Draft Proposal: Liquidity allocation for all additional DAO-managed funds

Authors

ChopChop

Glossary

DAO
ETH
DeFi
NFT

Summary

This proposal is intended to move forward launching all other DAO funds, by starting with defining the liquidity allocations for all additional NFT index funds, which were part of the community raise, namely Axies, Avastars, Autoglyphs, Cryptokitties and Joyworld Joys.

Finding DAO consensus on the allocation of liquidity (in ETH) per category is a first step required to launch the additional index funds on Balancer / SushiSwap.

The liquidity spreadsheet listed under Specifications is a work-in-progress document and will finalize for the main snapshot vote once thoughtful discussions have taken place on this forum post.

Effect

Opportunity

  • By coming to a consensus on the total sum & split allocation per category we are able to move forward with rolling out the new funds to our & the broader DeFi / NFT community
  • Pushing the currently on-hold funds to be publicly tradable will bring focus for all DAO contributors to work on and improve the value of future products (i.e. gallery, new front-end, and liquidity farming).
  • Having multiple NFT categories tradable will give NFTX a better sense and understanding of our current PMF is by listening to user feedback & monitoring usage

Risk

  • The liquidity spreadsheet assumes that liquidity allocations is to be split evenly across D1 & D2, while the current market may be more interested in deeper liquidity on floor / low cost index pools (i.e. Punk-Basic, Avastars-Basic).
  • Floor Prices per category are fluid and will change before we list funds. A severe floor price drop on one or multiple categories may lead to a situation of the treasury not having enough D1 fund tokens to stick to the proposed ETH allocation of a D1 or D2 pool.

Specifications

A liquidity spreadsheet has been made to split the allocation of liquidity over several NFT categories and specific funds.

The combined liquidity per category in this spreadsheet (i.e. all D1 Cryptokitties pools) is more important to find consensus on than the split between D1s, as Balancer D1 pool setup may collapse into one vault with the upcoming launch of Balancer v2.

How to read the liquidity spreadsheet:
The row we are discussing in this draft proposal is Row G, which is the row that determines ETH collateral provided by the DAO. The current numbers are mainly based on historical trading activity on OpenSea, favoring liquidity towards categories with higher trade activity. The numbers in this row remain static once consensus has been found.

Row J defines the current floor price of a certain index fund category, such as Axie Mystic 2. The number put into this row will dictate the final D1 token collateral the DAO has to provide upon listing. As floor prices change all the time, this row is dynamic and must be changed according to an updated floor price number before listing.

Row H is the sum of Row G/J, giving us the amount of D1 tokens that are to be put up by the DAO.

Treasury Management:
The combined starting allocation of ETH liquidity provided by the NFTX DAO treasury in this proposal, excluding the already available liquidity for CryptoPunks, is set to 370 ETH. This number takes into account the availability of D1 fund tokens available to the DAO.

This proposal takes into account the current balance of the NFTX DAO treasury. If this proposal finds consensus, all additional funds can be launched without interfering with other pools that the DAO currently provides liquidity for, i.e. NFTX/ETH. The current treasury owns approximately 510 ETH.

Funding request - Yes

This proposal, in its current form, requires 370 ETH and the equivalent amount of D1 index tokens to be spent by the DAO treasury, setting up all pools on Balancer & SushiSwap.

Proposed points of discussion

  • We must discuss and find consensus on the final allocation in ETH per category before this proposal may be cast on Snapshot.
  • Avastars currently has had its new series launch, on which the current floor prices are based. To determine correct floor prices, we should discuss whether or not the current NFTX Avastars pools allow this new series (general basic/rank30/rank60 pools) or not (pre-new series basic/rank30/rank60 pool).
Sentiment Check
  • Yes, I like the proposal & allocation as is.
  • No, please alter allocation based on my comment below

0 voters

4 Likes

This is great Chop!

I agree with everything here and want to reinforce the fact that if nothing changes we can launch all the funds without interfering with other current pools!

3 Likes

Thanks Chop, this looks good to me and I’m in support of the proposal. I only have some minor clarifying questions:

I noticed for many of the funds we are using only a small portion of the raised NFT’s for liquidity (i.e: 1.5 GLYPHS for liquidity, vs the ~30 that were raised in the sale, or 25 AXIE-ORIGIN vs ~60 that were raised). Is the idea that the DAO will retain the rest of the NFT’s as a capital asset for the DAO treasury? Won’t providing liquidity with all assets allow the DAO to earn fee’s and make the NFT’s working capital?

Are we simply limited by ETH? Also how much ETH would the treasury hold after this?

1 Like

Hey @freezer - good to have your support & also happy to answer that question!

The main reason is the one you stated (liquidity shortage on DAO treasury side), as well as for some pools (i.e. the AXIE-Origin) the amount that will be needed in D1-tokens to spawn the D2 pool on Balancer isn’t listed on the sheet (as it changes all the time and will be calculated by Alex at the time of listing).

With the proposal, we’ll be in the end allocating 320 ETH to the bootstrapping of these additional funds (which isn’t lost, it’s just provided as liquidity), leaving ~195 ETH of liquid ETH in the treasury without having to shuffle/withdraw liquidity from other pools, such as the NFTX/ETH & PUNK/ETH pools which are currently already operational.

Offtopic: From a treasury/risk management point of view, it’s in my opinion useful to start conversations about de-risking the DAO treasury moving forward (for instance, hedge parts to stable currencies) keeping close tabs on what happens on volume/liquidity growth once farming is up. All with the intent to guarantee DAO stays operational in the possibility of a downwards market.

4 Likes

Chop, what’s the latest on this? Any ETA for rolling out the rest of the funds? I do think some floor prices have changed quite a bit since the original proposal.

1 Like

Discussions around single fund focus, combined with contract creation being paused (making the creation centralized) have thrown some roadblocks.

When single fund vs combined fund talks have been cleared, we can move forward to make sure we don’t waste thousands of dollars in gas of treasury.

2 Likes