Sigprop: 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

BACKGROUND When the GHST Bonding Curve closed in early 2023, our governance token lost its deepest liquidity pool. 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. As part of this initiative, Skynet Trading contributed the necessary USDT to improve the liquidity and close the spreads, thereby ensuring a more stable, safe and efficient trading environment for GHST.

Skynet Trading has successfully fulfilled its role as a market maker for GHST throughout the entire year of 2023. Both parties involved have expressed a high level of satisfaction with the partnership. Skynet Trading has primarily supported liquidity on Coinbase. Skynet Trading merges its respected status with extensive institutional trading experience with an exemplary reputation and commitment to compliance and market integrity.

The loans that made this possible will soon expire but Skynet Trading is prepared to continue to support GHST. We believe the next such loans are 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 the majority of CEXs that GHST is listed on.

This screenshot from cmc (Feb 9, 2024) shows the amount of GHST buys and sells it would take to move the price 2% in either direction as well as cmc’s “liquidity score”.

It is evident most pairs suffer from thin books. This means GHST is inaccessible to most people seeking medium to large allocations on most exchanges. By lending Skynet Trading tokens, we can substantially improve liquidity. This strategic move will foster a safer and more reliable trading environment for all participants interested in trading GHST tokens.

THE SOLUTION

PART I of PROPOSAL: Loan Terms and Goals

Lend 600k GHST to Skynet Trading for a 12 month term. Loaned GHST shall be used as provisions across four exchanges: Coinbase, Binance, OKX, and Huobi.

Skynet Trading’s terms impose no retainer fee or trading fees. The loan shall be realized in three tranches of 200k GHST per. Each tranche will have its own strike price based on premium and/or future token prices. For example, the first strike price may be a rolling average of the token price across a certain number of days while another strike price may be SPOT + a percentage premium of 5 or 10%.

Exact strike prices will not be publicly available so only the Signer of the Agreement and the Primary Point of Contact (see PART II of proposal) will have eyes on what these rates are. The examples above are accurate representations of the type of strike prices we can expect.

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 established in the three tranche strike prices determined at time of signing.

PART II of PROPOSAL: Responsibilities

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 Pixelcraft Studios. They shall continue to maintain contact between the two main parties and always advocate for the best interests of AavegotchiDAO. There is an existing communication channel between Pixelcraft and Skynet that will continue 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).

Any DAO member can create a Motion to Change Roles and make official 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.

Having already worked with the Skynet team for over one year, I find Pixelcraft Studios serving as the PPC to be a very practical solution. That said, it is important to define a mechanism for transfer of this role in the spirit of decentralization.

PART III of PROPOSAL: Funding and Order of Operations The 600k GHST for the loan 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 and Primary Point of Contact for review. This contract contains sensitive information such as strike prices that are not to be disclosed to the rest of the DAO or public.

5. If both the Signer and the Primary Point of Contact find the contract agreeable, the Signer shall sign and proceed to step 6.

5.1 If either the Signer or the Primary Point of Contact find questions or concerns with details in the contract, the Signer shall not sign and instead the process will revert back to negotiations between all parties.

6. After signing of the contract, the Directors shall transfer 600k GHST to a wallet provided by Skynet Trading in the contract.

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 of reporting and adjusting strategies per DAO feedback shall continue throughout the 12 month term of the contract with Skynet Trading.

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. The PPC will help facilitate this conversation between the two parties.

RISKS The loan presents minimal risk, given Skynet's reputation in the industry.

Although Skynet 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.

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 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 are established: Improve liquidity on 4 exchanges.

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 propose that now is the time for AavegotchiDAO to engage with Skynet Trading to improve the current state of GHST liquidity on most of its current listed exchanges.

Skynet Trading has proven to be professional, compliant, ethical, and transparent experts in their field that can greatly benefit our governance cornerstone, GHST token.

Please note, regarding KYB, there will need to be 1 KYC’d director and a number of documents. The directors have already confirmed these KYB processes are achievable.