Temp Check Proposal: Make an ICHI Angel Vault

We propose a D2D (DAO to DAO) partnership to increase the liquidity available to buy $SILO to $4M+ on Uniswap V3.

Please reply to this thread if you would like to join a call/AMA to further refine this proposal.

TL;DR

  • D2D deal resulting in $4M of protocol owned liquidity (POL) for the Silo token
  • ICHI and Silo to partner in bringing TVL and additional projects to Silo’s lending protocol

Motivation

Price declines work against accomplishing Silo’s goals while income helps. Angel Vaults provide protection against price declines while providing high income.

Angel Vault Liquidity

Other forms of liquidity (both AMMs and centralized) result in $SILO tokens being deposited to an exchange. In contrast, you can only deposit an asset to purchase $SILO into the proposed Angel Vault.

How much needs to be deposited to the Angel Vault?

Every dollar helps, but we recommend 10-20% of market capitalization to optimize trading income and price protection. This is $2-4M at Silo’s current market cap.

Where will this value come from?
TBD - many options are available.

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Q: Can you provide an example showing how it works?
Take a look at the graphic below from Uniswap V3 Analytics. The red bar is ICHI’s price. Every bar to the left is over $1M waiting to buy ICHI. This purchase liquidity is managed by the Angel Vault protocol. That is how it protects against price declines and earns high income. Selling 10% of circulating ICHI only has a -7% price impact. :angel: Uniswap Info

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So if I understand correctly, Ichi’s Angel Vaults function as (algorithmically?) managed one-sided v3 positions?

Question: how quickly is the Vault raising the buy wall?
I could imagine a whale seller buying up the dry side of the orderbook, even keeping an inflated price for long enough as for the TWAP to adjust accordingly, only to sell into the DAO-provided “exit liquidity”. The exploiter would be in profit, paid for by community (/team) funds.

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So a D2D swap of Silo for Ichi and then we would have a Silo Angel Vault? Is the SILO from the swap going directly into the vault and what about a pair asset? Would this be coming from Silo’s treasury?

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Consider two extremes for vault strength (value of the vault/circulating market cap):

  1. Really Small (less than 5%) - the liquidity goes from $0 to current price. This makes it impossible to sell through it.

  2. Really Big (greater than 100%) - the liquidity can be right next to the current price. You could sell every circulating token for spot spice. This also makes it impossible to sell through the wall.

The width of the liquidity is algorithmically managed in between really small and really big to mitigate the risk of a big seller. For example, ICHI’s current buy wall is ~15% of market cap and goes from $14 to $18. Given the existence of other liquidity pools, a large seller would need to sell ~30% of ICHI’s circulating supply to sell through it.

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Thanks for the Q - I am new to this DAO and unfamiliar with its treasury management rules and decisions to date. We need people to join a call and negotiate/propose the financials. Without that engagement, this proposal will never leave ‘temp check’ status. Do you know who should be involved in this discussion?

This seems to allow sellers to sell with minimal slippage but wouldn’t buyers face quite high slippage on purchases since liquidity is concentrated below market price?

ShapeShift DAO has been really pleased with our Angel Vault so far, although to @bryan’s point above, we need to increase the liquidity in our vault more for it to reach its full potential.

Beyond incentivizing concentrated buy-side liquidity vs. traditional 50/50 pool 2 liquidity, which is compelling in and of itself, an added benefit of the Angel Vault is the opportunity it provides for Silo’s treasury (or the oneSILO treasury) to arb the oneSILO/USDC pool.

For example, ShapeShift DAO is going to arb the oneFOX/USDC pool today. To do this, we will mint 257,000 oneFOX with 205,600 USDC and $51,400 worth of FOX, which we will then trade for 257,652 USDC. Not only will the DAO make a small profit from this, but it is effectively turning $51,400 of FOX into USDC with zero sell pressure (while also helping the vault function optimally by making arbitrage opportunities on the oneFOX/FOX pool more frequent).