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).
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.
I propose that we allocate 10% of farmed rewards to provide liquidity for pies as PieDAO-owned liquidity and that we either:
- Use 10% from the 60% of farmed rewards currently allocated to veDOUGH stakers
- Use 10% from the 25% of farmed rewards currently allocated to compounding the treasury
- 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
- 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
- Either less rewards for veDOUGH stakers or less rewards for compounding the treasury
- Additional workload for the Treasury Committee
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.
- 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