This post seeks to outline a framework for an Abracabra and Ondo partnership. This partnership would build on Ondo’s Liquidity-as-a-Service offering and enable the use of $MIM (provided by the community) as liquidity for token issuers.
We propose that the Abracadabra DAO incentivizes users to deposit $MIM and future partners’ tokens into Ondo Vaults with $SPELL rewards.
Liquidity-as-a-Service (“LaaS”) is an offering from Ondo to make it possible for projects issuing tokens to increase the liquidity in their native tokens on decentralized exchanges by providing liquidity themselves. With MaaS, the community can deposit tokens into an Ondo liquidity vault with a flexible duration. Ondo and the Abracadabra community will match those deposits with an equivalent amount of MIM to form a liquidity pair. In exchange for providing MIM, the MIM community will receive a fixed APY return on its provided liquidity. We also propose that Abracadabra DAO provide additional incentives to users who deposit MIM (or the other side of the pair) into Ondo Vaults with SPELL rewards.
Ondo provides several advantages over existing liquidity solutions. With Ondo, token issuers earn trading fees and rewards which reduce (or even negate) impermanent loss (IL) risk and the cost of capital. With small adjustments, Ondo vaults are well-suited to facilitating direct listings, establishing the first liquidity for a token. Direct listings could eventually replace or complement IDOs. We would love to work directly with Abracadabra to build out these future offerings.
We propose that Abracadabra incentivize the community to use MIM-as-a-Service with SPELL rewards. The new Uniswap and Sushiswap liquidity pools in MIM that the program would create do not yet have histories of income from trading fees that investors can rely on for returns forecasting. As such, incentives will help with onboarding new token pairs to MaaS with MIM and will help bootstrap a sustainable model going forward, that will not rely on indefinite incentives.
Fei Protocol and Frax Protocol made a similar commitment of TRIBE/FXS incentives for its bootstrapping of LaaS. We recommend that Abracadabra provides $10,000 worth of SPELL per week per $1M of liquidity added to MaaS. The amount of incentives provided would max out at $500,000 in SPELL per week based on current prices ($500,000 SPELL per week assuming $50M in total liquidity). If more than $50M in total liquidity is provided, then the total SPELL incentives from the program would be shared pro-rata with participants based on their contribution. We strongly believe that this initial expense will be well worth it to attract new partners and foster the growth of MIM.
Benefits to Abracadabra
- Increase the supply of MIM and expand its reach
- A Fixed APY on all MIM used as MaaS liquidity
- Build out new and strengthen existing relationships with other communities
- Establish new Uniswap and Sushiswap liquidity pools based in MIM
Risks to Abracadabra
- The fixed tranche side of our vaults (which MIM would be deposited into) can realize losses if the variable tranche side of the pair experiences about an 80% decline in price.
- Smart contract risk with Ondo. We have three audits available for review here. One of our audits is from Quantstamp.