Status: PROPOSED Author(s): @jdcook (Index Coop) @bp333 (Visor) Discussions-to: https://gov.indexcoop.com/t/proposed-iip-109-deploy-protocol-owned-index-eth-liquidity-into-managed-visor-vault-on-uniswap-v3/3238 Created: 19 November 2021 Quorum: 109,069 INDEX [0.05*2,181,385]

This proposal has been abbreviated due to character-count; full-text and discussion can be found here: https://gov.indexcoop.com/t/proposed-iip-109-deploy-protocol-owned-index-eth-liquidity-into-managed-visor-vault-on-uniswap-v3/3238

Summary

There is (at the time of writing) ~$1.55m TVL in the INDEX/ETH 1% Uniswap v3 pool. Roughly ~80%+ of that liquidity is placed above the current price. A 10 ETH buy comes with a 2.51% price impact. Capital is discouraged from entering positions in INDEX due to the lack of liquidity. The INDEX token is susceptible to major price swings caused by relatively minor buys and sells. We need to facilitate a more liquid INDEX market.

We propose the following:

1. Exchange ETH2x-FLI currently in the Operations Account for ETH
2. Pair ETH with the requisite amount of INDEX
3. Deploy INDEX/ETH concentrated liquidity into a managed Visor vault on top of the INDEX/ETH 1.0% Uniswap v3 pool

Visor will manage our protocol-owned INDEX/ETH liquidity to optimize for price impact, yield, and availability of liquidity.

Motivation

Why focus on INDEX liquidity now?

INDEX liquidity is a problem right now for a variety of reasons (want to credit @tradespot and others who have highlighted some of these in an initial post and discussion here):

Specification

Exchange ~$700k USD worth of ETH2x-FLI (or all ETH2x-FLI if USD value is below $700k) in the Operations Account to ETH. The requisite ETH and matching INDEX (in rough USD amount, estimating around ~34,000 INDEX and ~170 ETH) will be sent to the Operations Account from where the liquidity will be deployed.

Supply the ~$1.4m liquidity to the Visor position manager contract called the Hypervisor. The Hypervisor will mint fungible ERC-20 LP tokens to a whitelisted address provided by Index Coop. Only the whitelisted address provided by Index Coop will have the right to deposit / withdraw assets to and from the Hypervisor. The Hypervisor has the right to a few managerial functions which are to set price ranges, set range orders, collect fees, rebalance, and mint/burn LP tokens to the whitelisted address. Therefore, the Hypervisor contract is non-custodial in that only the provided whitelisted address may deposit/withdraw assets into and out of the contract. The vault will remain private initially at least until an APR can be established, after which, it will be open to the public on Visor’s UI for depositing by public LPs.

Gamma Strategies (Visor-funded research organization) will manage the price ranges according to an autoregressive strategy which will widen the bands during periods of high volatility and narrow the bands during low volatility periods.

In terms of price impact, the current price impact at the time of writing this proposal is 2.51% for a 10 ETH buy order. After this deployment, the buy-side price impact for a 10 ETH order will be approximately 0.7 - 1.7%, depending on price volatility and range. However, all of these approximations are subject to change based on the characteristics of external liquidity and the price of ETH relative to INDEX.

See and toggle calculations here

Voting

FOR

DO exchange ~$700k worth of ETH2x-FLI for ETH and pair with INDEX to deploy protocol-owned INDEX/ETH liquidity into a managed Visor vault on Uniswap v3

AGAINST

DO NOT exchange ~$700k worth of ETH2x-FLI for ETH to pair with INDEX to deploy protocol-owned INDEX/ETH liquidity into a managed Visor vault on Uniswap v3

Copyright and related rights waived via CC0.