[Proposal] PieDAO Owned Pie Liquidity

Summary
Currently, PieDAO relies on its users to provide liquidity for its products by offering liquidity mining incentives through farms and the DOUGHpamine program. There have been sporadic comments on Discord about low liquidity where users were unable to make large trades due to high price impact and redeeming and selling each underlying asset would be too costly. As liquidity mining rewards are expected to decrease over time, this proposal seeks to improve pie liquidity for PieDAO users while growing the treasury and reducing reliance on our users to also be liquidity providers. In addition, it can show confidence in our own products (see Dog Fooding, thanks @Jamie_PieDAO for sharing this).

Background
The current Doughconomics uses treasury funds for farming (via a big brained Treasury Farming Committee) to then fund development costs, compound the treasury funds, and to reward active governance veDOUGH stakers. The allocations are 15%, 25%, and 60% respectively.

Specification
I propose that we allocate 10% of farmed rewards to provide liquidity for pies as PieDAO-owned liquidity and that we either:

  1. Use 10% from the 60% of farmed rewards currently allocated to veDOUGH stakers
    or
  2. Use 10% from the 25% of farmed rewards currently allocated to compounding the treasury

Considerations

  • DAO-owned liquidity should not be staked for farm/DOUGHpamine rewards
  • Treasury Farming Committee can decide which pie(s) to mint/buy depending on market conditions (e.g. volatile pies vs stable pies)
  • DAO-owned liquidity be in DOUGH/PIE pairings (i.e. 5% of farmed rewards would be used to market buy DOUGH)
  • Treasury Farming Committee can decide when to market buy DOUGH (but should not sell their own DOUGH immediately after)
  • Alternatively, simply mint/buy the pie with the least amount of liquidity each month

Advantages

  • Provides permanent liquidity for pie trading, increasing over time
  • The DAO earns swap fees
  • Incentivizes DAO members to participate in rebalancing of pies as we would collectively own the pies
  • Upward pressure on DOUGH price if buybacks are required for LP pairing

Disadvantages

  • Either less rewards for veDOUGH stakers or less rewards for compounding the treasury
  • Additional workload for the Treasury Committee

Paint Diagram

We had conversations about this on Discord, but I wanted to formalize it and hear more of your thoughts, especially potential disadvantages that I may have missed. In my opinion, I think we should use 10% of the 60% of rewards allocated to veDOUGH stakers since 5% of it may be used to buy back DOUGH and we can continue to grow the treasury with 25% compounding for long term sustainability. I would really like to hear everyone’s thoughts about this as well. Thanks.

Should we implement PieDAO-owned liquidity?
  • Use 10% from the 60% allocated to veDOUGH stakers
  • Use 10% from the 25% allocated to compounding the treasury
  • No, we don’t need PieDAO-owned liquidity
  • Abstain

0 voters

4 Likes

def biased but feel taking it from the 60% to veDOUGH stakers encourages more treasury growth, which ultimately results in more rewards for stakers and more Pie Owned liquidity down the line.

3 Likes

If we were to do this, I think there should also be a discussion about to continue all of our products.

For example, usd++, btc++, and ypie all have really low MC as it is. If the community has already voted with their wallets against these products, should we use treasury funds to grow all our pies, or would it make more sense to deprecate some of these products instead?

Especially if it was about targeting pies with the lowest liquidity, I wouldnt be too happy to see this money used for building up products other than the defi pies, bcp, and play since these are already the most popular.

5 Likes

Agreed.

2 Likes

I would say USD++ shouldn’t need liquidity for quite awhile.
BTC++ shouldn’t need liquidity either in in current state, but if we pull a USD++ type revamp with it might be worthwhile in the future.

At present though, I’d consider USD++ and BTC++ deprecated and agree the Treasury should focus on Play, DeFi pies and BCP at present

1 Like

I am glad we are looking at options to increase the liquidity of our pies. I am all for this proposal. I still own YPIE but had to unstake it from Sushiswap for fear of suffering impermanent loss. I still think YPIE has potential if it just had more liquidity. I will trust in Block’s judgement that taking it from the 60% to veDOUGH stakers is best. We definitely want to maximize rewards for stakers and Pie owned liquidity in the long term.

1 Like

Liquidity is an important that definitely needs to be addressed. Yield farming had been a big development with defi, but statistically farming has been parasitic and parasitic with farmers just dumping rewards and moving on to the next product when the APR gets too low.

I dont like the idea of Olympus DAO bonds since I believe we can create our own solution without paying fees to another DAO.

1 Like

What does 10% of farmed rewards amount to?

1 Like

I think approximately $10-15k per month. Based on the November treasury report, the TFC has generated $571k of farming income since July 21, 2021.

Very good point! I think we’ll need to come up with a process to delist/deprecate pies similar to how ETFs are delisted from an exchange when there’s low demand for the product.

1 Like

Compounding the treasury is important to me too. Voting to take it from the stakers but is this enough to provide liquidity that would make a difference?

1 Like

Assuming $12.5k of liquidity is added per month, here’s the difference it would make per month depending on which pool we decide to add to.

Some of these are WETH/PIE pairs though, so it may be worthwhile to add to these pools instead of starting a new DOUGH/PIE pool for products like DeFi+S and DeFi+L. Or do we prefer to create new pools that are DOUGH/PIE pairings only to remove DOUGH from circulation? Thoughts?

Pie Pool Current Liquidity % Liquidity Added/Month
BCP WETH/BCP on Sushi $110,672.72 11.30%
DeFi++ BCP Pool on Balancer $2,432,442 0.51%
DeFi+S WETH/DEFI+S on Balancer $829,127.20 1.51%
DeFi+L WETH/DEFI+L on Balancer $744,957.57 1.68%
PLAY PLAY/DOUGH on Sushi $1,837,724.99 0.68%
YPIE WETH/YPIE on Sushi $31,844.92 39.25%
3 Likes