narok

I agree with the premise that our LM program is a great expense and inefficiency that should be changed.

I favor a more aggressive solution though of phasing out LM, shifting to PoL, and buying back liquidity where possible to create a win-win for the treasury and our existing LPs.

Your proposed use of Uniswap V3 is interesting, it does indeed put liquidity to far more efficient use. The downsides would be increased IL, some additional contract risk from a liquidity manager like Arrakis, and the added expense of whatever cut the liquidity manager takes. These costs could be worthwhile though, and I would like to better understand them. Is there any particular reason you propose partnering with Arrakis vs. other liquidity managers?

Out of ignorance, I don't fully grasp the nuances of POL:

What would optimising our liquidity mean? - Reducing volatility, earning some interest, reducing dilution, something else? I don't understand what we are trying to achieve
What are the liquidity issues that exist apart from the LM issuance?
How do you judge that we simply "have too much" liquidity? (I would rather say that the sensitivity of the pool is high to small trades)

I'm trying to understand.

narok expensive Liquidity Mining campaigns

These are not a cost for the DAO, it´s a cost to the current Bottoholders (via dilution).

narok LM issuance is not the problem per se, it is that the funds here are not used in optimal manner

So moving them to V3 would optimize the pool. Is this correct?

narok It means that LPs are currently awarded more than utility they are bringing to protocol

How truly accurate is this?

As a LMiner I´m giving up the fees (normally negligible but accrue to the dao), incurring impermanent loss risk (big stuff if you are here since inception, and this loss would consolidate if the LM is discontinued all of a sudden) and opportunity cost (I could be LMing somewhere else). This is for the LMiners risk.

As for the value to the dao: what has changed over the last year that makes this contribution less valuable than it was? Why did we have such a initial big pool to start with, if a tighter one (seemingly) would have sufficed? Is there anything else we are not fully aware of? Would the Dao incur IL risk and to what extent? How would the bond program fit here and would the outcome of discontinuing the LM program would be fair for all parties?

I think we should also understand whether that 550k pool suffices. Those benchmarks are useful, but are those sizes intentional (for a grounded cost-benefit reason) or a product of circumstances?

I would not denominate the size of the pool in fiat, because that´s so contingent on Botto´s and Eth´s price. If Botto´s price drops 50% (it was $0.03 in Jan., and recall the upcoming OTC deal), what would happen to the size of the pool? This is tied to the previous paragraph and IL risk: it seems to me that what matters is not the USD size, but how the pool rotates and at what unitary flows (of Botto and Eth). We have a few big big whales. Are we accounting for all this?

Fully agree that our LM program is currently a drain on $$ and is an inefficient use. I would even double down as @Ben suggested - either fully eliminate LM or phasing it out over time before the current end date of 2024.

However, I do not agree with the usage of Arrakis - they are a MM and we don't need that at the moment. There is no lack of liquidity/depth in my opinion - and the cost of paying 50% of fees to Arrakis is absurd.

I would recommend we simply take a portion of the LM program tokens (20% as suggested) - and use Uniswap V3 ourselves and put in a range to optimize capital (and adjust the upper and lower limits accordingly over time). Yes there will be IL - but that's the risk we can take on and manage.

thomahawk69 Yes there will be IL - but that's the risk we can take on and manage.

How can you say this so lightly? We supposedly need Eth, so we are raising through an OTC deal but hey, let's take IL risk when the token is likely to get a hit.

And how can you say it's a "drain on $$" when that's such an ambiguous (or plainly false) statement?

My main concern with active liquidity managers is not the fees but that they’re still pretty young and risky contract-wise with a history of hacks (not sure about Arrakis, more familiar with a couple others). Even if hack risk is somewhere 1-5%, that’s too high for any meaningful amount of liquidity in my view.

I favor keeping things simple with Uniswap v2 for now. Set and forget it with less contract + IL risk. Botto has way above avg liquidity vs. other protocols of its size. I think it could do fine with a lot less.

narok Here is the link of out V2 pool with indication of IL suffered (you can see lifetime IL of 1.4%):

This page is interesting, thank you. However it does tell a partial picture that does not help to draw useful conclusions. First by annualizing the IL rate. Secondly, and most importantly, by using the $0.21 price as a reference (vs. $0.16 yeah the IL is not huge, maybe 3%), but what to those that purchased between October and Sept. 2021, just the period when it was above $1.00 (part of my position is from that period). I can assure you my IL is well above 20%. I can´t even think for someone who purchased at $4.

But that´s not what matters, what does is that if tomorrow the price plunges back to $0.03 (nothing wild) or grows up to $3 the IL won´t be 10%, but greater. If we go on and concentrate the liquidity the effect will be much greater. We could eventually lose tens or hundreds of Eth both in up and down swings. That risk is atm externalized to LMiners.

narok I gave you some example of how much liquidity is found on protocols of similar size

Thanks for that.n But I´m asking for the reasons that would sustain our decision. Benchmarks are nice to have, but how do we know we are copying good practices? I´m not trying to change the status quo, I´m trying to understand analytically whether it makes sense.

narok We are overpaying for liquidity

How do you judge this? I honestly can´t still figure out how you are so sure.

narok Some people don't really have the incentive to change this as they are profiting from this

I´m among these people. Not sure still if I´m "profiting". I could have a larger position in another pool. Being a LM involves some risk and opportunity cost.

The key point would be knowing if the dao would profit (greatly) from the removal of the LM program, bearing in mind that it would more than let down many people who trusted this would last until mid/late 2024. In truth, it wouldn´t be the dao who would benefit, but the holders who are not mining liquidity (we are not spending Eth at all)

Who will decide on the range?

dencryptus

I haven't done the calculation myself but if we take narok's porposal at face value - you think giving out $80k/month is not a drain on $$?

I guess your definition of value is very different than mine

narok

@narok I didn't suggest taking 20% of LM campaign tokens. Just reducing the emission. I don't think that current team is capable and knowledgeable to do this. This is way I suggested Arrakis - of course it would be best to talk with all potential protocols that offer this service and decide then.

Sorry I read it incorrectly. So you're saying we reduce LM emission by 20%, and then on top of that, you want us to move 20% of our V2 pool into Arrakis? Did I get that right?

If so - I'm on board with reducing emissions - but does that mean we're simply extending the period longer by reducing the emission %? I would go as far as taking 20% of the pool away to use that to fund other things.

But I don't really see the point of moving 20% of our V2 pool to someone to manage - I don't see any benefit at this moment.

dencryptus can you say more about the implication of the semantic differences you're concerned about? If opportunity cost are things like OTCs (for funds), Airdrop (marketing expense), grants, etc. those all are roughly equivalent to dollar value and so abstracting it into a dollar cost seems reasonable, even if not 100% equivalent. To be sure, can factor in governance rights and whether it's accurately priced based on work participation for rev share, which may even mean it's undervalued and so using the $$ amount is a baseline but still gives a rough idea.
I don't understand the emphasis you're putting on these semantic differences, would help to understand the implications of it rather than arguing about definitions.

thomahawk69 I never said it's a $/ETH drain - so YOU are the one that's causing confusion to others by putting words in other ppl's mouth.

LMAO You DID say "$$ drain", and I added Eth to exclude that option too (I didn´t quote you) in the event that someone else wasn´t excluding it too. It´s funny/interesting that you are now SO exquisite about my quoting after having used basic concepts disrespectfully and tried to use them to draw flawed arguments.

Anyone can read what you wrote; anyone can guess your intentions, what you meant or you did not mean. I´m glad that you decided to "be clearer" about your "definition" in your second paragraph, which is closer to what really is, and to mine too. Unfortunate that you had to return to the old habit in the third one. There is no dollar drain for the dao, and this is not subjective, it´s a fact. Unfortunately for you I´m not making anything up. I just demanded precision and an honest conversation with anyone interested on an important matter for the Dao. I still demand it.

hudsonsims can you say more about the implication of the semantic differences you're concerned about?

Sure. I´m not arguing for a minor semantic problem. I hate to have to be picky, even more on definitions. If I do is for the increasing feeling that twisted concepts are being used to support partisan conclusions (even worse: states of opinion). Honest conversations would be impossible this way, and honest conversations between people that share some common knowledge should be extremely simple.

hudsonsims abstracting it into a dollar cost seems reasonable, even if not 100% equivalent

Abstracting it to dollars makes no sense. By that same logic, we would be burning $6,000-10,000 dollars every Monday on the ritual-burning-pyre. Using the current price to abstract a scenario with strong dilutive effects does not make much sense either (I already said how I would handle it), but hey, not the biggest issue. By thomahawk´s logic in his last post (I´m drawing an analogy myself, not quoting or putting words on his mouth) the Monday´s ritual would also be big “$$ drain”. But it´s not, because Botto in treasury 1) belongs to all Botto-holders, thus 2) is financially neutral, both of which which lead to, 3) is not an asset for the dao, but a liability when it has been issued. When has unissued Equity been an asset for a company? Never. It´s nonsense. I can´t remember how many times I explained and shared materials explaining this.

It´s not the first time that we conduct narratives based on distorted concepts, and that´s dangerous because then someone not as financially literate as thomahawk might go and read what he wrote ("$$ drain"), and that someone might understand that LMining is just another $ expense for the DAO (so hey, let´s save some bucks together!).

You ask about the implications. The main one: we overlook the core issue and screw up good (and fair decision making). But also, implications of conceptual and communicative clarity:

1) Precision and efficiency in conversations
2) The ability, and the perception of being able to hold honest conversations that lead to the best decision-making in our hands
3) 1 and 2 applied externally, which will soon become more important

What´s the core implicit issue here? That LMining dilutes some Botto-holders and does not dilute other Botto-holders. That´s where the partisan “conflict” lies. If all Botto-holders were doing LMining, LM rewards would be as neutral as burning $botto each week (or any other $Botto amount in treasury tomorrow).

What do we need to understand (and if you look up, ALL my previous interventions pursue this..)? Whether the (hypothetical) value that the LM program brings to the DAO as a whole (and thus to the Botto-holders that are not LMiners) compensate the dilution that the program is generating to the Botto-holders that are not doing LMining, bearing in mind that many LMiners made a decision in good faith and with a calendar in mind. THIS is imo (and I think you are already with me) centering the conversation.

But please don´t tell it´s a “$$ drain”. It´s not a $$ drain for the DAO, , it´s a value drain for those who are not doing LMining, only. And it wouldn´t be if the value LMiners brings > than the dilution non-Lminers suffer.