Stargate Market Maker - Preserving CEX Listings

Engaging a market maker for Stargate was proposed in SIP 24 (https://snapshot.org/#/stgdao.eth/proposal/0x9f220b762e40e2fc8166b15e64510a0843bb8328f48d1407a800ae1a63f577fd) and 25 (https://snapshot.org/#/stgdao.eth/proposal/0x8ca03295d142b8ed1dc55adffdaec3bd24d4a9613a44c1aa983907f3dab5ec9d). Both posts ended with a positive signal but did not hit the 70% quorum required for them to move forwards (https://snapshot.org/#/stgdao.eth/proposal/0xfb862e6810019e8bf3282a1e06d2077edf28424bfc830562e56b91db0a70e861).

While these votes have been ongoing, multiple exchanges contacted the Stargate Foundation about Stargate’s liquidity issues on centralized exchanges and notified that the token will be delisted or deprioritized in the future if a market maker is not engaged by the Stargate DAO.

Delisting will also have negative consequences to the on chain volume for the STG token. Currently, the Stargate DAO owns almost all on chain liquidity and earns significant fees from trading activity that uses this liquidity. A portion of the activity is arbitrage between on chain liquidity and centralized exchanges. A lack of a robust centralized exchange pool results in less liquidity and decreases the ability for this arbitrage to happen and results in less fees earned by the DAO.

Process:

Numerous market makers were considered to bring forward one proposal that the community can vote on, if enough signal that this is interesting to do is given. The proposal will list details about the market maker, and some base details of their proposal. Due to competitive edge, not all details can be shared. If this advances to voting, the Stargate DAO will select one of two options: The first option is that the marketer maker proposed, GSR, will be chosen and the DAO will proceed with GSR as the market maker for STG.

The second option is no market maker will be chosen, the proposal will be voted down and the DAO will proceed without a market maker for the foreseeable future.

About GSR:

GSR is a leading market maker, ecosystem partner, and active, multi-stage investor. In addition to the veteran traditional finance and derivatives background of its founders, GSR maintains an ethos of client service that is at the center of its offerings.

With 250+ employees around the globe and a core engineering and trading focus, GSR uses nearly a decade of market data and crypto expertise to continuously refine and expand its trading engines and programmatic execution capabilities, with a focus on providing best-in-class service to projects across different stages of their development. Its trading technology is connected to 30+ exchanges, including major decentralized exchanges (DEX’s) and lending protocols.

GSR works with projects across the entire crypto ecosystem, and has considerable expertise across the decentralized finance (DeFi) space - with a particular focus on core infrastructure, security, and protocol levels. It has provided, at times, over US$1bn of liquidity a day to DeFi markets, while investing heavily in DeFi protocols across the Web3 ecosystem. Going beyond the breadth of its investments, integrations, and infrastructure, GSR is committed to being an active and reputable collaborator in the space, highlighted, in part, by the launch of GSRBlue: its marquee long-term NFT portfolio of well-known creators and projects.

GSR is operating as normal and remains focused on maintaining liquidity for our clients despite the market events of last year. As standard practice we proactively manage our exposures to all exchanges and reduce dynamically where necessary. GSR is well-positioned to navigate the high volatility and continues to actively deploy capital to maintain healthy liquidity in both private and listed linear and nonlinear products in the space.

Terms:

The following terms can be shared about GSR’s offer.

Number of tokens requested: 8,000,000 Length of term: 24 months Strike mechanism: European option (https://www.investopedia.com/articles/optioninvestor/08/american-european-options.asp) after 24 months at an average price greater than $1.15. The exact price is not shared to protect market integrity.

A european option is an option that is not exercisable until the end of the term. The price of STG has to be over the price of the option to make it worth it for GSR to actually accept it. In this case GSR would return a cash equivalent to the DAO. If it is not over the strike, they will have market made STG for free, returning all tokens at the end of the term to the Stargate DAO. This aligns GSR with the long term success of Stargate protocol for the entire term of the agreement while providing much needed liquidity to the market.

In this case, they are BUYING the STG tokens at that price in the option, i.e. if STG at the strike price they make $0 profit they only acquire tokens at fair market value which are worth exactly what they paid for them.