Allocate SILO/ETH Protocol-Owned Liquidity (POL)
TLDR;
- Allocate 100 ETH + equivalent SILO to Sushiswap (Arbitrum).
- In return, SiloDAO will receive SUSHI Incentives and ETH/USDC deposits via a BentoBox integration.
- Allocate 100 ETH + equivalent SILO to Balancer (Ethereum).
- Authorize the core team to rebalance liquidity between DEXs in the best interest of the DAO.
Core Proposal
Interest in $SILO has been increasing greatly due to our recent releases and increased revenue. With this increase in demand, it’s important we make the liquidity pools for SILO on Ethereum and Arbitrum, where we currently operate. A reliable and deep pool for our governance token inspires confidence in the project.
To this end, the core team would like to provide a path forward for the DAO to partially become its own liquidity provider while decreasing the cost of liquidity mining emissions by farming back incentives on co-sponsored pools. Toward this effort, we have spoken with a multitude of projects and are asking the DAO to move forward with SushiSwap. The proposed deal is outlined below.
SushiSwap
Sushiswap is currently the leader when it comes to native Arbitrum tokens’ liquidity. Sushi counts on a huge suite of products and an incredible community with great reach. In exchange for SiloDAO seeding liquidity into a SILO/ETH pool and incentivizing LPs, Sushi will provide additional SUSHI incentives and help us bring back part of the pool’s TVL into the protocol.
Sushi’s Offer comes with the following benefits:
- Co-Incentivize SILO/ETH pair with $SUSHI and $SILO tokens.
- BentoBox Integration - Sushi will be able to deposit a fraction of the TVL’s value back into the protocol as ETH or USDC.
Balancer
We currently incentivize Balancer via voting incentives through Hidden Hand and Votemarket. Our bribe efficiency here is huge; for every dollar spent on incentives, we get roughly $10 back (This is currently the case but might change in the future). Despite the massive APYs delivered by the Balancer pool, we have not seen a great increase in depth. The POL dedicated to this market will most certainly cover our expenses, and all things staying the same, we will likely profit greatly even when accounting for IL.
Reasoning
We currently spend~$ 4K in incentives for our Balancer pool; from this liquidity, the DAO captures no upside. The Balancer POL will allow us to take advantage of our enormous bribe discounts and ensure there is always some SILO/ETH Liquidity present on main net.
The Sushiswap deal laid out above ensures a cost-effective way to incentivize liquidity, and the POL provided by the treasury will allow us to earn back some or, under certain circumstances, all of our costs back.
Risks
Smart Contract Risk
As with any DeFi protocol, AMMs have an inherent risk of undiscovered exploitable code. However, it is worth noting that these protocols count on multiple audits and are battle-tested.
Impermanent Loss
The DAO would be taking on an extra cost in the form of Impermanent Loss. This can be rather drastic but tends to even out over time, as seen below.
Impermanent Loss can negatively affect LP’s return due to the changing price ratio between assets. If the price of SILO moves down, the SILO/ETH provider is left with more SILO at a lower price and less ETH. If the price of SILO moves up, the reverse is true, and the SILO/ETH liquidity provider is left with less SILO at a higher price and more ETH.
Voting
We will poll both proposed liquidity mining programs through simple Yes/No snapshot proposals. The DEXs chosen by voters will move forward to an on-chain proposal.