The initial liquidity composition will be decided by HOPR governance.
In order to provide HOPR community more context and details regarding liquidity management in general and specifically from Arrakis, please have a listen to one of the latest AMAs we had.
Arrakis AMA 04/Nov/22
Join the Arrakis Finance Genesis House and use Arrakis PALM on Uniswap V3.
Arrakis Finance is a liquidity management protocol that helps project tokens bootstrap deep and sustainable liquidity in the most cost-effective way.
Since launch, Arrakis has achieved
$1.3 billion in TVL across Ethereum, Optimism and Polygon
25% Uniswap V3 total TVL
80 projects have their liquidity managed via Arrakis vaults
Arrakis PALM - Protocol Automated Liquidity Management - is a service that consists of a suite of liquidity management strategies researched and developed by Arrakis Core strategists (Bene Gesserit). It aims to help projects bootstrap and maintain sustainable and deep liquidity.
By leveraging the concentrated liquidity nature of Uniswap V3 and the hyper flexibility made possible by Arrakis infrastructure, PALM is able to create market making experience that resembles Central Limit Order Book (CLOB), and help projects
- Bootstrap liquidity by acquiring more base asset inventory. For instance, HOPR can seed the liquidity with an initial composition of 95HOPR/5DAI (or any other base asset). PALM’s bootstrapping strategies will progressively balance it towards 50/50. HOPR can now allocate more of its base assets to building the core products instead of liquidity provision.
- Execute market making strategies in a cost-effective, transparent and automated manner, to ensure deep and sustainable liquidity. After reaching a healthy liquidity composition, PALM will shift the focus to actively managing multiple concentrated ranges around the current price, to minimize slippage and sufficiently support ongoing trading activities.
Arrakis manages liquidity via Arrakis vaults, which tokenize liquidity positions originally represented as NFTs in Uniswap V3, hence making them fungible, composable, and able to be easily integrated into any protocol.
What is the Arrakis Finance Genesis House?
The Genesis House is the launch partner program Arrakis has set up for Arrakis PALM. A select group of projects can participate and be the first to use PALM.
There has been ongoing discussion between Arrakis and HOPR teams regarding how Arrakis can best support HOPR to improve its capital efficiency and strengthen its liquidity on Uniswap. And both teams concluded that using the services from Arrakis by participating in the Genesis House would bring the most and best benefits to HOPR, which means that HOPR would achieve deep liquidity much sustainably, co-marketing via the Arrakis Genesis House would bring more eyes to HOPR, and on top of all that, we would take part in new novel technological experiments.
In terms of security, the contracts are undergoing audits right now and no liquidity will be deployed until audits are successfully completed. In addition, there will be a whitelist for the smart contract- only the HOPR multisig address will be able to interact with it.
Currently, the liquidity situation for $HOPR can be summarized as below:
As indicated from the table, even though with rather abundant liquidity compared with many other protocols, there is still a slippage of 2% for just a $100k worth swap, which is a clear indicator that there is significant room for $HOPR liquidity management to be optimized.
Therefore, we as Arrakis propose to provide HOPR with the full spectrum of liquidity management services on Uniswap V3 with PALM, to create deep and sustainable liquidity for $HOPR without the need of any liquidity incentives.
Depending on the liquidity situation of $HOPR at the time of the service being initiated, in general, the liquidity management will be conducted in 3 phases:
Phase 1 - Accumulation of base asset
HOPR deposits minimum $100k worth initial liquidity into an Arrakis managed vault, with an asset composition ratio decided by HOPR governance. The underlying strategy PALM will focus on the accumulation of the base asset if the initial liquidity consists of more $HOPR.
Phase 2 - Redefinition of liquidity ratio
Once there is sufficient base asset accumulated in the vault, HOPR can request to redefine the liquidity ratio of HOPR/base asset based on its own then-current market outlook, and Arrakis will adjust PALM accordingly to achieve and maintain the newly defined ratio. HOPR also has the option to dedicate such decision makings to a market maker, e.g. Arrakis.
Phase 3 - Growth & Expansion
More liquidity will be needed with the growth of both the trading volume and the demand for $HOPR to be tradable on other DEXs or networks. Arrakis will help HOPR manage liquidity both vertically, i.e. maintain a deep and sustainable liquidity pool with more inventory from HOPR to accommodate the increasing trading demand, and horizontally, i.e. seamlessly manage liquidity in all avenues by automatic rebalancing and arbitrage among them, therefore unifying isolated markets and fragmented liquidity into an efficient cross-DEX and cross-chain liquid market.
For the services provided, Arrakis charges fees on two fronts on a yearly basis:
- Management fee: 1% of AUM
- Performance fee: 50% of trading fees generated
- Arrakis will effectively become the liquidity management arm of HOPR and use its domain expertise to provide dedicated liquidity management solutions, while the HOPR core team can save the technical & operational overhead and focus its resources on building HOPR.
- Only a limited amount of initial base asset inventory (or possibly 0 if there is already an existing market on Uniswap V3) is needed for Arrakis PALM.
- Arrakis’ liquidity management solutions will significantly improve the current liquidity situation of $HOPR, and at the same time eliminate the need of liquidity incentive, hence preserving the value of HOPR from constant selling pressure by mercenary LPs otherwise.
- Arrakis will also assist and advise on any market making related decision makings, and the future growth & expansion of HOPR liquidity, to provide a full spectrum of liquidity management services.
First a poll for temp check