Arrakis’ fee seems rather high compared to Gamma. Can we expect to generate more trading fee earning to cover up the cost (at least)?
Question to Gamma:
You suggest to put all the liquidity in one pool (ETH/HOPR 0.3%), which I don’t think is something HOPR DAO is willing to do in a short term.
If we would manage a portion of either DAI/HOPR liquidity (6.8m) or ETH/HOPR liquidity (200k) via Gamma’s platform, which one you would suggest and how much?
Gotcha. It was not so much that we would prefer ETH or DAI, but more so that Arrakis and us do the same pool, so HOPR can utilize the liquidity from both while mitigating counterparty risk. I only suggested ETH because ETH has so many liquidity pools paired with it that it can lead to very efficient routing.
However, given the recent market collapse, it could be a more conservative stance to pair with DAI. DAI has a pretty well capitalized DAI/ETH pool so it would just be only incrementally less efficient than pairing with ETH. But given the stability of DAI, it could be the wiser decision to go with DAI.
Based on the above, perhaps we can have within the vote, the pool that you would more likely want us to manage? Both have their merits in my opinion. With ETH, your more exposed to its volatility, but also its rise. With DAI, you have the conservatism in a volatile market environment.
I think liquidity is mainly your vehicle for token distribution. Having a well capitalized liquidity pool would make it easier for those to buy HOPR and pay to send data through the HOPR network.
Additionally, scaling the depth of HOPR liquidity at the same pace as the demand for the network would make sense from a security & operations standpoint as you would need more HOPR to be bought and staked in the nodes. Lastly, a wide HOPR distribution that caters to small and large investors would make for better governance decisions.
That’s a good question. The main shortcoming that seems to always come up in past proposals are our previous exploits that have occurred with our v1 contracts. What happened in our v1 contracts are that we allowed for public single-sided deposits. For our OHM-ETH pool, an external party took out a flashloan, inflated the price of OHM by purchasing a massive quantity, deposited OHM single-sided into our contracts at the inflated price, received more than his fair share of LP tokens, dumped the OHM token, and drained some amount of the liquidity when withdrawing the LP tokens.
This only affected our one public OHM-ETH pair due to the liquidity position. This affected none of our privately-managed pairs because only the DAOs/DeFi projects have the ability to withdraw and deposit into the private hypervisor contracts.
So our privately managed pairs are safe from this type of attack regardless of whether single-sided deposits are allowed or not.
These public contracts have been audited twice by ConsenSys Diligence and Arbitrary Execution.
This is a great question. We’ve worked with many other DAOs for similar proposals such as FWB DAO, ARCx, Liquity, and THX network. Each were different in their own respect.
With FWB, they were mostly concerned with low sell side liquidity and excessive FWB in their position. They wanted to add more ETH and have that actively managed to stabilize their price from falling too much when ETH liquidity would run out of their position. So we actually managed single-sided ETH liquidity and actively managed that so that we controlled for downside exposure.
ARCx actually had a similar issue in that they did not have much sell side liquidity, in ETH, but were abundant in ARCx. However, they did not want to provide the ETH themselves but wanted to source it via a single-sided range, very similar to Arrakis’ proposal I think. So what we did is we created a single-sided range for them right above the current price. What we learned from them was that it was a bit risky to have thin sell side liquidity, so you need some amount of full range liquidity there so there would be some cushioning if the price were to crater off the edge due to irrational sell pressure. That would allow us to rebalance the single-sided ARCx lower (much like a Dutch auction) so that we are able to eventually find buyers. We eventually got to a stabilized 50/50 liquidity position. The risks with removing a significant portion of the sellside liquidity is that there’s higher price impact on sells. So if the markets were to dump lower, you’d initially have higher price impact on sells and would rely on buyers to buy into your range to source additional DAI. Also, an important note is that, there could be FUD when you reduce sellside liquidity that is already existent. Many members of their discord were aware of the thin sellside liquidity and were hesitant to buy given that they knew that the price had the potential to fall more vigorously in a market downturn.
I would say Liquity and THX Network are similar to HOPR’s situation in which they were not lacking in either side of the liquidity, but want more active management and capital efficiency in their liquidity, so that more funds can be allocated to operations rather than to liquidity. For that reason, I suggested that we concentrate the current DAI/HOPR (or ETH/HOPR) liquidity a bit more to either prepare for higher volumes to come or to take out some liquidity from the position to fund operations, increase runway, etc.
The amount of trading fee that can be generated has something to do with mainly 1) how much volume there is, and 2) how much liquidity is under management. We can certainly catch a lot of the existing volume so that it goes through the liquidity under our management. And the more liquidity is under our management, the more volume we can facilitate, hence more fees to be earned. However, the overall volume trading $HOPR is up to the market demand and not in our control.
I think that AMA went well. Thank you hopr for setting that up and thank you for Gamma and Arrakis for introducing themselves and answering questions. That was very informative and educational. My thoughts are both seems to be very knowledgeable in their field and offer something that can be beneficial. But my question would be is it beneficial for hopr? I am fairly new to Hopr so I’m not sure why the team thought this would be necessary. Seems like both Gamma and Arrakis agreed that hopr had enough and didn’t really need their services. Its possible that being new to hopr that I’m missing important information but just being on the outside and briefly looking inside I wonder why fix something thats not broken? Hopr performed so well during yesterday’s event.
Hey there! Thanks for tuning into the Twitter spaces. And as mentioned on call, this is not necessary, BUT presents an opportunity for optimization of the liquidity. The idea is that you want to place funds where they will be best put to use. Current much of the $7M of liquidity is unused and could be better used elsewhere.
Our strategy was a conservative, auto-rebalancing strategy that would allow HOPR to have the same price impact with 20-30% less liquidity. $7M in my opinion is quite excessive and by concentrating around $5M of liquidity in an automated fashion, we can achieve the same results in a more efficient manner, while preserving $2M to be used by the DAO to pay contributors, increase runway, or just have access to on a rainy day.
Also setting up the infrastructure for liquidity management could pay dividends later when you have more demand for your token, more volumes, and more volatility, we can adjust dynamically either by adding more single-sided liquidity, going narrower/wider on ranges, or implementing a more sensitive rebalance trigger. We would also provide monitoring and updates to the DAO on what would be the right parameters to employ.
Hey bp thanks for the response! I found Gamma to be a little on the suspicious side at first but after reading your responses on the forum and after the AMA I have learned a lot about Gamma and the proposal. You’ve definitely cleared whatever fud I had about Gamma.