This BIP seeks to introduce a gradual commitment of liquidity as a public good by Botto DAO. This would be achieved via the implementation of a two bucket approach for the management of its treasury’s Protocol Owned Liquidity (POL) that delineates between DAO Directed POL and Permanent POL.
To underscore Botto DAO’s commitment to ensuring POL is upheld for the long-term benefit of its stakeholders, and in alignment with the idea that liquidity may be considered a public good too, this BIP suggests the implementation of a two bucket model for POL, whereby:
Initial Permanent Lock: 20% of the treasury’s current total POL (3,443.02 LP tokens out of 17,215.11 LP tokens on Uniswap V2, prior to the recent migration of about 10% of Ethereum mainnet POL to seed liquidity on Base per BIP-63) will be locked permanently vis-a-vis the initiation of a Uniswap V3 full price range position for BOTTO + ETH on Ethereum mainnet using the associated UNCX liquidity locker.
The use of UNCX’s liquidity locker will enable the Permanent POL to be highlighted on DEX trackers such as DEX Tools, reinforcing the visibility of this initiative to new potential Botto users.
Note that locking liquidity does not mean the underlying BOTTO + ETH tokens are burned and removed from circulation. It simply means the ability to remove liquidity from the pool is no longer an option for Botto DAO. As a result, this immobilized and stable value as represented by Permanent POL will be available for all Botto stakeholders to trade in and out of in perpetuity on Ethereum mainnet.
Monthly Permanent Lock: every month for the duration of the initial one year implementation of this proposal, 1.25% of the treasury’s current total POL (215.19 LP tokens) will be contributed to Permanent POL. Over the first year of this proposal’s implementation, this equates to an additional 15% of the treasury’s current total POL being added to Permanent POL, in addition to the initial 20% lock.
Duration of Monthly Locks: this proposal will be committed for one year from its approval, or through the end of the final period in which the one year end date falls, whichever comes last.
Thereafter, Botto DAO members may opt out of this proposal through another governance vote. Otherwise, it will carry on under its established terms until no more than 50% of Botto DAO’s current total POL (8,607.55 LP tokens) is permanently locked, which would be achieved in roughly two years after the approval of this proposal if it carries on as such.
Features of the Permanently Locked Liquidity Position: a Uniswap V3 position is suggested as the implementation approach since UNCX’s associated liquidity locker app enables a “Lock Eternally” option, such that the accrued trading fees from the underlying Permanent POL can still be collected by Botto DAO, thus augmenting its revenue over time.
Also, a Uniswap V3 position would enable active LPs to offer concentrated liquidity for BOTTO within specific price ranges in the future if they so choose, on top of the baseline, eternal and full price range level of Permanent POL established therein. This will become increasingly appealing to LPs as Botto's liquidity mining program approaches its end in October 2025, especially for more active LPs that are not regularly engaged in training Botto for a cut of active rewards and are more inclined to managing concentrated liquidity positions for trading revenue instead.
The BOTTO + ETH pool on Uniswap V2 would still continue to be an option for more passively oriented LPs interested in participating in the liquidity mining program which ends in October 2025 and/or those interested in offering liquidity for the purpose of also accruing voting points to help actively train Botto and thus be eligible for active rewards.
As such, a 1% trading fee is proposed for the Uniswap V3 pool containing Permanent POL, to both bolster its revenue potential for Botto DAO and to make the pool more appealing for active LPs to participate in, as the higher fee versus Uniswap V2's 0.3% swap fee would better compensate active LPs for the risks associated with impermanent loss, whereas the concentrated liquidity active LPs would provide on top of Permanent POL would offer traders improved price depth and reduced slippage.
Trading Fee Distribution for Permanent POL: trading fees in ETH corresponding to Permanent POL would be collected once at the end of every period and then distributed in the subsequent period in accordance with Botto DAO’s established terms defining the split between active rewards and the treasury at any given time.
Since the Uniswap V3 LP position would delineate between trading fees accrued in BOTTO tokens and trading fees accrued in ETH, it is proposed herein that the trading fees in BOTTO tokens would be burned by sending them to the zero address, whereas the trading fees accrued in ETH would be distributable.
For example, if at the end of a period, the collected trading fees for Permanent POL are 1000 BOTTO and 1 ETH, the distribution would be as follows:
1000 BOTTO would be burned by sending the tokens to the zero address.
1 ETH would be distributed evenly per round over the course of the next period between active rewards and the treasury per the established split.
Two Bucket Model for POL: two buckets of POL will be created as a result of this proposal.
DAO Directed POL:
This can be apportioned to expanding BOTTO’s liquidity to new DEXes outside of Uniswap on Ethereum mainnet, to new pools on Base in the future, and/or repurposed for operational expenditures if needed.
DAO Directed POL will account for about 65% of Botto DAO’s POL by the end of this proposal’s initial one year implementation.
Permanent POL:
The associated liquidity is locked and thus the underlying liquidity will forever be in a full price range Uniswap V3 position and will thus be indefinitely accessible via Uniswap and/or DEX aggregators on Ethereum mainnet.
Permanent POL will account for about 35% of Botto DAO’s POL by the end of this proposal’s initial one year implementation.
Amplification of Botto Project’s visibility from the monthly announcements on Botto’s communications/social media channels of LP tokens being locked for the Permanent POL bucket, further reinforcing Botto DAO’s commitment to progressive decentralization and governance minimization.
Increased market confidence and crypto native user acquisition driven by Botto DAO’s consideration of liquidity as a public good vis-a-vis the Permanent POL bucket.
Increased interest from collectors, as entrenched liquidity on Ethereum mainnet vis-a-vis the Permanent POL bucket may further reinforce the provenance of Botto’s minted artwork as originating from the first decentralized autonomous artist built on Ethereum with a liquidity management strategy that is anchored accordingly.
Additional source of ongoing revenue for Botto DAO vis-a-vis the distribution of trading fees in ETH collected from Permanent POL at the end of every period, and the corresponding revitalization of Botto Project's foundational and symbolic burn narrative as linked to accrued trading fees in BOTTO tokens being sent to the zero address.
Uphold the continuity of the 100 VP per round baseline for all accounts per BIP-54, as linked to the total number of LP tokens allocated to Permanent POL over time, thus ensuring the constancy of baseline VP for the ongoing training of Botto by both new and established users.
The proposed burning of trading fees collected in BOTTO tokens as linked to Permanent POL may be viewed as wasteful, though it implicitly returns the associated value to all Botto stakeholders vis-a-vis the reduction of the circulating BOTTO token supply.
Note that unlike the prior burn initiative which ended with the approval of BIP-47, the proposed burning of BOTTO tokens in this proposal would not reduce the treasury's BOTTO holdings, and instead would be directly linked to reducing BOTTO tokens already in circulation. As such, the treasury's BOTTO holdings would not be impacted.
The proposed initiation of Permanent POL will limit Botto DAO’s operational optionality, though the treasury’s holdings are currently sufficient to cover expenditures “for years to come,” not counting any additional revenue the treasury will continue to accrue.
As of August 2024, Botto DAO’s treasury holdings, from which the core team’s operational expenditures are covered per BIP-43, consist of:
407.54 ETH
1,339,280.62 USDC
15,619,603.32 BOTTO
The treasury’s current total POL consisting of 17,215.11 LP tokens is separate from the above holdings, and the portion corresponding to DAO Directed POL as defined under the terms of this proposal would not go below 50% of this present sum.
