This proposal is tentative, meaning I’d like to receive feedback from the community before putting it up to a vote. All opinions welcome, thanks !
This Proposal Seeks a 500,000 PSP Deposit into the Bancor Liquidity Pool to help us grow our liquidity depth and help us further diversify our liquidity sources.
The Proposal does not cost the protocol anything as all liquidity would be fully protocol owned (say it with me “POL”). (Impermanent Loss Protected, Single Sided Deposit AKA no ETH needed)
The Liquidity deposited in Bancor will also accrue risk free fees creating another revenue stream for the protocol.
In PSP-IP2 We discussed for the need to grow the Liquidity of PSP across many DEXs (Sushi for PSP-IP2) , this could be likened to an addendum to help us fill the goals outlined by Brice in the discussion and in our defined Key Performance Indicator:
This Proposal seeks to fulfill 5% of the liquidity goal for sushi in PSP-IP2 at no cost to the protocol right off the bat and in fact would generate a return for the treasury long-term. For those unfamiliar Bancor currently has two main advantages that are of great use to us as a DAO in particular (V3 Should prove even more beneficial for us):
- Single-Sided Staking: Since deposits on Bancor are purely single sided this means the treasury can greatly increase it’s liquidity depth without having to provide a counter asset like ETH.
- Impermanent Loss Protection: Other AMMs are hard to garner liquidity naturally due to the great cost LPers incur through impermanent loss (when price diverges LPers lose out profits to the Market and Arbitragers). For this reason Liquidity Mining is a must for a DEX like Sushi or UNI but Bancor doubles as an insurance company completely negating this risk by arbitraging it’s own token as well as paying out any extra loses in it’s native token back to LPers.
Typically for Space to be opened single sided in a Bancor Pool there has to be equal amounts of BNT on the other side staked single-sidedly but this can also be achieved via a BancorDAO Co-Investment. Luckily yours truly already went ahead and passed such a proposal not too long ago (details here: Proposal: Whitelist ParaSwap (PSP) + 100K BNT Co-Invest - DAO Archive (SUBMITTED) - Bancor Governance Forum). The Bancor Proposal opened up enough space for 800,000 PSP at current market prices to be staked single sided but due to our own inflationary single-sided rewards being incredibly high the pool has not had enough liquidity to grow naturally. A 500,000 PSP Deposit should allow for the pool to begin reaping more fees from aggregators like us while still allowing for room for more community LPers to join.
Governance should also monitor the volume of transactions processed by the pool to measure its effective contribution to PSP’s overall liquidity.
This proposal will establish a sustained and significant liquidity source for the PSP token on main-net.
Bancor was chosen for it’s Impermanent Loss Protection and Single-Sided Staking (outlined in the Context Section)
- 500,000 PSP from the Ecosystem Reserve used to provide liquidity on Bancor fully controlled by the DAO.
- Supplied to Bancor’s PSP Single-Sided Staking Pool.
As was stated previously the current goal for ParaSwap is to grow it’s liquidity on DEXs to support token holders.
This Proposal fulfills 5% of the liquidity goal of Sushi without the need for inflation.
This Proposal costs the protocol nothing, in fact it is a new revenue stream.