SAIP 56 - Allocate 2m USDT to bootstrap the MIMSwap deUSD/MIM pool
Tldr: This proposal seeks approval from the Abracadabra DAO to allocate $2 million USDT from the treasury to provide initial liquidity for the deUSD/MIM pool on MIMSwap Ethereum. The primary objective is to kickstart the pool’s liquidity, ensuring a stable trading environment and an attractive experience for new liquidity providers (LPs) who are interested in participating in this pool.
Introduction
MIMSwap is a decentralized exchange (DEX) that offers significant potential for the Abracadabra ecosystem on Ethereum, particularly in terms of bootstrapping the initial liquidity for MIM and deUSD pairs.
Establishing a robust deUSD/MIM liquidity pool on Ethereum is crucial for several reasons:
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User Experience: A well-funded pool will reduce slippage, making trading more efficient and appealing for users of the new deUSD cauldrons. This will encourage more LPs to participate, thereby further increasing liquidity and stability.
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Market Stability: By ensuring sufficient initial liquidity, we can mitigate the risk of extreme price volatility and minimize the potential for large price discrepancies across different DEXs and chains for new LPers joining the pool.
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Strategic Growth: Funding this pool aligns with our broader strategy of expanding the utility and adoption of MIM and deUSD. A healthy pool will attract more traders and LPs, contributing to the overall growth of the ecosystem.
Proposal:
The proposal is to allocate $2 million USDT from the Abracadabra treasury to provide initial liquidity for the deUSD/MIM pool on MIMSwap Ethereum. These funds are currently sitting idle in the gnosis safe. This allocation will be managed as follows:
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Liquidity Provision: The $2 million USDT will be used to purchase an equivalent amount of deUSD and MIM, maintaining a balanced ratio that mirrors the current liquidity conditions in other pools (e.g., 50% USDT for deUSD and 50% USDT for MIM). The acquired assets will then be deposited into the MIMSwap deUSD/MIM pool.
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Monitoring and Management: The liquidity will be closely monitored to ensure optimal performance and alignment with market conditions. The DAO will receive regular updates on the pool’s performance and any significant market shifts that might necessitate further action, in case they are required.
Expected Outcomes:
- Enhanced Liquidity: The infusion of $2 million USDT will provide a strong liquidity base, reducing slippage and enabling smoother trading for all participants.
- Increased LP User Experience: A well-funded pool will draw in more LPs thanks to its superior user experience, further strengthening the pool’s liquidity.
- Ecosystem Growth: A stable deUSD/MIM pool will support the overall growth and adoption of both MIM and deUSD, reinforcing their positions within the broader DeFi ecosystem.
Risks and Considerations:
- Market Volatility: The allocation of USDT to this pool does carry market risk, particularly if there are significant fluctuations in the value of deUSD or MIM. However, the controlled and monitored approach proposed here aims to mitigate such risks.
- Treasury Impact: The use of $2 million USDT from the treasury will temporarily reduce the available funds for other initiatives. The DAO should consider this in the context of broader strategic priorities.
Conclusion:
Funding the deUSD/MIM pool on MIMSwap Ethereum with $2 million USDT is a strategic investment in the future of the Abracadabra ecosystem. By providing strong initial liquidity, we can create a more appealing and stable trading environment, attract more LPs, support the long-term growth of MIM and deUSD and lastly position the DAO correctly for rewards flowing towards the pool later on.
Voting Options:
- Approve: Allocate $2 million USDT from the treasury to fund the deUSD/MIM pool on MIMSwap Ethereum.
- Reject: Do not allocate treasury funds for this purpose.
This proposal is open for discussion and feedback from the DAO community before being put to a vote. Given its a treasury management proposal, the speedlane AIP format has been chosen, with a 48 hours discussion period followed by a 24 hours voting period.
Voting can be found here. Vote passed.