[HOPR] Proposal - Both providers on a level playing field for a 3 (or 6) month trial period

If I understand this issue correctly our two aims in this question are:

  1. To have the best possible liquidity on uniswap v3
  2. To best preserve/grow our currently available liquidity

Some commenters have expressed a preference for a level playing field between the two external liquidity managers (ELM), this simple proposal is aimed at them.

Give both of the 2 ELMs 20%* of our total available liquidity to manage in the best way they see fit for a 3 month period, while managing the remaining 60% liquidity as per the status quo.

At the end of that period, we analyse the data to discover which strategy has worked best, it may well be that due to the nature of DEXs that they will be complimentary to each other, but their LP sizes etc (after fees) should show which ELM strategy best meets the above aims.

At the end of the trial we can decide to continue, stop or increase the liquidity under management for each ELM.

*If the community feel this is too high, it can be reduced as desired, the main point is that both start with the same amount of liquidity under management.

If this proposal makes it to voting, we could offer it at multiple lengths of trial and amounts of liquidity.

**We need to bear in mind that if we wish to end the trial at the 3 or 6 month point Arrakis will still charge us for a full year’s management fee.

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I think this proposal is better than the original ones with the % adjusted and also keeps the risk for the DAO at a decent level

I’m on the AMA with the two providers right now, and if I heard them correctly, Gamma actually suggested they would be willing to do a split with Arrakis provided they both were managing the same pair. I think what @MonkeyTennis proposed is the ideal outcome here:

  1. Arrakis is better known and is currently managing more liquidity. However, they are also charging a premium. %1 of the assets under management and 50% of trading fees.
  2. Gamma isn’t as well known but is only charging 15% of swap fees plus gas fees. From the AMA, I also get the impression that they’ve done a decent amount of research and are recommending what they think is in the best interest of the DAO. (They also said that we really don’t need to use either provider, because we’re doing fine as is. I appreciated that honesty.)

We need an apples-to-apples comparison.

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Thanks for refining the proposal.

Although the market will ultimately determine where things happen, are these our benchmarks?:

  1. Total fee cost over funds at completion of the trial
  2. Market price target/no target with ranges
  3. or ?

Also for consideration: We should have an audit of each proposal’s term activity, if this proposal does move forward, to make sure what is being presented throughout is actually done as described to not skew the data. Being that this ultimately is a business agreement and the best way to keep things valid is to verify and inspect the inputs and modifiers.

How about 500k each on DAI/HOPR? 20% seems quite a lot for the trial. (Arrakis min. amount is 100k)

Now I’m wondering how the Arrakis yearly 1% on AUM would be dealt if the term is only 3 months.
@barbarossa_Arrakis Would you be charging the same 1% on AUM even if the term is shorter than a year or would it be adjusted according to the term?

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should not be charged during testing

I’m all for this trial but have a few questions.

Would 3 months be enough time?

Wouldn’t the results be determined on how much activity would be happening on chain? If there is a quiet period during the trial would that not reflect poorly on both teams results?

Also would the trial put the liquidity at risk? As it may force both providers to take larger risks to outperform one another.

Whilst I’m sympathetic to this viewpoint, it would only be a ‘test’ on our side, for the manager, it is their work we are employing them to do. They are incurring costs and are justified to charge for them.

@satopin If they were not willing to charge this pro-rata, then I think we should say thanks and goodbye.

As far as 500k each goes that works for me. If this proposal makes it to a vote, we could include choosing the amount in that process.

@SpeedTickets.4Nodes Do you mean price target for the hopr token? - I don’t believe the managers can reach a set target, just weather market conditions as well as possible. the market will decide our price. Though I think it’s worth noting that we did well this week because of the vast majority of the liquidity being in hopr/dai.

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Yup, I agree with this notion. Keep in mind, the liquidity ranges presented in our strategy was mainly for the ETH/HOPR pool. I think I would change that to the DAI/HOPR pool now given the recent crypto market volatility. But given that’s changed, we would run another optimization analysis to see what the right ranges would be for the DAI/HOPR pair. I’ve outlined pros/cons in this post here: Introducing Gamma and Arrakis - #52 by bp_gamma

But everything else in our proposal, such as business terms, would all remain the same. We’d be happy to walk you thru how best to read our smart contracts as well.

It could just be relative performance to the other competitor and the full range position on a % increase or % decrease basis of the liquidity position. And we can control for a certain span of time.

Just speaking from the Gamma side, all our rebalances will be deterministic. We specify the ranges and the reset triggers that will trigger a rebalance. All our rebalance events are emitted on chain as well. So there would be transparent oversight whether Gamma is straying from its intended strategy.

Been seeing this a lot, and I think there’s some confusion about what constitutes good performance. Perhaps it’s a set of factors we care about such as:

  1. Minimizing impermanent loss and preserving the liquidity position
  2. Good price impact - making sure it isn’t too low or high based on current volumes
  3. Risk management & execution - how did each manager do in terms of managing risk and executing their strategy?

I think all three are pretty important.

3 Likes

Awesome. Thanks for being so quick and detailed with responses!

should not be charged during testing
I think so

Again, your detailed and thought out responses are great.

I agree with your Key Performance Indicators.

As for an audit, a report and records related to balance and fee activity every two weeks would be sufficient to cross check with Uniswap’s metrics I think.

arrakis aka g-uni and gamma are both really good … we could have a look at xTk aka xToken to make it a triade!

Please see my comments on the initial splitting proposal which I have just posted. I think we need to give them a minimum of 6 months and let them use the chains they are most successful with as noted in their proposals. I have one concern though that the ETH pair gas fees will be higher that the DAI fees (if I understand it correctly) so that could skew the results.

Probably this is the best proposal between “50/50” and just status quo. I’ll vote for it.

But the question is - will three months be enough to see some important results?

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So, the Arrakis proposal is basically for 1 year according their reply;

“Our launch partner program is for 1 year term.”

My interpolation of this is “DAO can withdraw the fund anytime before the 1 year term finishes if DAO wishes, though, “Management fee: 1% of AUM” will be charged”.

If they are not willing to pro-rata their 1% of AUM for the period of the trial, that would be a deal-breaker for me

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I think we should not look at this proposal through the lens of liquidity efficiency (pnl), but rather safety. We never know what can happen in crypto. There are inherent risks in giving control over our funds to a third-party protocol.
Therefore I think that whichever the result pnl of the experiment, we should stick to 20%/50% to them and handle the rest ourselves accordingly to our status quo.

I hope this idea will be voted on, i would like to see how the management of each candidate will work. In addition, some diversification is not bad.

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Arrakis has just confirmed that you are correct here @satopin. Including them in this trial could prove to be very expensive, if we end the relationship after 3 or 6 months.

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