Token Liquidity Program

Suggestions
#1

Summary: Seed liquidity improvement program using community token allocation. Use either Balancer’s Liquidity Bootstrapping Pool or Balancer’s 80/20 pool to begin taking advantage of veBAL incentives. This is the first proposed step in a long-term program to increase token liquidity and add utility to ALK token.

Abstract: Balancer’s recently launched veBAL allows 3rd party projects to benefit from BAL token liquidity and protocol, by incentivizing liquidity providers with BAL emissions. Balancer offers liquidity pool products focused on bootstrapping token liquidity and IL mitigation, which are able to be staked in the Balancer gauge, and in return earn BAL emissions.

In conjunction with a coordinated effort to gain Balancer community support, allocating DAO assets to (i) seed one of the aforementioned pools with WETH and ALK and (ii) further incentivize LPs to stake Balancer WETH/ALK LP tokens in the Balancer gage, would be a strong first step towards enhancing ALK token liquidity and utility.

Milestones would be as follows:

  1. DAO to seed 80% ALK/20% WETH in respective Balancer liquidity pool
  2. stake DAO LP token in Balancer Gauge
  3. DAO to establish a small amount of veBAL and direct emissions to ALK pool
  4. engage Balancer community discord to support and vote for ALK pool
  5. discuss and possibly incentivize voting for ALK pool using [REDACTED] Hidden Hand

Benefits to using Balancer over Uniswap, Sushi, or Curve include (i) simpler IL mitigation, (ii) Balancer has pools designed for bootstrapping token liquidity for non-highly correlated assets, (iii) lower relative demand for veBAL support when compared to current Curve/Convex market dynamics.

As a first step to improving ALK token liquidity and utility, this seems to be a solution offering a great value for the time required to initiate.

5 Likes
#2

This looks like a great idea. @McWaterCap do you have any specific suggestions for a) the amount to seed the pool with to make it an attractive option and b) a reasonable amount of veBal to establish (per your point 3)?

Also, what are best ways to incentivize the Balancer community? A part of your point 5 is redacted so not sure what you meant by that point.

Finally, are there any risks worth mentioning?

#3

@engin
Seeding a pool with appx $1MM US ($200K WETH, $800K ALK) would be a solid starting point, where the equivalent of a $10K trade wouldn’t have too large slippage impact on token supportive transactions. Further, IL on ALK would be mitigated by almost half in an 80/20 pool vs a 50/50 pool. Seeding the pool could start smaller in size as well, with the goal of gaining additional LPs.

Approximately $75-100K in veBAL should provide for a meaningful start with attractive rates to incentivize additional LPs to join the pool. I’ll reach out to Balancer to involve them in this overall discussion.

Per my comment above, ‘Redacted Cartel’ has a new marketplace called ‘Hidden Hand’, whereby DAOs can incentivize veBAL voters to allocate BAL emissions towards certain liquidity pools. This marketplace is akin to votium, votemak, etc.

Primary risks include those standard to providing capital to an automated market making pool. Impermanent Loss risk would be significantly lower in a Balancer 80/20 pool than compared to a 50/50 pool. Added risk would include market risk of the veBAL staked.

1 Like
#4

Jared here and I run Balancer Labs Biz Dev. I’m happy to help be a guide to the Alkemi community and ensure this proposal gets the proper visibility internally. I’m also more than happy to answer any questions related to the proposal.

The benefits of the Balancer pool design space enumerated are spot on. An 80/20 pool is a great tool to acquire early-stage liquidity especially when further incentives are layered on top. The structure can help acquire/retain LPs that are focused on reserving their upside, limiting IL and earning a yield. As @McWaterCap mentions, the trade-off is price impact.

For reference, this is the link for getting gauges approved - standard template that I can help with - BAL Gauges - Balancer

4 Likes
#5

@Gooseisloose
Appreciate any shepherding in building liquidity and engaging the Balancer community!

1 Like