$1M in Shared Liquidity for BRIGHT<>HNY on Honeyswap, split between 1Hive and Bright DAO

$1M in Shared Liquidity for BRIGHT<>HNY on Honeyswap, split between 1Hive and Bright DAO

Proposal Information

Proposal description:
1Hive and Bright DAO have both expressed interest in splitting DAO-owned liquidity for BRIGHT<>HNY on Honeyswap, funded from each DAO’s Common Pool. This proposal is being made in tandem with Bright DAO.

Because of the size of this proposal, we’ll use 5 separate funding proposals to add the liquidity in steps, following this process:

  1. 1Hive requests $100k in HNY, simultaneously Bright DAO requests $100k in BRIGHT.
  2. On passing, tokens will be sent to a shared 4 of 6 multisig with 3 1Hive members and 3 Bright DAO members.
  3. Both tokens will be added to the BRIGHT<>HNY liquidity pool on Honeyswap, and each DAO will own 50% of those LP tokens.

This process will be repeated 5 times until all liquidity has been added.

Price slippage:

Since this process will take time, price slippage between the tokens is unavoidable. Here’s how we’ll deal with it:

  • Liquidity is added 50/50 to Honeyswap at the exchange rate at that time. Tokens leftover in the multisig after that due to price appreciation can be deducted from that DAO’s next proposal. i.e. if the multisig has $10k in appreciated $BRIGHT after LP is added, Bright DAO’s next funding proposal will target $90k.
  • Regardless of token appreciation or depreciation, each proposal will target $100k at the time of the proposal (rather than aiming for a hard target of $500k over the course of all 5 proposals).
  • Appreciated tokens leftover after the 5th and final proposal will be used to incentivize rewards for liquidity providers for the BRIGHT<>HNY liquidity pool.

**In the event that any of the 5 funding proposals doesn’t pass within 1 month of being requested for either DAO, that funding proposal will be dropped and all leftover $BRIGHT or $HNY in the multisig will be returned to that DAO’s Common Pool. No more funding proposals will be made, however all shared liquidity for BRIGHT<>HNY at that point will be kept.

Proposal Rationale
1Hive and Bright DAO have a strong connection and well-aligned interests for the future of Web3. Sharing liquidity cements this relationship in a way that is mutually beneficial for both DAOs:

  • DAO-owned liquidity is a good long-term token liquidity solution vs. renting liquidity with rewards.
  • Strengthens the friendship between Bright DAO and 1Hive - both communities are incentivized to act in each other’s interest.
  • Shared liquidity acts as treasury diversification for both DAOs.

Expected duration or delivery date (if applicable):
Upon each proposal passing, the multisig will aim to have liquidity added to Honeyswap within a week.

Team Information (For Funding Proposals)

Bright DAO:
@UBIpromoter
@Fluchtzwerg
@TripleSpeeder

1Hive:
@Monstrosity
@twells
@paul

Skills and previous experience in related or similar work:
@Monstrosity previously led a shared liquidity proposal with Shapeshift - we’re following that process with some improvements based on what we learned.

Funding Information (For Funding Proposals)

Amount of HNY requested: $100k WXDAI equivalent

Ethereum address where funds shall be transferred: 0x156E71f1e57D52226fc113FC4777762e98d5600e

12 Likes

BRIGHT is a blue-chip project and every effort should be made to partners up with them. This liquidity push is a thoughtful one that I think makes perfect sense.

1 Like

500k in Honey is almost a third of the common pool and about 7-8% of the total supply of Honey. Why is it such a high amount considering the low market caps of our tokens?

Also is there an explicit demand for liquidity that isn’t being filled? I would understand more if Gardens or something similar was taking off and Honey was being bought up but that’s not the case, Honey has been consistently dropping.

Also can you detail exactly how each project is effected if the other project fails/their token goes to zero?

6 Likes

The only concern I have about this is the adding of deep liquidity while our token price is low. However, I think this phased installment approach gives plenty of time for $HNY token price to find whatever it is it is looking for.

As for a partnership I think many including myself have almost seen HNY and Bright as extremely close communities so from that perspective it makes sense these tokens could have heavier ties.

1 Like

BRIGHT would be borrowing HNY’s liquidity with xDAI on Honeyswap. To buy BRIGHT on Honeyswap, you’d need to go through xDAI > HNY > BRIGHT, and selling would be reverse. So looking at 4 scenarios (each happening in isolation):

1. Buy demand for $BRIGHT increases (xDAI>HNY>BRIGHT):

  • In xDAI<>HNY liquidity pool, xDAI is added and $HNY is removed. Price of $HNY goes up and value of LP goes up with this price slippage.
  • In BRIGHT<>HNY liquidity pool, $HNY is added and $BRIGHT is removed. Price of $BRIGHT goes up and value of LP goes up with this price slippage.

2. Sell demand for $BRIGHT increases (BRIGHT>HNY>xDAI):

  • In BRIGHT<>HNY liquidity pool, $BRIGHT is added and $HNY is removed. Price of $BRIGHT goes down and value of LP goes down with price slippage.
  • In xDAI<>HNY liquidity pool, $HNY is added and xDAI is removed. Price of $HNY goes down and value of LP goes down with price slippage.

3. Buy demand for $HNY increases (xDAI>HNY):

  • In xDAI<>HNY liquidity pool, xDAI is added and $HNY is removed. Price of $HNY goes up and value of LP goes up with this price slippage.
  • Value of BRIGHT<>HNY liquidity pool goes up with this price slippage.

4. Sell demand for $HNY increases (HNY>xDAI):

  • In xDAI<>HNY liquidity pool, $HNY is added and xDAI is removed. Price of $HNY goes down and value of LP goes down with this price slippage.
  • Value of BRIGHT<>HNY liquidity pool goes down with this price slippage.

So the high level effect is that our token prices become correlated, affecting both of our liquidity. $BRIGHT going to zero would significantly hurt the price of $HNY and HNY<>xDAI liquidity on Honeyswap. $HNY going to zero would mean $BRIGHT loses all its Honeyswap liquidity, if it isn’t able to get liquidity for other pairs.

There is demand for more than $1M in liquidity for $BRIGHT - on mainnet they’re getting several $20k+ transactions a week..

As @Eth_Man pointed out in a really good forum post, correlation between non-stable tokens is something to avoid, but in the case of projects we’re close with like BrightID, I think it’s a good thing for us to be financially invested in their success like this.

Quick afterthought…
This made me think of something for when Olympus Pro launches on xDai/Gnosis Chain… If token prices appreciated and HNY<>BRIGHT liquidity value went up, I wonder if it’s possible to do a reverse OP bond where 1Hive and Bright DAO sold BRIGHT<>HNY at a discount for xDAI, which we could then use to add DAO-owned liquidity for our tokens with xDAI.

1 Like

I love this proposal!

More Liquidity More Value for HNY… All this HNY is basically locked, and aligning with BrightDAO is a great thing for both communities.

I agree with willjgriff that it might be too much to do 500k right now… but starting with 100k and then letting the bull market pump both projects price… it might be all we need to get 1 mil in liquidity :wink:

5 Likes

The proposal says to do it in chunks of $100k of value for each side. I think that’s still a good amount to start. The proposal can mention that we will have the option to repeat the proposal five times for $100K each and $500k total, but passing the proposal doesn’t commit to all five. That leaves the option to abort or wait (e.g. if prices go down or sentiment changes).

What do you think @paul ?

6 Likes

Based on the positive feedback here and discussions with other members of BrightDAO, I have just posted a matching proposal on the BrightDAO forum.

Unless anyone raises significant issues, I think we can put Tranche 1 up for vote in both DAOs.

3 Likes

Sure, we can treat it like a single $200k liquidity proposal, and then gauge interest from both DAOs for another round between proposals :+1:

1 Like

The Bright DAO team noted that most of their liquidity is on Uniswap right now, so if this proposal passes there might be a mismatch in BRIGHT price on Honeyswap, in which case the Uniswap price would be more accurate. To address this we’ll follow this process:

  1. At time of LP being added, we’ll look at the Uniswap DAI price of BRIGHT and Honeyswap xDAI price of HNY.
  2. If BRIGHT<>HNY pair on Honeyswap is trading more than 1% off that exchange rate, we’ll use the multisig funds to swap on Honeyswap until it’s within range (this won’t be much money since liquidity now is low).
  3. Once within range we’ll add the LP.

Can we establish a period of time between creating these liquidity proposals to monitor for effectiveness eg at least one month in between? I’m still against a total of $500k in Honey in total right now, I think it’s too high a risk when Honey is currently worth so little.

1 month between proposals sounds OK. We can compare trading volume the month before and the month after to see if the liquidity is being used, and if there’s been any major price swing for either token we can talk over how that affects another proposal.

Are people OK with that?

How long of a “cool-off” period do we need between HNY<>BRIGHT liquidity proposals?

  • 1 month
  • More than 1 month
  • Less than 1 month

0 voters

1 Like

Liquidity is added! It will stay in the Gnosis safe until either DAO proposes a change to that:

xdai:0x156E71f1e57D52226fc113FC4777762e98d5600e

6 Likes

Pleased to see this circle around in BRIGHT’s favor. A prime partnership project now and in the future with the ubiquity of sybil attacks.