de292e344ba8708eef2a6a7e9
