[CP-1] CYBER Multichain Liquidity Balance [Rejected]

As an one-off exception and in the interest and urgency of time, this proposal will not adhere to the DAO policy of a 7-day voting period. This voting period for this proposal will end exactly 12 hours after it is published.

Abstract

To optimize CYBER liquidity across ETH, BSC, Optimism networks, we propose a series of active balancing strategies for CYBER token on these networks. The strategies include

1. Deploying a CYBER-ETH, CYBER-BSC, CYBER-OP bridge powered by LayerZero's ProxyOFT (https://layerzero.gitbook.io/docs/evm-guides/layerzero-omnichain-contracts/oft/oft-v1). Users will be able to bridge CYBER from any chain to another on Stargate.

2. Utilizing Cyber Community Treasury’s unlocked CYBER to provide liquidity for bridging. The foundation will try to keep 25k CYBER-ETH, 25k CYBER-BSC, 25k CYBER-OP in the bridge. A total of 7,000,000 CYBER-BSC and 3,888,000 CYBER-ETH can be used to maintain liquidity on the bridging service.

3. If either CYBER-ETH, CYBER-BSC, or CYBER-OP runs low in treasury, the foundation will burn and mint CYBER across chains to maintain a good balance of CYBER on each network. The total supply of CYBER on all chains will remain 100,000,000 unchanged at all times.

Motivation

At CYBER’s Token Generation Event (TGE), a fixed amount of CYBER has been minted on 3 networks. Of the total 100,000,000 CYBER minted, 87,700,000 CYBER were minted on Ethereum (CYBER-ETH), 9,000,000 CYBER were minted on Optimism (CYBER-OP), 3,300,000 CYBER were minted on BNB Chain (CYBER-BSC). The current circulating supply includes 5,638,000 CYBER-ETH, 2,400,000 CYBER-OP, and 3,000,000 CYBER-BSC. With circulating CYBER living on different networks and no mechanism for bridging, we have seen a significant imbalance in CYBER’s distribution among users, CEXs, and DEXs. This has led to a large premium for CYBER-ETH ($20.47) versus CYBER-BNB ($13.40) and CYBER-OP ($13.08) on DEXs as of 17:30 UTC, Friday, 1 September 2023.

Introducing Multichain Liquidity Balancing strategies would make price discovery for CYBER more efficient across networks.

Justification

We consider it necessary to provide the same access to CYBER for users on different networks and provide less confusion for users entering the ecosystem. CYBER deployed on Ethereum, Optimism, BNB Chain are the same native token to CyberConnect and so should be freely bridged across networks with sufficient liquidity for demands from all networks.

Detail of the Proposal

We propose the following 3 steps to ensure the balancing of CYBER across Ethereum, Optimism, and BNB Chain networks.

First, the foundation deploys a CYBER-ETH, CYBER-BSC, CYBER-OP bridge powered by LayerZero's ProxyOFT (https://layerzero.gitbook.io/docs/evm-guides/layerzero-omnichain-contracts/oft/oft-v1). Leveraging an omnichain interoperability protocol like LayerZero, we can enable atomic swaps of CYBER on different networks. We would achieve effectively a liquidity bridge with the foundation providing liquidity only and not opening up “minting” permission of CYBER to the bridging service. Users will have access to the bridge through UIs like Stargate only subject to the bridge’s liquidity. More bridging services are also been evaluated and would be introduced if necessary to reduce centralization risk on the bridge.

Secondly, Cyber DAO and its Treasury’s unlocked CYBER will be utilized to provide liquidity for such bridges. To avoid outsized risk from any bridge, we plan to keep 25k CYBER-ETH, 25k CYBER-BSC, 25k CYBER-OP in the bridge in the beginning and dynamically change the supplied liquidity. Since not a lot of liquidity is supplied at all times, there would be a lack of liquidity if an imbalance occurs from bridging activities happening mostly in one direction. The foundation will try to maintain enough liquidity according to users’ demands. All unlocked CYBER in the Treasury, a total of 7,000,000 CYBER-BSC and 3,888,000 CYBER-ETH, can be used to maintain liquidity on the bridging service. Providing a bridging service would not affect CYBER’s total supply.

Thirdly, the Treasury will keep a good balance of CYBER on each network. In the case of an even larger imbalance occurring where the treasury itself runs out of CYBER on one network and accumulates a large sum on another one or two networks, the foundation will need to burn and mint CYBER to regain the balance of CYBER inside the treasury. For example, if inside the Treasury, CYBER-ETH runs out while CYBER-BSC and CYBER-OP have a total of 10,888,00 CYBER, the foundation will burn some CYBER-BSC and CYBER-OP to mint an equal amount of CYBER-ETH. The burn and mint action will also help the global distribution of CYBER across networks to reach balance. One restriction is that the total supply of CYBER-BSC will remain larger than 750,000 and the total supply of CYBER-OP will remain larger than 250,000. Again, the total supply of CYBER on all chains will remain 100,000,000 (unchanged) at all times.

Considerations

1. We will keep evaluating all bridging technologies and adopt the ones with the highest security guarantees.

2. Only the foundation should be able to provide liquidity to the bridges to limit potential risk factors to the foundation.

3. The foundation will keep only enough liquidity on the bridge for safety concerns. The exact amount is based on users’ demand.

4. There may be some period of time where users’ request to bridge CYBER across chains is not immediately fulfilled

Timeline

This proposal, if accepted, can be implemented in the 72 hours after the approval depending on technical implementation.

As a one-off exception and in the interest and urgency of time, this proposal will not adhere to the DAO policy of a 7-day voting period. This voting period for this proposal will end exactly 12 hours after it is published.

General Cost

This proposal does not require funds.