Authors
Core Team
Glossary
Concentrated Liquidity
LP
AMM
Summary
This proposal is intended to utilize some of NFTXs’ idle treasury assets in a way that adds value to the underlying goals of the project, increasing liquidity and volumes for NFTs on permissionless protocols. By doing so, we also look to gain additional learnings from users, to be used while developing NFTX v3.
Rationale
Since the start of NFTX DAO back at the end of 2020/early 2021, we’ve mainly utilized the DAO treasury for LPing our own governance token against ETH, as well as supplying significant liquidity positions for well-known NFT projects such as CryptoPunks. Treasury management has therefore been rather risk-averse, as we try to take on as few protocol/centralization risks as possible.
As the Ethereum ecosystem develops, new innovations on the decentralized exchange landscape arise, including new types of liquidity pools such as the concentrated liquidity options on Uniswap V3, smart pools on Balancer, and Kyber Elastic.
The DAO still holds a significant amount of its treasury value in NFTX Vault tokens (mainly PUNK), which are currently not utilized further than being inventory in our vault (unstaked, to not dilute yields for organic users). Single-sided LPing on i.e. Uniswap V3 can be used to increase liquidity to the upside of these collections, lowering slippage significantly for buys and/or swaps through NFTX (and aggregators that source liquidity from the NFTX protocol).
Effect
Opportunity
- Add additional buy-side liquidity for some of NFTXs’ treasury-held collections, such as the CryptoPunks collection, lowering slippage for NFTX collections.
- Gather AMM performance data as an LP persona of NFTX, to be used while building v3
- Fee generation from AMM trading (only relevant when outweighing IL noted on risks)
Risk
- Potential IL (Impermanent Loss) against holding PUNK (current strategy) due to aggressive price bumps.
- Additional protocol risk exposure from the DEXes we LP on
Specifications
If this proposal would pass, the next steps would be actioned upon.
- Migrate PUNK/WETH from Sushi V2 towards a Uniswap V3 position (near-infinite range) at 0.3%
- Add a 25 PUNK single-sided CL position at 1% (TWAP floor once migrating <> 300 ETH)
- Add 6 GLYPH single-sided CL position at 1% (TWAP floor once migrating <> 400 ETH)
- Divide 25 PUNKS over Balancer v2 & Kyber Elastic pools, to compare performance & aggregated volume against Uniswap V3.
After actioning the above points, the positions will be tracked on a monthly basis to include learnings into V3 R&D. All positions will be reconsidered directly after NFTX v3 deployment.
Funding request - Yes - Implementation Requires Funding
To perform actions stated under specifications, we require a total of 50 PUNK and 6 GLYPH vTokens, as well as SLP positions to PUNK/WETH for migration towards Uniswap.
As these positions all start single-sided, no additional ETH/USDC is required to perform these actions.
Communication
Proposed points of discussion.
- Impermanent Loss risk understanding
- Do we set a maximum trial period in advance
Quorum (For forum)
-
Minimum Quorum: At least 5 votes
-
Passing Threshold: More than 50% must vote in agreement for the XIP to Pass. For changes to the NFTX contract, more than 70% must vote in agreement for the XIP to pass.
-
Yes
-
No
0 voters