Proposal: Provide ALD liquidity on Arbitrum, Polygon

[crouguer]

Proposal
AladdinDAO should provide ALD liquidity to DEXs on cheaper chains, ASAP, to allow retail users the ability to cheaply buy ALD and thereby gain exposure to Aladdin’s mainnet farms.

BSC already has ALD liquidity on Pancake with some volume, apparently. I propose adding Polygon and Arbitrum. Polygon fees are very low and I think it has a big retail population, while Arbitrum seems to currently be the rollup with the biggest TVL and most momentum.

Rationale
One of AladdinDAO’s primary goals, arguably the main one, is to helping (especially non-professional) yield farmers select the highest quality long-term farms that are worthy of farming-and-holding. A huge barrier to doing this in a meaningful way is that both Aladdin and most of the great farms identified so far by the Boule Council are on Ethereum mainnet, where most regular (non-whale, non-pro) users are priced out by gas costs. Moreover, for farms that have been proposed and selected for other chains, there are technical barriers to listing them that delay them. Aladdin should absolutely become multi chain in future and provide its service on chains with more reasonable gas costs, but for now we are on mainnet.

In parallel to this, discussions are continuing around a new economic model for the ALD token. There seems to be general agreement that ALD’s value should be underpinned by a ‘basket of prime DeFi tokens’, sort of like an ETF. By holding the native token yields of Boule Council selected farms in our treasury, we create a sort of on-chain fund, and users buying ALD get (indirect) exposure to those curated assets.

As is often the case, the problem of high mainnet gas fees might be hiding an opportunity: if ALD is underpinned by great mainnet DeFi assets in its treasury then users get exposure to them by simply buying ALD. Moreover if ALD is bridged to other chains where it can be traded cheaply, we are essentially providing exposure to Ethereum mainnet prime farms without Ethereum mainnet gas costs. (I smell a narrative!) Assuming Ethereum gas fees never really come down, this could form a big part of the ALD value proposition in the long run, or at least for as long as there are great DeFi opportunities on mainnet.

Other chains that Polygon and Arbitrum should probably also be considered, though we will probably want some kind of limit on how many different chains. A nice side benefit of this could be to see which chain has the most ALD activity and that might help guide future multi-chain development.

Potential Problems
Staking: When an eventual single-staking pool for ALD is implemented, which seems likely sooner rather than later, users on other chains will be unable to participate.

Governance votes: At the moment, governance voting rights are only available to ALD held on mainnet because that is all that’s supported by Snapshot. Martin suggests that Snapshot is under some pressure to add support for other chains, so this may change in the future.

What does everybody think?

[ALD_WHALE]

Great idea! As you mentioned, there seems some challenges right now. But considering there being many alpha’s at other chains, we should definitely go for multichain solution.

[paulp]

Adding Avalanche to the list I think would be super wise. There are many many market participants that are completely priced out in ever accessing yield from premium defi protocols, who primarily use AVAX. Getting $ALD on Avalanche solves this.

[martinkrung]

I see several ways to do this:

• We provide liquidity, we own. So we need to define which pairs we use. We will lose money on this because we will likely have impermanent loss.

• We expect the community to provide liquidity and pay for it with ALD token

• There would be a third option, but I don’t thinkg a product exists for this: We expect the community to provide the liquidity and pay for a potential impermanent loss who is generated. (For LP who old LP longer then 6 month) (This would be a product haha)

This comes down to the question how much money from the treasury we will park in this? Whats our risk appetite regarding IL? Which pair to use?

On which chains we provide liquidity on is basically limited how much we want to spend. And on which chains multisig is existing to hold it, if we decide we hold some ourselves. (Avax not gnosis multisig)

Target chain which I would prefere personally, orderd in priority: BSC/Arbitrum/Polygon/Avax

A discussion about target chain is also if we want to move some of the funds to a cheaper chain to use for regular payment and also token vesting to core contributors.

[ALD_WHALE]

Though i have never heard of it, third one sounds very interesting. There are some projects experimenting project owned liquidity. Both community and project can support LP to minimize IL.

[btt]

Nice proposal @crouguer

I agree that the high cost of eth mainnet is likely going to be a turn-off for retails from other alternative networks to participate in our product. And the same issue may sooner or later extend to future vaults as well since high gas fee can significantly limits the underlying strategies to be deployed, especially rebalancing and compounding.

Regarding the potential staking problem, I’d say that though it’s indeed a legitimate problem, but at this stage it doesn’t seem to pose a high negative impact to our platform. Given the nature of our newly discussed model, ALD is only appealing if retails see a high potential growth of the treasury. Before the hard number shows that, the majority of the buys probably are going to be only for price speculation. In addition, rational stakers should realize that it’d only make sense to stake if the amount is relatively high enough, and accounts with high amount won’t be discouraged by high gas fee too easily. But as the treasury and narrative grow, we do need to think about it at some point, depending on how fast they grow.

** Another thought that just came to my mind regarding the staking issue on other networks. An alternative to do so can be issuing $stALD on secondary markets in those chains where this is a demand.

[btt]

I think the closest product to your third option is some of the LaaS providers, e.g. Tokemak, Fei+Ondo. Though some of them charge a handsome fee and all of them have an onboarding process, which can be quite selective or time consuming.

I personally think that the timing when to provide liquidity is more important than how, at this stage. The impermanent loss issue would be more severe if we can’t show a clear product that is appealing to ppl so that they can hold. Otherwise, it’s going to be a dumpster show. I would say let’s work out the model and get the new narrative out first.

[martinkrung]

Governance should not be a issue, as snapshot can be used cross chain I did research yesterday.

Regarding the first target cheap chain, I suggest to just ask our users, basically the boule plus members. They can just vote and then we have a clear answer. It’s not a vote or binding, its more a survey.

Voting like this:

Please choose every chain which you currently us regularly or have some substantial funds on? Or Something like this…

• BSC
• Polygon
• Arbitrum
• Avalanch
• …

During the daily I had the idea to split the staking pool, so use two different chains. So product is on mainnet but compounding staking reward pool is on BSC. As excess token are distributed to the pool some manual coordination would be needed to adjust reward. I don’t know if this is feasible org wise. Sadly, you can’t call function cross chain in the EVM world, or at least there is no standard to my knowledge.

[crouguer]

Thanks for the feedback @btt. Agree generally with everything you said.

Regarding staking, I would envision a staged rollout, something like I mentioned in the contributor call on Wednesday. Getting liquidity to target chain(s) is the most important, but eventually maybe whichever chain ends up becoming our first ‘second home’ could have a minimal staking contract deployed… though there would be details to work out. Your idea to use a liquid staking token could be a nice vector.

Regarding timing, I didn’t think it would be so important, except that there was already liquidity ready on the target chain when we expect to start seeing retail demand as the new structure and narrative are pushed out. Why do you think that just having liquidity available on a different chain will cause a problem for ALD price? Not saying it won’t, I just don’t immediately see why it should.

[crouguer]

Thanks Martin! The counterpoint to using a poll or vote among boule plus members is that they’ve already shown a willingness to suffer mainnet gas fees for buying a minimum of 5000ALD and staking it. Might it not be better for us to be listed on chains where there are the most new users rather than existing ones…?

Is there anywhere that tracks a metric, like # of wallets below a certain balance that we could use to guide us?

[btt]

I may very well be wrong. The principle of the new model is to have the ALD price positively correlate to the treasury’s reserve. Since there is already some fragmented liquidity in the market, the current ALD price has nothing to do with the new model. If we start adding liquidity without having a certain amount of treasury growth to back up the price, I’m concerned of a downward spiral on the PA, and in turn, on the treasury.

My alternative would be, first build up the treasury and push the narrative, and then let the market learn and understand what the price should be, and hopefully the market then will price the token to what it’s worth based on our treasury. Once that is settled, we then can more confidently add liquidity.

[crouguer]

Hmm, this is different than my expectation of what seeding liquidity would do, but maybe I’m missing something. I wouldn’t expect any price impact from just making ALD available for trade on an alt chain DEX, especially since the only way to sell into that liquidity would be to bridge ALD from mainnet, at a cost. Users will do that if there is an arbitrage opportunity (which is, I guess, how price will be kept consistent between chains?), but it’s not like there’s a whole pile of ALD already sitting on these alt chains itching to be sold.

In terms of narrative, I think that we’re probably always expecting some kind of price premium over the treasury backing value for ALD, since ALD is also a gov token and has utility (currently Boule Plus membership, certainly more in future). Not to mention any speculative premium the market may apply for future growth, etc. We will be counting on a certain level of get-in-early mindset during our bootstrapping phase while the treasury is not yet a significant factor.

In any case if we are leaning toward a structure where ALD is marketed as a cheaper, easier way for retail investors to access great mainnet farms, then we will be relying on those retail investors for price support for ALD… and most retail is priced out of mainnet. So, timing wise, I think that we need some minimum amount of ALD liquidity on at least one or two alt chains at the moment we start marketing, so that there is a reasonable purchasing option for any quantity of ALD at the moment people hear about it.

Does that make sense or am I missing something?