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.

narok

narok the magnitude could be reduced by having proper liquidity manager on Uni V3 pools that would shift liquidity as we trend down

In my experience you would suffer the same IL, only that in several instances rather than in a single one. Unless you went back to providing liquidity to the whole curve. Giving more depth in a tighter range...Idk, it´s like giving wings to speculators. I truly hope you are 100% certain of what you are proposing here re V3.

narok Glad that you said this

Never hided it. Yeah earning is better. It´s detrimental in the sense that we receive more in $botto than the pool generates in fees. The fees is just one thing LMiners give up, together with other costs/risks they assume. Given the extremely low fees, I wonder how stable the pool and the price would have been without the LMining program.

narok You asked how I judge that we are overpaying. Simply, we are diluting our token-holders at pace of almost a 1m per year of token emissions. To me that seems like very unreasonable price to pay.

This does not answer the question. You kinda address how costly it is for you, but not the benefits (if any) that the program brought to everyone (ie a functioning and deep pool that accrued fees to everyone, without IL risk) and whether those benefits could be reached by a POL without incurring great risks (which could could eventually be more costly than the dilution you are ¨suffering¨ now). This is the conundrum I see. What I still don´t see is a clear picture of the situation going forward. I´m missing Carbono´s input on this?

I get your feeling as a non-mining Botto-holder but LMining is permissionless. It´s you who is getting diluted, not me and the rest of the miners. The pool has been working more or less fine. Anyone can enter the pool (you too), and it doesn´t cost much to do so. Whether people who are in the pool think of it as a failed investment is contingent on when and how they entered. Honestly I think I´m net positive (but not by a huge amount though) and I´m still bearing the IL risk everyday.

I do think there is something interesting in reducing emissions and analyzing the elasticity.

How about the following?

EndTime: 15/10/2024 (DD/MM/YYYY) - Respect this

6 months in advance (i.e. starting on 15/04/2024) emissions (as set up in the contract) start to decline, 20% a month (until they become 0% in Endtime). In parallel, the team, hopefully having raised funds in between, has time to set up clearly what the POL would be (I still struggle to see all the risks associated). For those 6 months we will have time to test how things go (and adjust, or even drawback if necessary) . The dilutive net effect wouldn´t be much different, we would have a "plan" ahead for everyone to adjust, and the landing would be gradual (which I always thought, it had to be). What do you think?

dencryptus

LOLOLOL you are hilarious.

$$ drain means waste of money. If you don't understand what that means - I literally cannot help you. Don't bucket everyone else to your level and say it's "ambiguous" and "a false" statement.

You can interpret and nitpick anyway you like. You want to continue to argue to protect your LM tokens - you are entitled to that. And others are entitled to their opinion of wanting to wind it down because it can be put to better use.

It's hard to have a reasonable debate when you can't accept other people's opinion other than your own.

thomahawk69 $$ drain means waste of money. If you don't understand what that means

Issuing $botto is not a waste of money, either. I explained above in my reply to Hudsonsims what issuing $botto is, and how it affects all the parties involved. Try to contend against that (if you can).

thomahawk69 It's hard to have a reasonable debate when you can't accept other people's opinion other than your own.

This is precisely what you have been trying to conceal. Your argument is simple and can be summed up in (I´m quoting), LM is a "drain on $$" equivalent to "giving out $80k/month", and in an "inefficient use" so you would "double down and fully eliminate LM (...)". The problem is that the two first quotes are false and/or misleading (explained in the answer to Hudsonsims), the third one is an opinion (which deserves an analysis that imo you are trying to put aside) and the fourth one is a maximalist proposal (one more in the toolbox). We are lacking the real evidence and a robust solution.

thomahawk69 You want to continue to argue to protect your LM tokens

This is what´s hilarious (and false). Not only you are making interested assumption (that probably is describing your intentions more than mine), it´s also pretty clear that you popped up lately (I made calls to review this many months ago), that you are not reading this thread, and/or that you haven´t done a few basic computations. That debit, just like a few others, goes to your account, not mine.

The discussion should go about how to build a robust POL and transition to it (because we will have to), not about cutting LM asap (just because...you don´t want to suffer dilution but would rather suffer and perhaps enjoy other things?)

thomahawk69 If you don't understand what that means - I literally cannot help you

While I kindly appreciate your worry regarding what you see as an inability to understand what a "waste of money" is, let me respectfully call into question any 101 patronizing that you could eventually offer or provide, and proceed to list out why I can´t or will trust your judgement and intentions onwards. So far, at least, you could not:

• Utilize the the concept of opportunity cost (so you can´t item ALL the factors involved in this BIP and provide useful arguments on the basis of it)
• Help a busy team bring up the concept of dilution in a BIP (BIP-35) that was all about fundraising, and will impact Botto-holders more heavily than BIP-39
• Transparently differentiate between treasury management and fundraising as two separate key functions in one of the most important BIPs we had
• Advice a busy team on setting up the basic guardrails that would look good to any investor in a fundraising process (others had to)
• Help this community understand and apply the principle of accounting prudence
• Thus, account for price dilution when valuating all the tokens in treasury (maybe because if you tried to do so, the math would make some of your assertions fall apart)
• Differentiate, at a very basic level, between an asset and a liability (could these concepts also be subjective?, it would be the summum of relativism)
• Help a busy but enthusiastic community increasingly understand basic concepts of your field and build knowledge, by expressing yourself accurately and precisely

The worst part is that you can´t refute any of the above without some blushing. The evidence and your statements are out there. It´s obvious that not everyone here has a financial background and thus almost everyone deserves wide room to express themselves straightforwardly in the best way they can. You do, however; so some of your assertions come as a big surprise, and none of the reasons that I can come up with to explain why you´re doing this is very pleasing.

dencryptus Issuing $botto is not a waste of money, either. I explained above in my reply to Hudsonsims what issuing $botto is, and how it affects all the parties involved. Try to contend against that (if you can).

we can agree to disagree - you think it's not - I think it is. Spending $100 vs $200 - can be both considered a waste of money if the money can be put to better use. But if you want to see it as not - that's your prerogative - but please don't try to say that your answer is the only right one. Any expense can be considered a waste of money - it's up to how the person sees it. There is not right or wrong answer, so please stop saying it's "false" and "misleading"

dencryptus This is precisely what you have been trying to conceal. Your argument is simple and can be summed up in (I´m quoting), LM is a "drain on $$" equivalent to "giving out $80k/month", and in an "inefficient use" so you would "double down and fully eliminate LM (...)". The problem is that the two first quotes are false and/or misleading (explained in the answer to Hudsonsims), the third one is an opinion (which deserves an analysis that imo you are trying to put aside) and the fourth one is a maximalist proposal (one more in the toolbox). We are lacking the real evidence and a robust solution.

you are proving my point yet again - you wont even take people's pov under consideration. Straight up just accusing ppl's statements are "false" and "misleading". I can say that the LM program is a waste of $$ and an inefficient use - because that's my opinion. It's like someone saying $100 champagne is a waste of money, but then you come in and say their statement is "false" and "misleading".

dencryptus This is what´s hilarious (and false). Not only you are making interested assumption (that probably is describing your intentions more than mine), it´s also pretty clear that you popped up lately (I made calls to review this many months ago), that you are not reading this thread, and/or that you haven´t done a few basic computations. That debit, just like a few others, goes to your account, not mine.

The discussion should go about how to build a robust POL and transition to it (because we will have to), not about cutting LM asap (just because...you don´t want to suffer dilution but would rather suffer and perhaps enjoy other things?)

LOLOL - I've made it very clear that I'd like to reduce or eliminate the LM program. I'm not shying from that fact. This all stem from the fact that some ppl don't want the DAO to OTC $BOTTO tokens - so finding another alternative led to this. I can guarantee you that the intentions of everyone in this community are not the same, but that does not make 1 person better than the other. So just because someone doesn't agree with you doesn't mean they are wrong.

dencryptus The worst part is that you can´t refute any of the above without some blushing. The evidence and your statements are out there. It´s obvious that not everyone here has a financial background and thus almost everyone deserves wide room to express themselves straightforwardly in the best way they can. You do, however; so some of your assertions come as a big surprise, and none of the reasons that I can come up with to explain why you´re doing this is very pleasing.

Good for you for thinking that you know the answer to everything, but we don't have to agree. You think you add more value than others, that's your opinion. You don't trust my judgment, that's your opinion. I can also say that I don't agree with your comments, but I can see where you are coming from - but the fact remains that you can't fathom accepting other ppl's opinions that's not aligned with yours. Re-read your comments - and I remain firm that it is impossible to have a debate or conversation with someone like yourself. And this to me is a waste and a drain of my time.