We would like to discuss how to proceed forward with xGov #61 Proposal, approved in the Reserve List during Voting Session 2 ended in December 2023.
As stated in the proposal (“We request grant to increase the AMM liquidity.”), the goal is to increase the liquidity of several AMMs whose pairs include VoteCoin, as proposed by @scholtz.
Let me make some initial considerations to clarify my point of view:
- The xGov has been designed to request grants for building products for the Algorand Ecosystem, the liquidity provision is not the primary goal.
- We are in an experimental phase, so it is understood that it’s possible to investigate other more “creative” uses of the xGov funds, if, and only if, reasonable conditions are met and no “free money rules” are applied.
- As it was stated in the grant proposal some relevant information was missing: the duration of the liquidity is the most crucial one.
Given all those uncertainties, we have essentially two options in front of us:
- Declare ineligible the request because, after proper scrutiny, it is not complete and incompatible with the spirit of the xGov Grant Proposal.
- Explore a path that could secure the execution from possible risks.
Personally, I prefer the second option, because it can be seen as an interesting experiment that, in case of success, could be taken as inspiration for possible future liquidity deployments (at different scales) within the xGov scope.
The first clarification that I think it’s crucial, and we all should agree on, is the following:
The 32k Algo, after the liquidity deployment, must return to the xGov fund; It’s completely ruled out that, after let’s say 3 Months of liquidity provision, the funds could remain in possession of the proposer, with no clear pre-defined agreement of the final use like a gift. Supporting this weird interpretation (proposed by @scholtz ) would allow people to exploit a “loophole” to ask money for temporary use and then have the final possession, which is totally in contrast with the spirit of the xGov Framework.
If we agree on the above, this is the possible arrangement that could address and hedge some of the intrinsic risks:
- Ludo has to pitch the Time Horizon of the investment (M = 3 to12 months range) with sound arguments;
- We have to decide who is going to absorb the Impermanent Loss (proposal: to be shared between Ludo & AF) and the fees obtained;
- Demonstrate willingness to not Rug Pull: as proposed in the xGov Retro Session (and supported by Ludo), setting up a Vault (Vault - Vestige Docs) with X amount of the minted Vote Coin Token: M months, the claimant is Ludo’s address;
- X should be a sizable fraction of the 0.9B wallet (P65L ⋯ YT3U – Vestige ) calculated by subtracting to the 0.9B the operation costs for the Time Horizon M: X could be something around 0.8B, but open to discuss;
- [not sure if it’s technically supported by AF security settings] Setting up 4 Vaults with the related LP Tokens minted through the Liquidity deployment (as proposed here): M months, the claimant is a 2 out of 2 multisig wallet (Ludo + AF).
- After the M months, the funds must be returned to the original xGov address, for future uses.
Please share your thoughts about this proposal, if you think we should proceed and in case what could be the necessary arrangements for a reasonable and safe execution.