2 final proposal edits before this proposal goes up 
Proposal is up in the Honey Pot! Gardens
Gnosis Safe address: 0xb5F50e42aD28fB4BFc25b6B4c5a34AaD30649FC0
I donât think this proposal should pass, and here is why:
The points Iâd like to make are:
I kinkly ask @paul to cancel the proposal until there are more opinions of blockchain engineers on the table. A change like this to the tokenomics of gardens should be made with a lot of care, and what Iâm afraid of is that when something wrong is done, itâs difficult to undo it when it is in the blockchain.
I am definitely in support of a common initiative by all the value-aligned communities to try an experiment with this proposal. However, I removed my support as I think the arguments @sem expressed are significant. Until further analysis and more transparent discussions or statements from the parties involved, I think we should stall it for the long-term benefit.
Yes but it is also less than 1% of our mcap. So from that perspective it isnât nearly as significant comparing it that way.
Itâs backed by the other communities. The purpose for water was because communities can not pair liquidity with $Hny due to the difficulty.
This goes back to the very problem we are trying to solve. Our ability to perform D2D swaps, bootstrap garden DAOs, and add to honeyswap liquidity is being completely restricted by this model which has its benefits and thus the proposal for $water rather than support for making $200k+ Hny proposals easier to pass
The multisig I think is a real concern. I donât know that it is enough to pull my support but itâs enough to at least slow the passing of this proposal. I would encourage any development help we can get to implement a better solution for this gap
I strongly disagree with most of these points.
The points I believe have merit are governance with a multisig and the risk of a hacked project minting infinite tokens. And while this proposal isnât perfect, it significantly improves on the status quo for these concerns!
Governance with a multisig. Yes, we need to build a better governance system for shared liquidity, but Water is still a big improvement on current multisigs, which are the status quo. Water is a 5 of 12 multisig with members from 7 different projects. Our shared liquidity with Shapeshift and BrightID, and BrightIDâs shared liquidity with Giveth, are all 4 of 6 multisigs with members from 2 projects. Honeyswapâs liquidity incentives are also managed by a multisig, which still hasnât been able to switch STAKE<>xDAI rewards to GNO<>xDAI, 4 months after the merge. Our current liquidity governance is not in good shape.
Hacked project minting infinite tokens. The risk here is that a project with significant liquidity outside of their $WATER LP could be hacked and infinite tokens minted, which would disproportionately affect $WATERâs price beyond just that projectâs share of the LPs. For this to happen, the malicious tokens would be minted and sold for other tokens with $WATER LP, and an unsuspecting arbitration bot would then buy those tokens in the $WATER LP and sell them through the tokenâs other LPs with more liquidity, until either those LPs were also drained or the arb bot was drained. A few important notes about this risk:
To address the other points:
Iâve been championing the practice of DAOâs owning their own liquidity - Spinning up a new multisig for every tokenswap deal has proven to be cumbersome and ineffective when change inevitably needs to happen. It would be great if somewhere in this system a DAO can hold itâs own liquidity - in the form of an index token or something liquiditable.
In terms of backing the value of $WATER - What about lowering the entry price (100k in tokens) and instead putting in a percentage of stables that is paired with $WATER then $WATER is subsequently paired with protocol tokens. Would there be a threshold where if a DAO had to sell itâs tokens to acquire xDai that it would make up for it by having a huge amount of liquidity created for it?
Have we considered other governance tools like an AragonOS, DAOhaus/Moloch?
The current proposal for Water is a very innovative, yet simple and elegant. It is multi-party token swap where you also get an index token out of the deal⌠and unlike most index tokens that require some sort of liquidity mining to bootstrap, Water has liquidity by virtue of itâs creation.
I donât see the benefit in changing anything to make it more complicated. What is great here is the simplicity. I fully expect this model to be copied and I am bullish on Water.
If 1hive did token swaps with everyone in water it would have the same risk as Water has currently, with less upside (no index token), and more coordination.
As far as modeling⌠I donât really see a need for it. It is a simple thing⌠if the prices of the other tokens go up, it positively effects the price of WATER and HNY, if they go down, then the price of Water and HNY go down. But now, not only do you get more liquidity for your token, there is also a reason to buy WATER. What really is there to model?
Multisigs have proâs and conâs but this is a nice friendly multisig⌠I donât see much risk in this multisig, as Paul said, i see more risk in multisigs that have fewer groups, this is a very diverse group.
It is a large amount of the Common Pool, but it is also a great use of the funds. It will not be sold to produce labor, which would lower the price, it will be directly utilized to provide liquidity, while also creating the utility of an index token, both of which help the economy.
If you donât see the value in token swaps to add liquidity or Index Tokens⌠then this is not the proposal for you. But I see value in token swaps for liquidity and I love index tokens as a simple way to get exposure to a basket of assets.
This in no way would be fake liquidity. It is pass-thru liquidity⌠well hopefully⌠if Honeyswap works right.
The only thing I worry about is if Honeyswap will be able to route thru the liquidity⌠because with the GIV/TEC token swap the Honeswap front end doesnât seem to recognize the liquidity well⌠Routing seems to be ignoring the GIV/TEC pool? ¡ Issue #71 ¡ 1Hive/honeyswap-interface ¡ GitHub
The routing through liquidity can be easily solved with a simple PR as far as I know. It also happened with COLD/HNY before, and we were able to solve it.
By the way, the main point that I might be against the proposal is the multisig as I believe we can also leverage our own governance tools. That is why I thought a more comprehensive and transparent discussion would be better for the long term. Also, at this point, I can say that transparent info from other parties to be involved in the multisig is missing. We can improve that.
Great point⌠We should say exactly who is in the multisig⌠I will work on that⌠We do that for all Giveth Multisigs, and this one is no exception.
For now here is a link: Gnosis Safe
There are fans of the idea of sharing liquidity among communities, and Iâm also one of them as you can see in my first reply in this thread.
What Iâm not fan of is about itâs implementation. I donât trust the way itâs implemented and I donât like the idea that DAOs canât undo giving liquidity. Why should they support the impermanent loss, and on top of that lose 15% if they ragequit? Is it really ragequit if you must ask the WATER board to leave and they must accept it?
Also, as I was saying WATER is not backed up by anything. Monstruosity says that one community backs the other. This is similar to be the unpopular kid in the class, and invite everyone to your party telling them the most popular kids will come. It may be true if you succeed with your lie, but this does not make you popular, just the appearance of popularity.
I think WATER is doing something similar with the rest of communities. It is taking the cool communities to a party to share liquidity, which is great. The problem is that it wants to be as cool as the rest without deserving it, and what is worst, make the others pay for the drinks.
WATER is requesting at least $100k to each community in order to join the party, but it doesnât put anything from its part (except for some seats in the board in which there is people who nobody voted and the community can not revoke).
Furthermore, normally when you have an index token, it can be redeemed by the underlying tokens, something that has been successful in Moloch DAOs or in Dandelion DAOs such as PieDAO. It is not the case for WATER, another way to see why it does not have any intrinsic value.
My question is clear: didnât we lean anything as a community from the agave launch, the agave hack and the alvin hack? Do we really want to put more than the 8% of our treasury on an untested token without the supervision of the blockchain engineers of the community, and without receiving any guarantee that we will be able to get our tokens back?
I request @paul and the rest of the WATER supporters to cancel the proposal to take some time to demonstrate that my claims are wrong and more importantly that the proposed WATER model is safe and fair for the communities that join it, and then present the proposal again. If you continue with the same proposal without providing more details on how it will work, I will defend my points in front of Celeste.
I am not sure I see it this way. The analogy would be better to say each community wants a pool to swim in but by themselves they donât have the pool nor enough water. $WATER is an empty pool and each community brings an equal amount of âwaterâ to pour into that pool so they all can swim in the pool. $WATER doesnât need to contribute anything because it doesnât gain anything it just acts as the holding for the communities. What is swimming in this analogy? It is deeper liquidity for their token. Does $WATER gain anything having deeper liquidity, no the benefit is to the communities. Rather than use $WATER would you be opposed to using $HNY for this experiment instead of $WATER? That approach didnât seem to get much traction
⌠I wonât cover multisig concern which has already been brought up
There are three two elements that do not fit in the swimming pool analogy:
Sem⌠working on a more comprehensive launch doc which Iâll share here. I agree that there are important aspects of this launch that arenât fully addressed yet.
Right now I want to cover the economic model of Water in more detail, because I think your comments come from a misunderstanding of either the proposal or of how uni v2 style decentralized exchanges work.
In the example below all 7 of the interested communities have joined Water. Hereâs the spreadsheet which you can copy and play around with yourself. At equilibrium, the xDai values of each of the LPs are equal, and look like this:
But the individual token values for each community are different, so when looking at the unit values in each LP, itâll reflect that. To make the model simpler I set all token prices to either $0.50, $1, or $2 to start, and included the HNY<>xDAI pair which is important in this economy as the top xDAI pair:
^ in this screenshot:
So what happens if the value of one of the tokens goes down? i.e. the token can be bought for a lower price somewhere else, but really this encompasses every imaginable reason a token goes down in value, which you can boil down to âpeople like owning that token less.â
Here is what the xDAI value LP chart looks like if the value of FOX has gone down:
Someone can now presumably buy FOX at a lower price somewhere else and sell it for $2 in the WATER ecosystem.
Assuming they want to cash it out for xDAI, the trade theyâll make is FOX > WATER > HNY > xDAI
This model assumes that price slippage will return the ecosystem to equilibrium when 0.1 $FOX is sold. Hereâs what the unit value model looks like after that trade:
Damn! That was pretty cool. What happened?
Now letâs look at the opposite, more pleasant event where FOX has gone up in value:
The arbitrage opportunity in this event is to buy FOX at $2 in the WATER ecosystem, since it can presumably be sold for more somewhere else. If the arbitrageur starts with xDAI, their trade will be xDAI > HNY > WATER > FOX. Again weâll say equilibrium returns when 0.1 $FOX is bought:
Damn! That was even more cool! People are way happier now:
With this I want to clear up some misunderstandings in your posts:
Because of arbitrage and price slippage, the price of WATER is a function of the prices of tokens itâs paired with.
There are no WATER tokenholders. 100% of circulating WATER at launch lives in liquidity pools. Unless you mean the arbitrageurs buying and selling WATER for their work, but theyâre being compensated for the service of keeping the greater Honeyswap exchange in price equilibrium.
Anyone may choose to buy and hold WATER after launch if they like it as an index token, and that would benefit all the token communities in WATER. But investors and arbitrageurs arenât able to sink WATER below its index token value because its entire initial supply lives in LPs.
The WATER board does not actively manage LPs, arbitrageurs play the role of active managers for WATER, and their incentives are well-aligned. The WATER board is only needed to remove liquidity when a community asks them to, or when a token is compromised. In the case of a hacked/failing token, WATER board members are personally motivated to remove that LP since itâll negatively affect the price of the tokenâs they represent.
Communities are not providing tokens to WATER as an investment. They are paying for the valuable service of sustainable liquidity for their token.
This is the reasoning behind the 15% fee for RageQuitting. Participating communities should have the option to leave, but since WATERâs price could grow quite a bit, it might become tempting for those communities to treat it like an investment and try to add or remove WATER liquidity to maximize profit. This goes against the purpose of WATER which is to provide affordable, long-term liquidity.
I have to retract of one of the arguments I did before and I edited and stroked out. The reality is thatâŚ
If:
Then:
Although I still do not like the method in which WATER wants to be implemented, I apologize for the bad argument, and I hope this post serves as a good correction.
Thanks for the examples @paul, I think they they help understand WATER much more.
I still think there are lots of concerns that are not amended in the proposal and Iâd like to propose two WATER alternatives that give more control to the communities:
The WATER board could receive the funds from the different communities, put all of them in a Symmetric Finance pool (Balancer friendly fork on Gnosis Chain), and send them back to the communities.
We all obtain an index token and a huge amount of liquidity in Symmetric in just one step, and without most of the concerns we have been discussing about, because in this case the communities would have control their liquidity with the rest of the communities.
If a token had to be removed, the WATER board could suggest a new distribution, and a contract could be written that would automatically withdraw the liquidity form the old pool and add it to the new pool without the removed token, all in one transaction, without the rest of the tokens even noticing a scratch in their liquidity.
WATER board could serve as an OTC market used when a community wants to exchange tokens with others in order to add liquidity to their token. Instead of buying the tokens in honeyswap, they could have a better deal doing an order such as 50% HNY, 30% AGVE, and 20% BRIGHT in exchange of any amount of their native token.
The WATER board would try to fill all the orders (maybe taking a small fee for the work it is doing), and sending the tokens to the communities.
Each community, who had already chosen which tokens are more convenient for them, would be able to hold them in their treasury or pair them in an LP. As in alternative 1, they would have entire control over the tokens they bought with their tokens and could decide when to stop providing liquidity with communities they suddenly trust less than before.
Both Alternative 1 and Alternative 2 send the tokens back to their communities, so we do not have the concern of a multisig holding the funds from multiple communities anymore. This also allow communities to decide what to do with their treasury.
The difference between them is that in Alternative 1 there is a recommendation made from the WATER board who chooses which token distribution should have the Symmetric LP based on the amounts provided by each community, whereas in Alternative 2 each community chooses which tokens to buy in order to build itâs liquidity treasury.
Hi @paul, I really like the concept you are working on with $WATER. Last week I was brainstorming a similar concept on the ShapeShift discord and a couple members referred me here. The ability for DAOâs to contribute to a multi-asset pool, as a method of diversifying DAO treasuries and creating a vested interest in other DAO projects, is vital to the DAO ecosystem. The solution you are proposing seems solid, but I think there are opportunities to simplify it so that it can scale and reduce friction for completing the pools more efficiently. I think Alternative 1 by @sem is even closer to a concept I was drawing up. I put together a summary write-up that might have some relevance to what you are working on with WATER. Iâve linked it here, and would appreciate any thoughts on it: D2D Multi-Asset Pool
I realize this might distract from your specific proposal here, so if there is better place to continue the discussion, let me know.
Here are the details of who is in the Gnosis Safe:
I think the plan is to also create a second safe that will be able to mint water, an 8/12 safe with the same people.
Remember that one of the conditions to effectively not extract value from the communities is precisely do not mint new WATER and to burn all the WATER that is obtained from retiring liquidity (in ragequits or excommunications).
I understand that in order to refill WATER for project that want to add more liquidity you need a reserve of water, but having some reserve of WATER for that purpose and have the ability to create as much WATER as you want are very different things.
WATER board is already trusted on holding the liquidity pool tokens, but granting powers to mint new WATER becomes problematic if the token becomes popular among the rest of the people and itâs used outside the LPs. Is there any reason why WATER total supply is not capped?
Thanks for sharing Gunnar - lots of overlap, but I think a D2D Multi-Asset Pool is solving different problems than Water. The main goal of Water is to provide sustainable, affordable liquidity for the projects that join, and exposure to a diversified pool of assets is sort of just a nice byproduct (although critical to its utility).
Itâs an improvement on founder-provided liquidity, liquidity rewards, and 1-to-1 DAO shared liquidity which are the most common ways tokens in our ecosystem have built their LPs.
I really like the interface in your proposal for creating a pool framework with terms that other DAOs can fill. Maybe the 2 ideas could be integrated where DAOs creating a pool could have the option to add shared liquidity between the projects as well?
