That is a huge amount of value in that information. Thank you!
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The current pair HOPR-DAI more than enough.
If you have a an option for fiat to DAI with low withdrawal fees and a smidgeon of Eth you could buy the DAI and bridge it to xDAI for cheap.
should be ok for me
I am not very knowledgeable about this. What you are talking about will lose customers who make small investments?
I am in Gamma for a long time, was even there before they were called Gamma and before the panic made it crash. They are working hard and in it for the long run
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First off, @bp_gamma, your proposal is really well put together, as have been all of your feedback to questions. I enjoyed reading through everything, it covered a lot.
You made very clear what would be Gamma vs Hopr permissioned functions. You have been audited by top notch firms, Consenys always makes me feel better. In conjunction with the restrictions on the liquidity pool itself, in that it will be private, makes this seem like a fairly safe bet. Your argument for a tighter range and preservation of some capital is compelling and insight on the added stability a DAI pairing vs an ETH pairing. Perhaps theres and argument to be made here though w/ how stablecoins have been scrutinized and targeted by regulators given the many failures we have seen in 2022. I tend to lean towards ETH simply because of the timing and potential upside this could provide.
Enough rambling though…my question is: You mention the flexibility to adjust ranges, amount of liquidity, and general strategy/approach. Is that part of what you provide automatically, is in done in tandem with the Hopr team, or does it come back to a DAO usually? My mind goes to tradfi and actively managed funds and I was wondering how much latitude you had as liquidity manager. Also, how real time the reaction would be if tweaking parameters was in the best interest of the position.
Sincere thanks for all of the time you have put in and quality of the input. Clearly you know your stuff!
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Yeah that is true in that DAI is much like a USDC-wrapper, which could be frozen at any time. If some of the USDC were to get frozen that’s within the Maker DAO PSM, it could lead to some DAI being unbacked. However, it’s yet to be seen how regulation could come down on DAI. MakerDAO does seem to be sufficiently decentralized, which does mitigate some risk. However, it does seem like the protocol in general is looking to migrate to Gnosis Chain which does utilize xDAI as a gas token. So perhaps this risk would be amenable to the DAO? I can understand the risks inherent with either DAI or USDC.
That’s a good question. There are certainly actions that we for sure cannot take unilaterally, such as adding more or taking out liquidity. That would necessarily be a decision that would be made by the Hopr team, but we would provide guidance and recommendations on that.
The current proposal is one to automate ranges based on back testing data. Typically, the data shouldn’t change the parameters materially from the original proposal. For minor adjustments to ranges and reset triggers, we can adjust on the fly every two weeks or so, but very likely the parameters would not change. If it is the case that the optimal parameters do change materially, we would notify the team in real time. Typically, this is more for projects that initially start with a lot of volatility due to an airdrop, or a project that deals with certain external events such as an exploit or major bullish/bearish news that would mandate widening the liquidity ranges, we would most certainly speak with the team first about that. Some times these actions can be taken prospectively where the team would have some knowledge on potentially volatility-inducing events, and we could help teams proactively handle those situations ahead of time.
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Many thanks for the proposal and clarifications over the last few days.
Given HOPR is on the xDai chain and whilst ETH fees currently are at All Time Lows, as this is a longer term project we could be transacting when ETH fees are sky high again. Why not carry out transactions on the xDai chain until the ability to directly transfer on the Gnosis chain is available. Sorry if this is a newbie question as not fully up to speed on the technical aspects.
Also I asked the next two questions on the other proposal so would be interested to hear your own thoughts.
Can you advise what steps you have in place to control Impairment Losses in the liquidity pool given its between two assets. Thorswap provides IL protection after 100 days so its not an issue after this period and keeps the funds safe moving forward.
Also when your system is balancing the ratio, how is this processed and whats the advantages / disadvantages on token price as you buy / sell the native token.
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Good proposal.
So currently due to the Nomad hack, there have been delays in bringing Uniswap to xDai (Gnosis Chain). I believe that may be happening soon however. I’ll have to check in with my contact at Gnosis Chain. But our strategy is not a strategy that is aimed to rebalance too often, so it likely wouldn’t incur too much gas costs.
We run optimization scripts that will optimize for liquidity ranges and rebalance triggers that result in the lowest IL for the pool. We would continually run those and provide the results to the team.
Upon each rebalance, the range will dictate a new range and allocation of assets. We’ll place as many assets into the base position, and for any remaining assets, we’ll place a single-sided limit position. Given the width of the ranges that we’re using, the allocation of assets will most likely stay pretty close to 50/50.
The result on token price is a good question. Some of the things that we’re optimizing for can be at odds with other things that we’re optimizing for. For example, if we’re optimizing for price impact, we may suffer greater impermanent loss and less upward/downward price movement. If we’re optimizing for impermanent loss, we could be suffering greater price impact as wider ranges do have less impermanent loss.
Given that price impact is not much of an issue at the moment, I think optimizing for impermanent loss might be the way to go. Concentrating the ranges, even slightly, would only make price impact better than what it is currently.
Many thanks Brian thats a very comprehensive response and something that the DAO can review and discuss to help our decision. Have a great rest of whats left of Sunday
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Thank you! Have a great Sunday as well!
“A secondary reason for choosing ETH is that ETH has come down quite significantly from its all time highs, so pairing with ETH could potentially lead to less downside risk from the price of ETH falling.”
Right now this make sense, however once the next bull run starts and it peaks, do guys actively consider shifting liquidity pairs in to a stable coin to eliminated the downside risk?
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So while possible and given that our vaults are noncustodial, the DAO would have to withdraw the funds, make the requisite swaps, and deposit into a new position manager contract. Our position manager contracts are specific to a pair. So while we can actively manage ranges, we cannot swap into other assets or manage assets outside of the specified LP pair.
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Although Gamma cannot transfer assets, it is possible to adjust ranges to push trade on another pair correct?
Such as dispersing liquidity ranges on ETH to manipulate the algorithm to point Unsiswap users to the DAI pair.
Yeah would have to think through that, but yes, that would be possible via price impact control through range management. The Uni autorouter will just route trades where price impact is lowest. I am not exactly sure whether that would be the most optimal outcome. I am still of the belief that we should choose either DAI or ETH, but not both.
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One thing I have noticed as a recurring theme throughout defi in general is how far everything still needs to come in its evolution before the risk of the "unknown’ could be considered sufficiently minimized. Even then, though, things just happen. Kind of to be expected, it’s still so young. Hopefully as we progress, the benefits of “trustless” start to avail themselves to a larger audience. Things like the 2008 housing crisis, a synthetic, human made crisis, is a good example of why I am very drawn to this space, in addition to what I am doing right now. No one from Bank of America wants my input on liquidity policy and management, but a DAO lets me join in the fun.
Again I am rambling. What I was hoping to hear was what you spoke to a bit, in that there IS some function of “rapid reaction” that can occur, although this does NOT apply to any functions that could be considered security risks for the protocol. I am no expert, and my basic understanding of the risks of outsourcing this management have been addressed. Hopr could do a lot of this management themselves, but to be tasked with constant monitoring, rapid, real time response to events (if needed), and staying up to date with the landscape (ie updates, changes, urgent events related to Uniswap or DEXs as a whole) is time they, and we as the community, would rather have them spend on building the tech and community. The ability to adapt to that “unknown” seems like it could be listed in the “pro” column for employing an entity like Gamma.
Thanks @bp_gamma
Good idea
Yes, that is correct, although I would caution against doing too much rapid reaction as well. During the most volatile times, rebalances may not go thru due to price changes and the need to use Flashbots and/or other MEV protection. For that reason, we chose very wide, conservative ranges, so when prices move quickly, another rebalance will be triggered immediately after without much risk taken. The nature of our rebalances are atomic so that unless the liquidity can be rebalanced completely, the transaction will not go thru. So strategies that naturally rely on frequent rebalancing do not fare on well on Mainnet due to these technical issues. During our trial and error period, we’ve attempted this and found poor results when trying to be too responsive on Mainnet. Conservative strategies tend to work best on Mainnet.
These types of fast rebalancing strategies are really only suitable to a fast L2 like Gnosis Chain, Arbitrum or Optimism, currently. Even Polygon can get extremely gas intensive and difficult to get transactions in on their busy days.
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