[AGIP 110] Lend 600k GHST to improve liquidity and orderbooks on major CEXs

Author: Jesse | gldnXross#6482 GotchiID: 4563 Quorum requirement: 20% (9M) Vote duration: 14 days XP Reward: 20 XP for each Aavegotchi in the voter’s wallet Discourse Thread: https://discord.com/channels/732491344970383370/1180534503828111471

New:

Please note the new specific KPIs and repayment strike prices documented in part 1 of the “Solution” section.

BACKGROUND

When the GHST Bonding Curve closed in early 2023, our governance token lost its deepest liquidity pool (paired with DAI). To prepare for the coming loss of this GHST/DAI pool, Pixelcraft Studios took it upon themselves to lend a total of 300k GHST to Skynet Trading, a liquidity solutions company, to bolster liquidity on major exchanges such as Binance and Coinbase. Skynet Trading has successfully fulfilled its role as a market maker for GHST throughout 2023, consistently maintaining the most liquidity for GHST on Coinbase. The loans that made this possible will soon expire but Skynet Trading is open to continuing to support GHST initiatives. I believe any future collaboration is something better suited to be executed by AavegotchiDAO. Proposal With the first year viewed as a sort of due diligence, I am now proposing that AavegotchiDAO replace Pixelcraft Studios with new loans to Skynet Trading, beginning with 600k GHST for 12 months explicitly to improve GHST’s liquidity on more centralized exchanges.

Skynet Trading is dedicated to providing trading services that aim to reduce slippage by narrowing spreads, increase the accessibility of GHST by focusing on spread and depth key performance indicators, encourage organic trading through the development of attractive order books, and minimize the impact of large market orders. Whereas last year’s focus was primarily on Coinbase, a 600k-sized loan makes it possible for Skynet Trading to also provide liquidity on Binance, OKX, and HTX respectively.

The Problem: Poor liquidity on CEXs.

This screenshot from coinmarketcap (Feb 9, 2024) illustrates the poor liquidity of GHST on exchanges. Most GHST pairs suffer from significantly thin books. This means GHST is inaccessible to people seeking medium to large allocations on most exchanges. Working with Skynet to improve liquidity across exchanges is a strategic move to foster a better trading environment for all participants interested in GHST tokens. Solution:

PART I: Loan Terms and Goals

This proposal is for AavegotchiDAO to lend 600k GHST to Skynet Trading for a 12 month term. The loaned GHST shall be used as liquidity provisions across four exchanges: Coinbase, Binance, OKX, and Huobi. Skynet Trading’s terms impose no retainer fee, no setup fee, or trading fees. Newly Published KPIs and Strike Price Formula: Tight spreads: No greater than 50 bps. Deep order books: Minimum of 25 orders on both sides of the book. 10k USDT across Repayment strike price: -300k tokens @TWAP7 from start -150k tokens @TWAP7 from 3 months into the agreement -150k tokens @TWAP7 from 6 months into the agreement

• The exact strike price formula was not included in the Sigprop but are now revealed per requests from DAO members and Skynet obliged. I can confirm the team has agreed to add the 3 and 6 month out terms in light of our concerns about frontloading all strike prices near the beginning of this potentially bullish year. At the end of the 12 month term, Skynet Trading will have the option to A) return the 600k GHST to AavegotchiDAO or B) purchase the GHST at the strike prices as defined in this proposal.

PART II: Responsibilities

The second part of this proposal defines the relationship between AavegotchiDAO and Skynet Trading and who executes which responsibilities. The solution offered is the creation of a Liquidity Management Task Force (LMTF). The Signer shall be a current director from Aavegotchi DAO Foundation willing to sign the contract between Skynet Lending and the Aavegotchi DAO Foundation. The Signer must be willing to KYC by providing liveness check and passport scans. The Primary Point of Contact (PPC) shall be the leadership team at Pixelcraft Studios. They shall continue to maintain daily contact between the two main parties and always advocate for the best interests of AavegotchiDAO and the spirit of this proposal. There is an existing communication channel between Pixelcraft Studios and Skynet Lending that will continue to serve as the main comms channel throughout this contract’s term. The PPC shall attend weekly DAO meetings when summoned and answer any questions raised by DAO members at those meetings. The PPC role can be transferred from Pixelcraft leadership to another party at any time via a DAO Role Change Vote (DRCV). The process is simple. Any DAO member can create a Motion to Change Roles and then make the case via a snapshot vote. If the voting power in favor of the motion exceeds 9 million, the role shall be changed. This threshold is high enough to discourage any practical attack vectors yet completely within the realm of possibility if the will to enact is widely supported by DAO participants.

PART III: Order of Operations

The 600,000 value of GHST will come from the DAO’s Liquidity Wallet (Polygon: 0x62DE034b1A69eF853c9d0D8a33D26DF5cF26682E). The Liquidity Wallet currently holds no GHST but still has roughly 2.3M USD of stablecoins, so we shall use the autoswappper contract developed in AGIP 69 to buy these 600,000 GHST. Steps: 1: Directors shall send 700K USDC to the autoswapper contract. 2: Set the autoswapper’s buy amount to 6500 USDC and the buy interval to 2 Hours. 3: Execute the autoswapper. It shall accumulate 600k GHST in roughly 8 days. 3.1: IF 700k USDC is not enough to purchase 600k GHST, the Directors shall calculate how much additional USDC is required and send those funds to the autoswapper contract as well. Their discretion is enough for up to an additional 100k USDC required, but anything beyond that will require unanimous approval during a weekly DAO meeting. Even one dissenting vote (expressed by emojis in Discord) during that meeting would render additional funds unobtainable. 3.2: Any GHST accumulated beyond the required 600k shall remain on the Liquidity Wallet’s balances until the DAO decides some further actions for those funds. 4. Skynet Trading presents the final executable contract to the Signer for review. 5. If both the Signer finds the contract agreeable, the Signer shall sign. 5.1 If the Signer finds details in the contract not aligning with our CoreProp, the Signer shall not sign and instead the process will revert back to negotiations between all parties. 6. After signing, the Directors shall transfer 600k GHST to a wallet provided by Skynet Trading. 7. The Primary Point of Contact shall begin interfacing with Skynet Trading to confirm receipt of the 600k GHST and the beginning of executing liquidity support across four exchanges. 8. Skynet Trading shall provide a monthly report to the Primary Point of Contact who shall, in turn, share this report during the next weekly DAO call. 9. This process shall continue throughout the 12 month term of the contract. 10. Nearing the conclusion of the contract, Skynet Trading and the DAO can signal to each other whether or not each party wishes to re-engage for another agreement or not.

Risks

I believe that the loan to Skynet Trading presents minimal risk, given the company's financial stability and reputation in the industry. Although Skynet Trading utilizes Fireblocks for institutional-grade custody solutions, risks associated with exchanges such as Coinbase, Binance, HTX, and OKX remain present. It is important to note that Skynet Trading does not bear liability for any risks or losses incurred due to the operational aspects of these exchanges. While not a direct risk, it is prudent to acknowledge the possibility of ‘seller’s remorse’ should GHST values significantly surpass the contract’s strike prices within the next 12 months. The strike prices, set as either premiums or averages of future market rates, are designed to align the interests of both parties. Both parties must enter this agreement with a comprehensive understanding of the associated risks.

Benefits

The benefits and reasoning for this are already well fleshed out above but to briefly review: Improving liquidity on at least three additional exchanges improves the trading efficiency of the token. Maturing the relationship with an industry-leading company like Skynet Trading may also lead to indirect benefits such as introductions to more exchanges and more opportunities for future loans related to on-chain DEX support and even perps markets (Skynet Trading is open to advocating for GHST perps and can make introductions).

Conclusion

For the benefits noted above, I am proposing that now is the time for AavegotchiDAO to engage with Skynet Trading to improve the currently weak state of GHST liquidity on most of its current listed exchanges.

VOTE:

Should AavegotchiDAO provide a 600k GHST loan to Skynet Trading for 12 months?