BIP-98: Treasury Deposits into QuantAMM and reCLAMM Pools

Summary

Deposit a portion of DAO Treasury to QuantAMM and reCLAMM pools on Sonic and other supported chains, and authorize further deposits to these pools under the Music Director framework.

Proposal

This proposal would retroactively grant Music Directors the ability to move treasury assets to both QuantAMM and reCLAMM pools, as deployed by Beets and/or Balancer.

• QuantAMM: Allow up to $50k in initial deposits, with further deposits accounted under the existing $200k monthly MD allowance.
• reCLAMM: Allow up to $50k in initial deposits, with further deposits accounted under the existing $200k monthly MD allowance.
• These permissions extend to pools launched on other chains, as applicable.

Motivations

Granting the ability to deposit DAO Treasury assets within QuantAMM and reCLAMM pools aids bootstrapping these promising new pool types, while increasing total fees earnt on the DEX and potentially growing Treasury asset balances through retained swap fees, incentives, and strategic allocation.

Depositing into these pools also helps to showcase the versatility of partner builders and the Balancer technology stack as operated by Beets. In addition to the forward-looking case, this proposal also seeks retroactive approval for recent Treasury deposits already made into the pools on Sonic. These initial deposits were executed under the belief that they fell within the existing Music Director (MD) operational mandate.

However, given the novel nature of the pools and their distinction from standard pool types, the decision was made to proactively seek DAO ratification to maintain transparency and alignment with the DAO's intent. While this area remains somewhat ambiguous, we believe securing retroactive DAO consent reinforces good governance practices and provides a clear precedent for future innovations.

Impacts / Risk Assessment

QuantAMM

QuantAMM pools utilise backtested strategies to adjust pool weightings with the goal of outperforming both HODL and traditional DEX LPing. These strategies run on-chain and are executed permissionlessly, which reduces the risk from centralised actors but also comes with additional smart contract risk.

QuantAMM has been audited by Codehawks (see below); with code fixes to some but not all high-risk issues, while a number of issues were addressed by not releasing previously planned hook contracts.

Deposits in QuantAMM pools are actively traded by the given pool’s algorithm which is selected based on extensive backtesting, so are anticipated to perform positively in terms of capital preservation and growth. However, this is not guaranteed and the pools are limited to quantitative analysis, so do not directly trade macroeconomic or news events and may underperform in changing market conditions.

Depositing DAO funds into QuantAMM serves to promote this new product on Beets while potentially growing Treasury funds and supporting protocol fee earnings and the ongoing Sonic Gems campaign.

reCLAMM

As reCLAMM pools involve providing liquidity over concentrated ranges which adjust with price movements, there is significant risk of adverse selection and loss via rebalancing. Extreme price volatility may result in significant loss of asset value.

These pools also allow for changes to the strategy and rate at which they rebalance, even after launch, so a previously satisfactorily performing pool could become otherwise. These settings can be changed by the pool owner, which will be the Beets Sonic pool owner multi-sig wallet.

Noting the above, concentrated liquidity also allows for significant benefits via higher fee earn rate, which is a boost for Beets in the ongoing Sonic Gems campaign.

Depositing DAO funds into reCLAMMs further incentivises alignment between the DAO and liquidity providers, as effective configuration and operation of the pools is directly beneficial to both groups.

reCLAMMs are a new product and so come with a level of new contract risk; however, the reCLAMM contracts have been audited by Certora (see below).

Specification / Execution Plan

Passing of this proposal will:

• Allow Music Directors to move up to $50k of DAO Treasury assets into QuantAMM pools.
• Allow Music Directors to move up to $50k of DAO Treasury assets into reCLAMM pools.
• Enable further deposits into either pool type under the existing $200k monthly Music Director allowance.
• Extend this permission to pools launched on other chains.

Relevant Links

QuantAMM

• QuantAMM Documentation
• QuantAMM GitBook
• QuantAMM Pool Factsheet
• QuantAMM Audit – Codehawks

reCLAMM

• Balancer reCLAMM Documentation
• Certora Audit – reCLAMM