Liquidity Community Call

29 July 2021

⏰ We start at 2 minutes after the hour ⏰ 🚨 This meeting is being recorded 🚨

Mission: We’re on a mission to make crypto investing simple, accessible, and safe for everyone.

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How do we do that? We focus on 3 core pillars

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• Product growth: Our products must provide deep value to users & distribution must be a core competency.

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• Community autonomy: Empower contributors of different commitment levels to produce impact for Index Coop stakeholders

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• Protocol sustainability: Ensure the Coop is built to last. This is done through treasury management, value capture, governance, and product + growth + community.

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Index Coop Mission & Strategy

Principles

• We work together towards shared goals: Contributors feel progress is being made together, and they are rewarded for it.

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• We’re on an never ending journey of growth & improvement: Contributors feel they can be additive in improving the current process

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• We foster a sense of belonging: Contributors feel like they are part of something they are proud/passionate about

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• We foster a sense of safety: Contributors feel they can communicate openly w/o judgment and/or personal remarks

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• We interact with empathy: Community members feel heard; Community members feel their concerns are taken into consideration during decision-making

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If at any point, we stray from these principles, please send feedback and we will endeavour to adjust

Call Technicalities & Agenda

Technicalities

• Please stay muted unless you’re speaking.
• We will use the +1 system to initiate speaking
• This meeting is timeboxed to 1 hour - further discussion can go in the Discord or continued with the epic owner

Purpose: To discuss the priorities for the Product working Group

Agenda

• Introduction
• Individual product review
• ETH2-FLI
• BTC2-FLI
• BED
• MVI
• DPI
• Polygon
• V3 Staking
• Delegated liquidity
• Next steps

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Liquidity

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ETH2-FLI

Compared to June:

• Liquidity has grown in both v2 and v3
• V3 is taking AUM and volume share

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> $100,000 to move price 1%

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No liquidity rewards at the moment

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Notes

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BTC2-FLI

Compared to June:

• Liquidity has grown in $,
• but reduced in BTC2 and ETH terms
• Trade volume increased (spot check)

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> $20,000 to move price 1%

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$SUSHI Onsen rewards at the moment

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Notes

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Direct BED liquidity Provision

• BanklessDAO / community have deployed $1.3 m
• Nice overall profile with >11 ETH to get 1% price impact
• Delay in getting Multi-sig set up.
• Now need to get funded and deploy test capital.
• Then deploy full assets

• As there is plenty of liquidity coop priority can be modified:
• Wider
• Less management
• Proof of concept / build systems

Notes

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MVI liquidity

• Pool AUM has recovered to $5.4 M
• This is a function of price and increased LP tokens
• Volume also looking better

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MVI liquidity

• Current pool allows ~ $19,000 trade for 1% price impact.

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• Arbitrage costs ~ $180 at 50 gwei and $2,000
• Estimated to keep price within 2% of NAV.

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• INDEX makes up a large part of LP income

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• Very small v3 pool

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MVI liquidity

MVI dominates competitors in both AUM and liquidity

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Current liquidity campaign is 3,286 INDEX over 30 days

• ~ $82,000 @ $25
• ~ $2,500 per day

Notes

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DPI liquidity AUM

DPI has multiple pools with AUM > $1 M

• v2 $28 m
• Sushi $ 5 m
• Balancer $ 5 m (inc wBTC)
• v3 $ 2 m

DPI liquidity v3

• V3 liquidity has been in place for ~ 2 months.
• Trade volume varies (as does v2)
• Not fully symmetrical
• > $25,000 trade for < 1% price impact

DPI Trade Depth

• All 4 pools allow trades > $17,000 with less than 1% price impact.
• Combined trade size for 1% price impact is > $180,000

DPI Trade share

• V2 Captures the majority of trade, but v3 and Sushi have strong days

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Note balancer pool includes wBTC, so trade could be ETH <> wBTC

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DPI Liquidity

• Aggregators can access additional stable coin pools ($220,000 trade has 20% in v2 pool)

DPI LP Income

• LP’s are earning a minimum of 14% annualised from fees and rewards

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Note v3 fees may be higher or lower than average.

DPI Costs and competitors

DPI dominates AUM, and Liquidity

• BDI is 2nd on AUM and liquidity
• DeFi 5 is 2nd on volume

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Current liquidity mining 12,578 INDEX over 30 days

• ~ 315,00 @ $25
• ~ 10,500 per day

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Notes

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DPI liquidity

Notes

• New Sushi pools coming soon - Concentrated option.

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Polygon

Owner:

Polygon Liquidity

@

• Bridge to polygon is open for all products
• Liquidity pools created on sushi
• More extrinsic uses available once we have liquidity on polygon
• DeFin (?) and Quickswap - want to support.
• Trying to build with Sushi.
• Need to move liquidity.
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• Liquidity mining rewards available once we pass $1 M liquidity (per product basis)
• Yield vault- jar to farm LP pair - DPI first.
• QI finance - Maker fork collateral for MAI -DPI easiest.
• Liquidity and oracle dependent.

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V3 Staking contracts

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Owners:

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Considerations on v3

@OverAnalyser

• V3 is not easy
• “No-one will get average”
• v3 staking contracts have not been battle tested - Potential Uniswap LM campaign
• Do we want to incentivise people to get rekt?
• Need to communicate risks and options for LP’s:
• Migrate to v3 - Wide -passive
• Migrate to v3 - Focused - Active
• Stop being an LP, and use the ETH and DPI in other ways (Collateral / yield for 100% ETH)
• Stay in v2 pool - expect volume to drop, but some trade will remain
• Possibly do an assessment for other pools for DeFi tokens with v2 and v3 pools.
• Benefits from not being a taxable event in some countries
• Move to Sushiswap Onsen
• Move to polygon Sushiswap
• Move to Balancer (L1 or L2)
• Wait for automated manager pool for DPI:ETH

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Sampling Liquidity on Uni V3

@afromac

Automating the Risk Parameters requires us to define a method for sampling liquidity on each DEX.

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Available liquidity is an input to the model, but fluctuates with changing conditions.

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This is easy to estimate on Uni V2 and Sushiswap, but more complicated on Uni V3

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Sampling Liquidity on Uni V3

@afromac

Uni V3 can be inconsistent but when it works it is phenomenal.

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Mean price impact on trades over 800 ETH is only 0.63%.

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Trade can revert to Sushi and Uni V2 when liquidity conditions are not optimal.

Can leveraging this tech be turned into a product?

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A token acts as a claim on an actively (algo) managed Uni V3 position - (DPI:ETH)

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Makes V3 accessible to smaller traders and incentivizes liquidity to positions we want to maintain

Notes on v3

@OverAnalyser

Eng position

• 2 months staking proposal in forum
• EWG have spent lots of tiem working on it
• No pools live using v3 staking
• Have done smart contract work
• Have designers from codematics.
• To start pool - multisig + UI work.

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• Not that friendly for user flow.

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Q How confident are we - quite safe - Uniswap team + audit.

• UI just stake and withdraws

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Delegated management

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Leaders: OA

Delegated Liquidity Management

@OverAnalyser

Draft proposal for dedicated group looking at overall management of Liquidity (mining and direct provision).

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Timing

• OA to Blog experience on MVI:ETH ✅
• Proposal issued following IIP-53 pass ✅
• Discuss and monitor BED:ETH on v3 ✅
• OA presenting liquidity observations and comment for each product.
• Community call on Thursday.
• IIP early August
• DPI and MVI liquidity mining campaign ends ~ 12 August.

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Notes in call

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Next steps

Owner:

Timings

@OverAnalyser

Current Liquidity Mining on DPI and MVI ends 13th August

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1. Share research ✅
2. Community call ✅
1. Agree a plan
3. Propose any IIP’s (Ideally by friday 30th)
• Votes w/c 2nd August (Ideally Mon to Weds)
4. Deploy INDEX rewards / staking contracts before 13th

Liquidity Costs comparison

@OverAnalyser

Notes

@OverAnalyser

• Cut v2 on DPI, incentivise v3, Direct provision to Polygon. MVI reduce ? Nothing on FLI.
• Trident in september - Mainet or polygon.
• MVI wait for Trident?
• Maintain MVI in 1 place - don’t split. Good to build
• Cut DPI v2, Incentivise v3
• Turning off v2, v3 will grow. Volume moves Liquidity follows.
• v3 staking gives momentum and narrative.
• MVI is at a different stage. Stay on v2 for a month.
• Less than 30 days needed a new contract - people would need to unstake and restake.
• Direct provision BED:ETH to DPI:ETH on v3. After september.

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v3 gives a basic oracle

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Risks

@All

Actions

@OverAnalyser

Other Topics

Speaker: Open Discussion

Open Forum (If Time)

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Archive

• DONT: forget to stop the video

Archive

• 0.9% AUM
• 1.7% fees
• 1.9 ratio

Archive

• DONT: forget to stop the video