This proposal is authored by cateatpeanut

Background

The SushiSwap Onsen rewards 4 are expected to expire on 2022 April 26th. After this the $BIT-ETH pool on SushiSwap will no longer be incentivized by $BIT rewards, which may lead to a decrease in the $BIT-ETH LP (liquidity provider) amount.

Proposal

• For the BitDAO Treasury to provide liquidity for $BIT on DEXs.
• Initial setting shall be approximately $60M Uniswap v3 BIT-ETH full range with 0.3% swap fee.
• DEX selection and settings can be adjusted via subsequent BitDAO proposals.

Execution

$BIT and ETH shall be transferred out of the BitDAO Treasury, sent to a trusted operator for BIT-ETH LP creation, and returned to the BitDAO Treasury.

Analysis

Why do we need DEX liquidity?

• To provide avenues for DeFi users to trade $BIT.
• To interact with DeFi protocols.

Why should BitDAO Treasury provide liquidity for $BIT?

• The BitDAO Treasury has surplus $BIT and $ETH assets that are not currently utilized.
• Current Sushi Onsen rewards for the $BIT-ETH pool are set at 100,000 $BIT units per day. By providing its own liquidity, BitDAO can reduce the costs of incentivizing liquidity. Subsequent incentivization of liquidity can be proposed later, especially in support of future BitDAO DeFi partnered projects.
• For further details on the benefits of “protocol owned liquidity”, there are good articles from OlympusDAO, including: FAQ - Olympus Medium Article - Olympus

Why Uniswap V3?

Based on analysis of Ethereum Layer1 DEX volumes and users, Uniswap v3 has the highest trading volume and users. Other contenders are Uniswap v2, SushiSwap, and Balancer.

Depending on strategic opportunities with other DeFi protocols, especially around structured products, we may propose to move the liquidity to another DEX.

Why Full Range?

Uniswap V3 allows the liquidity provider to quote a narrower range “concentrated liquidity”. For more information, read this Uniswap V3 Article.

However, a concentrated liquidity position is not recommended for the BitDAO Treasury as: 1) suffers increased impermanent loss; and 2) prices may move out of range and it is difficult for BitDAO to actively manage the position (as proposals take more than 2 weeks).

Can we explore options with other DEX Partners?

Some exploratory conversations for a Balancer 80/20 pool are in progress.

The BitDAO forum discussion thread: https://discourse.bitdao.io/t/proposal-bitdao-owned-liquidity-for-bit/2039