Split proposal specifics: What amount of assets?

HOPR DAO v0.5
1

This thread is for discussing the TOTAL amount of assets which should be allocated to Arrakis and Gamma to manage, assuming both are awarded a trial to manage the DAO’s liquidity.

For more context, see these threads:

Discussion Phase Extension
Some Important Context

Things to consider might include:

  • Risks
  • Rewards
  • Minimum amounts needed to be effective

This discussion is intended for people who think this amount should be greater than zero. If you don’t think either project should be chosen, you’ll have the opportunity to support this preference elsewhere.

What percentage of the HOPR DAO’s liquidity should be allocated to this experiment?
  • Less than 5%
  • 5%
  • 10%
  • 15%
  • 20%
  • 25%
  • 30%
  • 35%
  • 40%
  • 45%
  • 50%
  • Over 50%

0 voters

9 Likes
2

Do we have any indication from the protocols at what level it does not make sense or if there is a minimum amount of funds that it becomes viable?

3

Not directly an answer to this question, but I believe Arrakis have a $100k minimum buy-in (reduced from their standard buy-in).

I will contact the two teams to see what their input is here.

1 Like
4

For even more context, the DAO currently controls over $6m in its HOPR-DAI pool. So the poll options would translate to roughly:

Percent Amount
5% $300k
10% $600k
15% $900k
20% $1.2m
25% $1.5m
30% $1.8m
35% $2.1m
40% $2.4m
45% $2.7m
50% $3m
3 Likes
5

Good to know info, I’d been thinking 40% ($2.4m) so 20% to each manager but seeing this it’d be waaaaaaay too much overkill given the running Uniswap trade volume is $8K USD.

10% @ $300K of assets to each manager is reasonable.

6

I think it would be useful to get some input from the proposers themselves on this topic. I understand the volume is currently low, but I would think we would want to leave headroom with an eye towards a reasonable price impact so as not to overly dissuade people from using the pool. More importantly, what do these teams think is the minimum amount needed to be effective? And what is effective?

I would think 2 metrics for “success” would be:
-Trading fees accrued (measured in way that controls for variations in fiat value)
-Trading volume

@bp_gamma attached a spreadsheet that mocked up price impact based off of $5million in assets, if I interpreted that right. They also mentioned tightening up the ranges can mimic a deeper pool with wider ranges. We would probably incur more fees in that scenario given the need to rebalance more frequently(?), but need less total liquidity in the pool. Just dont want to spread it too thin between the two if thats the plan.

So, 1. What would be too little to give these protocols a fair shake?
2. Would should the parameters then be to make the biggest impact?

7

A couple things to note here:

1.) Splitting the liquidity to Gamma and Arrakis will not by itself lead to more fees overall. Given that the main liquidity provider (HOPR DAO) does not change, your overall share of the fees will still be 100% given that the DAO is the sole liquidity provider. However, to the extent that that volumes increase as a result of lowered price impact, then trading fees accrued could increase.

2.) Using fees earned as a metric to compare both managers can lead to unintended outcomes. The more concentrated your position, the more you will earn in fees, but also the greater impermanent loss you will suffer.

Given that both Gamma and Arrakis both mint ERC-20 LP tokens to the DAO, one can calculate the pricePerShare of each of their LP tokens, and see which has a greater increase over time. By tracking the value of each LP token, one can see whether the net liquidity position, inclusive of fees and impermanent loss is doing better.

2 Likes
8

10% good

9

My vote is not more then 10% of HOPR DAO’s liquidity for trial period.
This number could be increased later on once DAO will see effiency of provided services.

10

This is great information