LIP 010 - Supporting LNR Exchanges

By Valiander (Foundation Director) Copyright and related rights waived via CC0.

Disclosure

As a Foundation Director, I have a duty under the Lunar DAO Charter to manage Lunar Foundation operations to the best of my ability to maximize the benefit to Lunar DAO.

Abstract

The Lunar Foundation proposes to be given additional authority to leverage Treasury resources to support our exchange listings with additional liquidity and marketing resources.

Motivation

Our market maker has requested additional Treasury resources to support our order books on each of our exchanges. They have also requested that we engage in additional marketing to increase buy pressure on those exchanges.

Centralized exchanges typically have pre-packaged marketing campaigns that leverage the token to do various types of giveaways, such as airdrops. Engaging in this type of marketing will increase the exposure of the project, and in turn increase buy pressure on our exchanges.

Rationale

The Lunar Foundation presently does not have the authority to leverage the Treasury to supply additional exchange liquidity or engage in marketing campaigns.

Analysis

Exchange Operations

Centralized exchanges work very much like traditional public markets. If an asset is to be purchased, the order is put into an order book, and people willing to sell the asset have to be found to "fill" the order.

Coinbase has a detailed and informative article on the topic.

Market makers help fill orders on the order book, and also help strategically sell tokens to generate revenue for the business. Since market making services cost money, great market makers use their knowledge of the markets to make their market-making services self-sustaining.

Marketing

Exchange listings require constant marketing in order to draw in new customers. This is a significant challenge with decentralized exchanges, since wallet applications do not have the ability to receive push notifications from tokens contained in the wallet.

Marketing campaigns on decentralized exchanges usually involve email & SMS blasts, CPM & CPC ads on various social media channels, and airdrops... virtually all of which cost real fiat to execute.

Centralized exchanges, however, maintain their own marketing channels, including the ability to send push notifications to the millions of users of their mobile apps. Since these exchanges make their money in trading fees, typically the only thing they require to run these marketing campaigns are tokens to give away.

Timing

Now that Lunar.io has been refreshed with up-to-date information and a modern design, it is the perfect time to engage in new outreach to increase participation in the Lunar Ecosystem.

Conclusion

Making tokens available for exchange operations is a necessary function of any Web3 organization, and the Foundation needs the authority to respond to the needs of our market maker with the resources to grow the business.

Proposed Changes

1. Allow the Lunar Foundation to work with the market maker to supply Treasury resources to power our exchange operations on an as-needed basis.

2. Allow the Lunar Foundation to work with our exchanges to run marketing campaigns with Treasury resources on an as-needed basis.

Pros

1. Listed exchanges will have the resources to maintain consistent operations.

2. Increased marketing will have a net positive impact on organic trading volume.

3. Increased organic trading volume will allow us to make our exchange operations first self-sustaining, with the goal of being month-over-month profitable.

Cons

1. Using LNR from the Treasury reduces the amount of LNR available to the Treasury in the future.

Steps to Implement

None

Timeline

• Upon acceptance, this LIP would be implemented with immediate effect.

Associated Costs

None