[SCP-76] Join Water, the New Paradigm for Sustainable Liquidity

Incubation post

Summary

Water is a new protocol currently under development from the 1Hive community that was designed for the sole purpose of providing sustainable liquidity for governance tokens. Water is assembling the first cohort of projects to help launch Water, and ShapeShift DAO is invited to the pool party.

Abstract

The concept for Water was inspired in part by the success of the token swap and joint LPing 1Hive and ShapeShift DAO executed with $FOX/$HNY in 2021. After this swap, 1Hive received a lot of interest from other projects to execute similar token swaps and joint LPs; more demand than the HNY supply could meet. The idea for Water emerged from this demand: a token specifically designed to be paired with DAO’s governance tokens and LP’d on Honeyswap. Projects that are accepted by the Water DAO (initially a multisig composed of 2 members of each launch partner) provide $100k of their project’s token (to get started), $100k of Water is minted, and $200k is LP’d on Honeyswap by Water DAO. If a project ever wants to rage quit, Water DAO will send them 85% of however many of their tokens are currently in the LP (15% penalty). Assuming things go well, these tokens will remain in Honeyswap providing much needed liquidity for FOX at no ongoing expense to the DAO, and after launch we can consider increasing the amount of liquidity in the pool.

Water tokenomics:

Water will only be minted in order to provide liquidity for DAOs, subject to the approval of the Water multisig committee. The only way to acquire Water will be to buy it. Water will not be airdropped nor rewarded to community members. Why would somebody want to buy Water? Water will act as an index token for DAOs; so if you like DAOs, water is a great way to get exposure to a vetted basket. Regardless, even if there is zero demand for Water, it will still serve its primary purpose of enabling approved DAOs to increase their liquidity on DEXs without the need for expensive farming programs. If the price of the majority of the governance tokens participating increases, Water’s price will increase and will bring FOX with it. And ofc, vice versa.

To learn all about water, check out this excellent proposal and discussion from 1Hive’s @Paul: Water​:droplet: Shared Liquidity Proposal - :herb: Proposals - 1Hive

Here are the other projects that have already expressed interest in participating:

  • 1Hive
  • Shapeshift
  • BrightID
  • Giveth
  • Panvala
  • Opolis
  • Agave
  • Token Engineering Commons

Specification

In order to participate in Water, two members of the ShapeShift community must be appointed to represent the DAO on the Water multisig committee. I’ve nominated myself as well as another fox who prefers to remain pseudonymous in public forums, but is an active community member, large FOX holder, and known by the others on the water multisig committee. These representatives will be entrusted to act in the best interest of the ShapeShift DAO when deciding whether to approve or reject transactions proposed to the Water multisig.

Willy: 0x1D01A2FefB8883A5cfB8c77B19d9b96794581288
Fox #2: 0x1a3AD6064528b8899ECB85867Da809ffCA05A04a

Next, ShapeShift DAO and other launch partners will each transfer $100,000 of their DAO’s governance token (ie. FOX) to the Water multisig on Gnosis Chain. The Water multisig committee will then mint 100,000 Water to deposit alongside each partner’s token to a liquidity pool on Honeyswap.

If ShapeShift or any other partner ever wants to exit the program, the Water multisig will withdraw their liquidity and return 85% of the tokens that were in the LP at the time of withdrawal (15% penalty).

Benefits

  1. Participating in Water will increase FOX liquidity on Gnosis Chain at no upfront or ongoing cost to the DAO.
  2. FOX will be included in one the first index tokens for DAOs.
  3. If the experiment is successful, more projects will join, and ShapeShift DAO will have played a critical role in launching a new paradigm for sustainable liquidity.

Drawbacks

  1. FOX’s price will have additional correlation to the price of Water and the price of other participating projects’ tokens.
  2. 15% penalty if we ever want to exit.
  3. Water is an experimental protocol, and in a worst case scenario the price of Water could go to zero and we could lose the $100,000 FOX.
  • For - Join Water and allocate $100,000 FOX to the FOX/WATER LP
  • Against - Do nothing

0 voters

5 Likes