Hey! Bruno here from Fei community!
Fei is already a partner in NFTX Fuse pool by seeding FEI there. I would like to bring the discussion about a new kind of partnership, the Liquidity-as-a-Service (LaaS) offering.
Liquidity Mining attracts capital at a high cost, LaaS is a cheaper alternative.
With LaaS, projects can get immediate liquidity without issuing more tokens and upfront capital costs. Fei & Ondo Finance help by doubling their liquidity.
DAO allocates tokens to an Ondo Vault; this amount is combined with Fei to LP on Uniswap or Sushiswap. Currently, the program lasts 30 days and at the end of the period, DAO would pay a 0.17% fee (2% annual fee divided by 12 months) on the total value of the governance token deposited in the vault. This 0.17% fee can be partially, if not fully covered. This will depend on the accrued trading fees of the vault and the impermanent loss that are kept by the project.
You can use this worksheet to make simulations.
It is a good way to increase liquidity with a much lower cost than liquidity mining and to gain awareness by participating in this innovative partnership.
Fei is finalizing the selection of launch partners for LaaS. Those selected to be part of the launch group can benefit from the low fees associated with the group.
More resources on the Liquidity-as-a-Service here: Medium Article.
I would love to hear NFTX community about this idea.
Thanks for posting your ideas.
At the moment I can’t quite wrap my head around it. Are you suggesting adding deeper liquidity for the NFTX token, or is this for the individual vault tokens?
The latter can certainly be an issue for some vaults, but each token is generated with each NFT being added to the vault so I’m not sure how the DAO allocation of tokens to the Ondo Vault would work.
Could you potentially layout an example of how this might benefit low liquidity vaults like BAYC or CoolCats?
Hey Javery -
Liquidity as a Sevice is aimed at helping DAOs get liquidity for their governance tokens, and in your case would be applicable for NFTX tokens.
We accomplish this by leveraging Ondo’s vaults. Fei puts FEI into an Ondo FY pool (senior tranche), NFTX puts NFTX in the VY pool (junior tranche). Created pair FEI-NFTX LP is deployed on Sushiswap or Uniswap v2 for a fixed amount of time.
At the term, Ondo withdraws all liquidity, then pays the Fei DAO its FEI plus a predetermined fixed yield, and NFTX receives the remaining assets paid out in NFTX. NTFX would receive all the fees, but also assume the IL risk. Essentially, you would double the available liquidity, earn trading fees, and your DAO would keep ownership of the NFTX tokens.
This convergence of NFTs and DeFi is promising. As Brianna said, the pilot will launch focused in the governance tokens. But, maybe in the future, it could be also used for increasing the liquidity of vault tokens.
Intriguing. Especially since we aren’t paying any attention (or yield) to NFTX holders. I know we want to focus on product, but if we ignore the token we are hurting our community. Strong community comes from faith in the project and that is reflected in the token price. I believe we need to do something to incentivise the purchase and holding of NFTX tokens. By not doing so we are missing out on strengthening the community and losing valuable marketing that comes with that. This would allow NFTX to co-own liquidity. The impermanent loss risk is pretty hefty though considering how new and undervalued NFTX is.
What about bonding? Any possibility of owning liquidity through olympus or something similar?
LaaS has no upfront costs, can generate revenue for your DAO, and is much cheaper than traditional liquidity mining. If trading fees exceed any IL and the 2% fee, there would be net profit. Moreover, the TRIBE rewards are an extra incentive offering ~43% APY subsidy. In most normal circumstances, this partnership would be profitable for NFTX, while doubling the liquidity for NFTX.
We launched the first cohort https://twitter.com/BriannaPageM/status/1463602247309221888
There is still room for a few more to be part of the initial launch! Let us know what would be the next steps with NFTX.
Thanks for the posts brianna. Looks solid, I’ll ping the team and let them know.
I should add that I’m not personally very keen on liquidity mining or anything that costs us money or tokens to improve liquidity. My personal stance is that in order to get a product which works well we need to force ourselves to come up with ways of improving liquidity organically. I think that if we improving liquidity manually by paying for liquidity services that this actually risks hurting us because we will get a false sense of success, but eventually our treasury will run out, and then we will be back to square one, instead of being forced to align incentives among users in a way that is sustainable longterm.
That said, if there are ways of us making money in the short term by, say, earning and market selling TRIBE rewards then I’m all for that.
Should also reiterate that the above is just my personal opinion and by no means will I block any such initiatives if there is majority support among the rest of the team and token holders.
Hello Alex - this can actually be a source of revenue for your DAO. Your DAO would earn all trading fees and we are also giving TRIBE rewards, but only the next few launches will be eligible for the rewards. You can also check this article with some analysis about Laa$: Liquidity-as-a-$ervice Guide - Crypto Kailash
Let us know if there is interest in moving forward.