1. Proposal Purpose:
Hello Grape DAO!
Today I bring to you an idea for a proposal in hopes that we can collaborate on improving it together where needed allowing us to eventually come up with something we would like to implement as a community. I’m curious to hear your thoughts on what I wish to propose.
2. Grape Proposal Overview:
The Grape DAO currently has a large sum of USDC ($420K+) being held idle as treasury funds. I would like to propose that the Grape DAO allocate a portion of the idle USDC from its treasury to purchase LFNTY/xLFNTY tokens (whichever of the two are cheapest at the time of purchase).
These tokens would then be converted to veLFNTY and held by the Grape DAO wallet at a 4y lock up. Grape DAO would hold veLFNTY tokens as an asset in the DAO’s treasury.
- If there is interest in proceeding with this strategy, Grape DAO will also need to consider a set of parameters to be used in order to facilitate the purchase of the LFNTY/xLFNTY tokens on the Grape DAO’s behalf.
- Given the low liquidity of these tokens a simple one-time purchase could cause harmful price slippage. Enabling some type of system to be put in place prior to purchases of the LFNTY/xLFNTY tokens being made will help the Grape DAO more efficiently spend the allocated funds and receive a better purchase price for the investment being made.
What is Lifinity?
Lifinity is a proactive market maker designed to improve capital efficiency and reduce impermanent loss (IL). It is able to accomplish these goals by:
Proactively market making using an oracle
Implementing a rebalancing mechanism
Notably, Lifinity provides a unique market making architecture that combines lazy liquidity provision, concentration, and IL reduction. This sets it apart from both constant product market makers (no concentration or IL reduction) as well as concentrated liquidity market makers (no lazy liquidity provision or IL reduction).
Lifinity is the most capital efficient DEX on Solana (as measured by volume / TVL). Since its launch in January, Lifinity has performed over $1B in trading volume with only $5M in available liquidity.
For a deeper dive on Lifinity, please check out these resources:
· Documentation: https://docs.lifinity.io/
· Litepaper: https://lifinity.io/litepaper
Lifinity Token Model:
Lifinity DEX protocol is governed by 3 tokens. Protocol participants can purchase both LFNTY or xLFNTY and either lock or convert these tokens to veLFNTY as desired.
As a veLFNTY holder Grape DAO would be entitled to a share of the veLFNTY rewards generated each month and distributed to veLFNTY holders.
One of the major things that sets Lifinity aside from other platforms is that unlike other DEX platforms, the Lifinity DEX owns the liquidity that is provided by the protocol to traders seeking to swap between token pairings.
This means the protocol collects all trading fees and profits generated from market making using these funds. Since Lifinity provides protocol owned liquidity to (most of) its pools it also doesn’t have to pay temporary LPs to provide these pools with funds which happens to be the case in many other DEX projects. As such, the LFNTY token is not needed to promote any liquidity mining schemes meaning token holders are not being constantly diluted by new LFNTY token emissions. In practice this should have a deflationary effect on the token price.
Since Lifinity chooses to instead pay itself, the protocol is able to generate substantial revenues.
Monthly Protocol Revenue:
As you can see, Lifinity is having tremendous success generating profits even during some of the harshest market conditions crypto has ever seen. Bear market conditions like the ones we’ve been privy to for the past 3–5 months are a perfect opportunity for the team to continue battle testing the protocol.
If you take a look at the Lifinity Dashboard (https://stats.lifinity.io/) you can also see that a large percentage of tokens have already been locked as veLFNTY for 3+ years. For these reasons Grape DAO should feel comfortable holding veLFNTY rather than other Solana ecosystem tokens which are more prone to token dilution via the methods mentioned above.
3. Costs/Resource Requirements:
This proposal would:
· Allow the Grape DAO to participate in, and directly benefit from, the success of the Lifinity DEX and the LFNTY token.
· Provide a reliable, scalable, source of revenue for the Grape DAO treasury via veLFNTY rewards.
· Further expand the symbiotic relationship that exists between Grape DAO and the Solana ecosystem more broadly.
· Put a portion of the idle USDC treasury funds to productive use for the Grape DAO.
Potential future use cases for veLFNTY rewards:
· Monthly Grape Token Buyback (Rewards à USDC à Grape Buyback)
· Community Giveaways
· Grape DAO Partnerships
· Insert Your Idea Here
Points of Discussion / Contention:
Grape DAO will need to determine whether or not it believes acquiring veLFNTY tokens will be an appropriate use of DAO funds.
If Grape DAO decides to move forward with the proposal it will need to determine the amount of USDC it wishes to allocate towards establishing a veLFNTY position
After a USDC amount is selected, Grape DAO will need to determine parameters to utilize in order to gradually acquire LFNTY/xLFNTY tokens
· Which conditions (price, etc.) does Grape DAO wish to purchase veLFNTY
· Which period of time should the buying be spread over
- Will the Grape DAO be put under too much extra burden having to implement the buying strategy?
4. Author’s Thoughts:
For the sake of simplicity, I’ve tried to keep the variables in this proposal to a minimum as I figured we’d likely have a much more thorough discussion that would require me to rework/rewrite parts of the proposal as we decide on things as a community.
Is this investment worth making?
I am very enthusiastic about the thoughts of adding veLFNTY rewards as a revenue source for the Grape DAO. Given the already very intertwined relationship Grape DAO shares with Solana in general, this proposal could be a chance at taking steps towards further expanding the Grape DAO’s footprint and influence over an important Solana protocol.
How much USDC should be allocated towards veLFNTY?
My suggestion would be to allocate anywhere from $25k-$50k of the current undeployed USDC towards this endeavor. Given the lack of liquidity mining for LFNTY, there are very few sources from which the LFNTY/xLFNTY token can be bought. This allows for much better price stability of LFNTY compared to the average crypto token which is usually very volatile. A lot of this relies on the fact that many of the LFNTY tokens have already been converted to veLFNTY and locked for 3+ years.
- Which parameters could be used to avoid being front-run or raising price too high while acquiring tokens? Over how much time should the token buying be spread over?
My initial thoughts would be to spend $25k-50k USDC over 1 month. I’m not sure if there is a reason that we’d want to extend the purchase period too far into the future given the constant demand for the token.
Once again, the initial proposal that I have drafted and submitted to you here today should be seen as a starting point to base discussions around. Any of the numbers or ideas that I’ve used are merely suggestions and will need to be discussed further by the community and tentatively agreed upon before moving forward. I hope that the prospect of further intertwining the Grape DAO with the Lifinity DEX excites each and every one of you as it much as it does me.
Looking forward to hearing your feedback!