Cryptex Liquidity Strategy Discussion

Intro
Would like to continue discussing liquidity strategies.

Previous discussions are

I’d like to raise and discuss some possible strategies here.

  1. veCTX & governance
  • Users lock CTX for 1/2/3/4 years and get veCTX based on the lock duration.
  • veCTX holders will get the voting power
  • Proposals
    – Set CTX amount / month as LP incentives.
    e.g. We can set 20K CTX as LP incentives (90% - 100% APY for considering the liquidity is $750K-800K)
    – Set LP incentives weight for liquidity pools every week.
    (Reference to weighted voting on snapshot - Voting systems - snapshot)
    Voters will submit their result in percentage for all available liquidity pools. (like 10% for CTX, 90% for TCAP)
    We will sum up all proposal votes based on their voting power, and update the incentives weight of liquidity pools.
  1. Liquidity investment pool
  • DAO sets the CTX amount to be invested with WETH from users.

  • DAO sets the fixed APR for WETH deposits.

  • DAO sets the deposit period and investment period.

  • During deposit period: users deposit WETH and get shares of the pool

  • At start of investment period: WETH from users and CTX from DAO will be invested into the pool

  • After investment period: users get WETH back based on the fixed APR

  • if the trading fees are less than the fixed APR, then CTX from DAO will be swapped to WETH to cover the fixed APR

  • if the trading fees are more than the fixed APR, then the protocol will have additional WETH - that WETH will be swapped to CTX and DAO owns it.

  • Not only once, but DAO can have multiple investment pools at once if needed or can restart after expiry

    This way, users will get fixed rate APR and the CTX/WETH liquidity can be increased.
    This is an example liquidity investment pool for CTX/WETH but we can do the same strategy for TCAP or other liquidity pools later.

  1. Bonding / LP Bonding (POL strategy)
  • DAO sets the LP Bonding parameters (like CTX cap, price discount, vesting period, min-investment, … )

  • Users will provide WETH or WETH/CTX LP token to buy CTX token in discounted price.

  • Users will get CTX token in linear vesting.

    This way protocol can own liquidity of CTX or TCAP. (or JPEGz later)

I’d like to hear your feedback and finalize the liquidity strategy!!

2 Likes

Hi ph, Thank you for work in pulling this post together! Two questions:

  • On Option 1, where does the WETH/second asset come from?
  • On Option 3, does this count as the protocol “selling CTX”, which could be problematic considering the fair launch?

Thanks for writing this!

Before deciding on any strategy I would like to set the criteria for choosing one:

  • Is the strategy a good fit for products developed by cryptex.finance in it’s current form?
  • What are the economic impacts of this strategy?
    Eg. Will this negatively impact the price of CTX?
  • CTX token supply is capped. Do these strategies work for tokens with capped supply and if so how do we deploy them without draining the treasury and keeping long term survival in mind.
  • What is the complexity of implementing this strategy? How much time and effort will it take to implement this? Are we going to outsource/collaborate with some other protocol to achieve this? If so, how much will it cost the DAO?

With that said, I’d now like to share my thoughts on each of those strategies:

Vote Escrowed Model(veCTX)
I’m not convinced that this model works for us:

  • Our protocol doesn’t generate a lot of revenues right now.
  • We don’t have any pools like Curve where CTX holders can vote on distributing the fees/liquidity.

Keeping the above two points in mind, why will someone like to lock CTX for a long period vs dumping them right now? Without the hope for being able to vote on/control a big stream of revenue, I don’t think people would like to lock their CTX for long periods.

Liquidity investment pool model

The fixed APR part is a big concern for me. What happens if the protocol doesn’t generate any fees. In that case, the entire interest will have to be paid in CTX. If the price of CTX goes down even further then we might have to allocate huge quantities of CTX to cover for the fixed APR!
Does this strategy work for tokens with fixed supply?

POL model

My big question here is how much CTX will the DAO have to sell in order to acquire WETH? Won’t selling huge amounts of CTX on the open market impact the price of CTX negatively?

I understand that no model is perfect. But please try to use the criteria that I’ve outlined at the start to weigh the pros and cons of these strategies in order to choose one.

3 Likes

Thanks for your comment

Vote Escrowed Model(veCTX)
I’m not convinced that this model works for us:

  • Our protocol doesn’t generate a lot of revenues right now.
  • We don’t have any pools like Curve where CTX holders can vote on distributing the fees/liquidity.

Keeping the above two points in mind, why will someone like to lock CTX for a long period vs dumping them right now? Without the hope for being able to vote on/control a big stream of revenue, I don’t think people would like to lock their CTX for long periods.

This voting escrowed model is not related to the revenue.
You know, we were already paying out X amount of CTX for sushi/uniswap v3.
So I am suggesting to set the fixed amount of CTX for liquidity incentives and allow veCTX holders control the share of each liquidity pools. (further if we have more pools)

Liquidity investment pool model

The fixed APR part is a big concern for me. What happens if the protocol doesn’t generate any fees. In that case, the entire interest will have to be paid in CTX. If the price of CTX goes down even further then we might have to allocate huge quantities of CTX to cover for the fixed APR!
Does this strategy work for tokens with fixed supply?

We don’t open this investment pool for long term.
This is one-time liquidity pool model, which DAO can set the fixed APR, investment CAP, expire date, … and users can invest funds in certain period of start time, and can only withdraw funds after investment pool expired.
So this won’t be a problem with fixed supply tokens.
DAO can reopen this one-time liquidity pool if they want.

POL model

My big question here is how much CTX will the DAO have to sell in order to acquire WETH? Won’t selling huge amounts of CTX on the open market impact the price of CTX negatively?

DAO can set the available amount of CTX for bonding purchase.
I don’t think bonding can impact the price negatively.
Let’s say current CTX price is $10, and you bought 100 CTX with 10% discount price.
So you will pay $90 and get 100 CTX for 6 months (linearly).
This is not like instant buy CTX and instant sell, you will get tokens with vestings.
And you will only try to sell CTX only if the price is higher than $90. if you sell tokens in lower price, you won’t get any arbitrages.
Besides that, protocol will own liquidity with WETH and that will be great to keep the pool liquidities and generate revenues.

Would like to get your feedback.