Bootstrap Liquidity Raise Proposal

Governance
#1

Proposal to create a permanent liquidity boost by selling NDX at a fixed rate to then use raised funds to LP, with LP tokens being sent to the DAO.

Motivation
NDX holders need a liquid market to allow for interested parties to enter and non interested parties to exit. The best way to allow this would be through liquid AMM that allows for on demand buys and sells.

Proposal
Take part NDX allocation from the DAO and use .5x the NDX to be sold at or slightly below current market rate for ETH. The other .5x will be pooled with the ETH to create LP for the uniswap NDX ETH LP pool. LP tokens will be sent to DAO for future management if needed.

This allows for a permanent LP boost aswell as value accumulation to NDX holders through the DAO getting the fees from uniswap trades.

Vote on Snapshot

3 Likes
#2

I think this may be a better plan than the NDX-ETH LP rewards people have been suggesting. It would deepen the market, give buyers a chance to get some NDX without doing OTC swaps or causing massive slippage on Uniswap, and give the treasury some LP tokens which could then be burned if we decide to reclaim the NDX, and which would likely accumulate in value + accrue fees.

By the way, there was a similar discussion on the forum for Index Coop. They decided against it, but the comments may be interesting to read over - link

Pricing

For the rate, there are a few options. I don’t think we need to sell below the spot price, as it seems based on some requests I’ve received that there are enough people looking to purchase NDX over the counter that we won’t need to give a discount, I think people will buy it if it’s reasonable.

Constant Rate
We could just set a constant rate of somewhere around the spot price at the time we deploy the contract and set a short expiration date for the offer, then if enough tokens aren’t sold we could withdraw or update the price.

Moving Average
We could also do what the UnboundTokenSeller contract for the index pool does - which is to set a price based on the moving average on Uniswap over the last couple of hours. The moving average would be taken from the Uniswap oracle which is being used both for that contract and for the index pool controller.

Alternatives

Alternatively, we could just not use Uniswap at all. We could use a liquidity bootstrapping pool - which is a Balancer pool which starts at a very high ratio of NDX to ETH and gradually shifts to 50/50 over time. We could bootstrap it personally or just ask some community members to buy NDX from the treasury and give the providers of Ether some of the LP tokens. We could do this with Balancer directly using a smart pool (would require that we regularly call an update fn to shift the weights) or use the IndexPool contract, which has gradual weight shifting built in. If we did the latter it would help showcase the flexibility of the contracts we’ve built, but would require some updates to the dapp so that people can use it. If we used Balancer we could get additional BAL rewards for the treasury.

2 Likes
#3

I prefer this to incentivizing LP directly which, as @d1ll0n pointed out in the other post, will lower governance participation rate. In addition, there is no clear incentive to hold NDX at the moment, therefore giving LP incentives will likely result in constant selling pressure for NDX.

The suggestion to do a sale makes sense and using sale proceeds to bootstrap initial liquidity is quite common. Perhaps we can do a governance vote to decide the initial price of sale?

2 Likes
#4

I think you’re right that a governance vote to set the price would make more sense. There’s only ~18k NDX on Uniswap so there’s no reason to base the price on that. Good idea. I can create a Snapshot poll for that if we see some more support for this idea.

#5

Couple of notes:

  1. Governance participation could include staked LP tokens. It’s possible there are other protocols that do it.
  2. Before we go selling NDX for ETH maybe we should look at how much liquidity we should target. The table below shows the slippage vs liquidity on a $10k purchase on uniswap. You might need to sell LOTS of NDX to get the results your looking for.
    image
2 Likes
#6

I agree with culgin1 and think this is a better option that incentivizing LP directly. My personal preference would be for using the liquidity balancer pools or buying from the treasury.

#7

Was thinking that the DAO would set rate at first but thought that if it’s too different then either wont be bought or would drop the market rate. Though to be fair it’ll probably just instead set the market rate to that rate. Am open to both twap or DAO voted.

#8

What is the downside of using a bonding curve for the token sale and use the proceeds to LP on Uniswap?

#9

None thats for sure an option aswell. We also consider auction models for small allocations

#10

I like the idea of using a balancer or index pool. It seems to be the most efficient use of capital. My question would be is there any negative to this?