Summary - After discussions with the $FOX community during previous governance calls and tokenomics meetings, ICHI has been encouraged to submit a proposal to launch an ICHI $oneFOX-$FOX Angel Vault. This would allow the FOX DAO to build a treasury of DAO owned buy-side liquidity and protect the $FOX price during a market crash.
Abstract - Liquidity is the money made available for trading. Most approaches to market making and liquidity involve putting up $FOX tokens and a base asset (usually ETH) for sale. This works great when $ETH is going up in value versus the dollar but leaves the $FOX price exposed to drops in the value of $ETH versus the dollar. Only single-sided $oneFOX is added to the proposed $oneFOX-$FOX Angel Vault. This protects $FOX price against market corrections.
Motivation - $FOX price would be better protected against bear markets without hurting the upside during a bull market.
Specification - Angel Liquidity Vaults are a Uniswap v3 liquidity management protocol that allows LPs to deposit single-sided assets into a Uni v3 pool. They combine the rewarding and simple experience of Uniswap V2 with the concentrated liquidity of Uniswap V3. They enable projects to build a treasury of project owned liquidity and everyday DeFi users to earn fees without needing to manage their pool positions.
Click here to read more about Angel Vaults.
Liquidity may be added to the Angel Vault in the following ways:
- Direct deposits by the $FOX community treasury,
- Incentivizing deposits by LPs,
- Purchasing LP with programs such as Olympus Pro Bonds, and/or
- Leveraging the assets backing $oneFOX to mint more $oneFOX and deposit it to the Angel Vault.
This liquidity should total a minimum of $2M $oneFOX to enable profitable rebalancing of the Angel Vault. $10M or more liquidity is recommended given FOX’s large Uni V2 FOX-WETH pool. While several options are available, we propose the following to secure the initial liquidity:
- ShapeShift DAO mints $2,000,000 oneFOX (method of minting can be determined by TM&D committee, but may include acquiring stablecoins via Success Token sales, borrowing against FOX, leveraging existing stablecoin balances in the treasury, or potentially other means as long as they do not result in FOX sell pressure)
- Launch an Angel Vault farming program targeting $8M of additional liquidity for 6 months and a >50% APR including trading fees. Assuming an average APR from trading fees of ~35% (based on the results from the oneUNI/ICHI angel vault), a conservative reward rate of 25% should be targeted. At current FOX price of ~$0.65, this translates to $1M of FOX rewards, or 1,538,461 FOX rewarded over a 6 month period.
Benefits - ICHI’s Angel Vaults are the easiest and most cost effective way for projects to increase their liquidity floor, enabling:
- LPs to earn more trading fees with less,
- Liquidity rewards to increase the amount of buy side liquidity without also incentivizing sell pressure,
- The inflationary cost of rewards to be offset by the deflationary minting of the project’s branded dollar, and
- DAOs to build assets under management (AUM) backing their branded dollar and supplying DAO owned liquidity.
Drawbacks - If $FOX price declines in value, $oneFOX will be sold for $FOX. LPs will only be holding worthless $FOX tokens if $FOX price goes to $0.
- Protect $FOX’s Price Against Market Crashes with an Angel Vault
- Do Not Protect $FOX’s Price with an Angel Vault