An Opportunity to Partner two Communities and Strengthen the 1hive Treasury

DAO treasuries, as liquidity-providers, have predictable and strong hands. Two DAOs partnering to provide liquidity is particularly powerful. This is where two DAOs compose some kind of agreement about exchanging and providing liquidity. Gnosis & DxDAO is an example of one of these D2D joint liquidity partnerships

PrimDAO is building tooling and infrastructure to make some of these strategies easier and more robust to employ you can read more here

I would love to hear from 1hive on any further ideas or perspectives around this proposal and I’d like to thank @Kyle_Stargarden for helping draft this concept!

A “community swap” and “joint venture” scenario:

1Hive and Shapeshift execute a community swap for $250,000 equivalence of FOX and HNY tokens. The treasury balance sheets at that time don’t really change, other than in the amount of risk they each carry. Each community is now carrying some of the risk of the other community’s asset volatility. In other words, both communities now are rationally incentivized to act in the other community’s interest, because they both own a stake in the other. Each community has also hedged their own risk, by transferring some of that risk to the counter party community. This act marries the two communities together.

Each DAO is now holding $250,000 of the other’s token. The DAOs can execute a “joint venture” for liquidity. Each DAO can provision liquidity in equal portions. 1Hive provides $250,000 FOX and $250,000 HNY and Shapeshift does the same thing. Now we have $1 million in liquidity for the HNY/FOX pair, and the DAOs only exchanged $250,000 in value. None of this capital has been given away for liquidity rewards to internal and external participants. We’ve also tied the communities tighter together, and created technical mobility. 1Hive bees and cunning Shapeshift Foxes can now easily mobilize financial and human capital between the two networks.

Outside of DAO2DAO partnerships there’s been some other tremendous successes with protocol-owned liquidity like with OlympusDAO as well.

I’d like to open up the discussion here and I would love to hear from 1hive ideas or perspectives around this proposal!

Why token swap with Shapeshift?

I believe shapeshift and 1hive cultures are aligned. ShapeShift DAO aims to be the best self-custodial multi-chain community owned interface. They have an established brand over 7 years, experience/track record shipping/executing on products and a large amount of reach in crypto including through connected influencers like Erik Voorhees. By aligning HNY with FOX we will align the economic and community incentives of both DAOs to work together, including making it more likely to get HNY related products integrated directly into Shapeshift which will help bring our mission to the world and benefit both DAOs in a positive sum manner.

Shapeshift community has expressed interest in working with 1hive and trialling honeyswap on xdai for the FOX token. Shapeshift has been looking for a payment channel with $1-2M in liquidity to swap in and out of the FOX token as well as an on/off ramp solution. Recently Shapeshift has added close to $160k in fox-xdai liquidity to test the protocol. 1hive initial efforts to support Shapeshift was through a $500k-$1M liquidity minining effort using the farms but upon further discussion farming isn’t always the best use of capital and often results in sell pressure. With some members from the tulip swarm and shapeshift, the teams have pivoted to using this as a great opportunity to trial a D2D partnership. This is an opportunity to utilize capital in an efficient manner while aligning the two communiies.

For reference here are past discussion around liquidity mining:

Things to Consider:

How much HNY do we want to swap for FOX? note: a swap would also require a second amount of same value to add to fox-hny pool
  • $250,000 (~877 HNY)
  • $100k (~350 HNY)
  • No

0 voters

What should the exchange rate be for FOX/HNY? I would propose we consider historical prices of both HNY and FOX (see picture below and sorry for bad pic lol). Right now we can exchange 931 fox for 1 hny and both tokens have tracked very closely with one-another anywhere between 1000 fox/hny to 900 fox/hny. I would propose we split the difference keep it simple and do a swap at 950 fox/hny.
  • keep it simple exchange 950 fox/hny
  • other

0 voters

image

15 Likes

Hi friends, Willy from ShapeShift here :fox_face: :wave: :honeybee:

First, I’d like to praise @ Monstrosity and @ Kyle_Stargarden (sadly can’t tag because I’m a new user :sob:) for drafting this proposal and also @solarmkd and @paul for participating in a ShapeShift community AMA last month to discuss opportunities for partnership between the communities, including the possibility of a liquidity mining program on HoneySwap (1hive Honeyswap X Shapeshift Community Call - YouTube)

While I’m not opposed to the possibility of a future LM program on HoneySwap, I think this is an excellent first step for establishing deeper liquidity for both FOX and HNY on xDAI, and am in support of this proposal as currently drafted. I would support a $250k swap, but understand it would be easier to pass a proposal for a $100k swap. For this reason, I would support a $100k swap as a first step as well as a follow-on proposal for an additional $100 or $150k.

ShapeShift is using Colony on xDAI as the primary method for distributing payments from DAO proposals to contributors, so increasing FOX liquidity on xDAI is an important goal for the community. I think the DAOxDAO swap and LPing is a brilliant way to achieve this, and look forward to supporting this in both ShapeShift and 1hive governance.

15 Likes

This is brilliant and another well written, thought out proposal by @Monstrosity Thank you for all your doing man!

2 Likes

@Monstrosity this is brilliant opportunity and proposal! This was a quality proposal and I really like the approach of D2D swap instead of LM.

The only thing i would like to comment on is the exchange price. I know you have put some clear justification on why you propose 950Fox per HNY, but I have seen another treasury exchange not go well as they planned out a fixed exchange and one of the tokens went really flying as the exchange was proposed. So would it be more cautious to propose the exchange rate on the days/times of exchange - probably could be round up or down, but that way no DAO is short changed due to any sharp market movements.
Also not sure if this sort of announcement creates other attack vectors where someone stands to gain an arbitrage or trade opportunity? This is just me overthinking I guess, but I wanted to ask the question.

1 Like

Welcome @willyfox from shapeshift… it’s a great Collab :handshake:

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A well written and thought out proposal from @Monstrosity once again… The D2D swap instead of the LM is well thought of but putting up a fixed exchange rate would be quite discomfortable…I think there should be a rethink on that

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  • How does DAO-provided liquidity usually work? And how should it work?
  • Is there some kind of agreement on how long the liquidity should last or what situations make it OK to withdraw?
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I personally don’t think any formal document is needed. If anyone in the DAO feels the partnership is no longer desirable I think it makes sense to allow anyone to make that presentation.

Interesting enough it looks like Aave<>Curve had a token swap proposal
Aave Snapshot - Suppported
Curve Snapshot - Rejected

2 Likes

I wanted to get ahead of anyone asking about FOX Tokenomics or anything around this topic as I didn’t cover this very well in the post above. You can find the allocation in the following blog post Scroll down to ‘fox allocation section’.

TLDR: 61M Circulating Supply & Max Supply of 1Billion: ~55% of all tokens are in the FOX DAO and is distributing at about a rate of 0.1%/month beyond the other already previously allocated buckets. various tranches are unlocking over 3 years to former employees/shareholders and DAO treasury

It is clear to me shapeshift is doing some neat work but of course it is difficult removing fees and still staying competitive. Fox looks to be taking some creative and respectable approaches to addressing these such as the Olympus DAO Bond proposal,running a cosmos validator, or some of what has been outlined in the fox tokenomics forum post. I really like the following quote taken from the forum post which I believe aligns very well with 1hives ethos.

Could we still add fees on top of decentralized protocols that the FOX token could waive? Of course.[…] I think this model is short-sighted, and frankly sucks. Personally, I got into DeFi to remove the middlemen, not to be one. I believe there is a better, positive-sum model in which no fees are ever added to protocols, and users can actually more by using a protocol through ShapeShift than if they interacted directly with a protocol from their own node.

There is a lot of information in the links so if you had any questions on this topic I hope this helps.

8 Likes

Great questions. This is so new i’m not sure we’ve had time to develop best practices yet.

Here’s an example from OlympusDAO’s OIP-29: Execute Treasury Swap with Sushiswap:

The swap carries with it a six-month vest (with the exception of providing liquidity with the assets), and an expectation that neither side trades or reduces their exposure after this term without a governance vote, which the other party can participate in through their respective holdings.

3 Likes

Nice I was already preparing a post about this… it’s a nice one sir :handshake:

Hey guys! I’m LPX from the ShapeShift community, and have been leading the initiative on our side for some kind of partnership, whether it be a joint venture or a incentivized LP program. I would love to answer any questions you guys might have.

Also, check out our Notion that was just made public by our products workstream – there’s so much going on at ShapeShift it’s hard to keep track sometimes!

So far its been made pretty clear that our community would like to see a LP program, but we thought, why not do something greater while we’re at it? Anyways, feel free to wander into our discord with questions :slight_smile:

P.S. We love what you guys have achieved at 1Hive DAO. Amazing community you guys have got going.

6 Likes

Cool to see such a large and established brand collaborating with 1Hive! Crypto OGs in particular know that ShapeShift and Erik Vorhees have been substantial players since the early days, and have fought some major battles to walk the walk of censorship resiatence and decentralization.

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Welcome @LPX … it’s nice seeing this great community partnering with 1hive…let see how it goes :handshake:

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Exiting proposal, thanks for sharing @Monstrosity

I keep getting surprised by the speed we progress in the space. We are already discussing the first D2D agreement and the idea was just introduced a few months back by BlockScience.

The proposal is clear and it will benefit both communities. I agree with @willyfox about having a first $100k proposal followed by a second shortly after.

The main open question I have is about the next steps while we do not have a standardized way to create these agreements. One idea that comes to mind is:

  • A Gnosis Safe is created on xDai with 6/10 signers (or similar)
  • Each community chooses a group of members (5 in the example) to be part of the multisig signers
  • Each community send the tokens agreed to be swapped + tokens to add as LPs
  • The safe open a liquidity position with the assets under management
7 Likes

We were thinking of doing a 4 of 6 (3 1hive & 3 fox) and then once the OTC swap is complete we would send 50% to 1hive DAO and then the other 50% to FOX.

Do you think you his LP should stay in a multisig? I feel the DAO would be a safer place.

2 Likes

Great, yeah sending the LP tokens to each DAO is better :+1:

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This is something I advocated for in the past and think is really important to help improve honeyswaps value to the defi community. I would love to see big liquidity of the best defi projects on honeyswap, but individuals take on too much risk and cost by doing it themselves unless they are a whale. Strategic partnerships like this proposal overcome that hurdle and will help to drive more users to xdai and honeyswap, whilst also helping commensal projects to prosper.

What are your reasons for this sir

Our version of the proposal is undergoing final governance check by the community before heading to Snapshot for official voting!

3 Likes