Motivation:
We should reconfigure the on-chain liquidity landscape to maximally support expansion and integrations. We currently have two sources of DAO managed liquidity for SPOT. The Bill broker and the managed charm vault. Both have tradeoffs and play a distinct role to play in supporting SPOT and AMPL.
Bill broker is a on-chain trader which buys and sells between a fixed band around the FMV. Its goal is to bring counter cyclical demand to AMPL (through flash swaps) and act as a stabilizing force on the network.
The charm vault on the other hand is a smart manager of concentrated liquidity on univ3. Its goal is to provide liquidity for swappers at all times and generate trade fees (while limiting IL as much as possible).
Proposal:
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Update the Bill broker fee curve. As per Gemini’s suggestion, we can set the fee bands such that the bill broker uses almost all of its inventory to trade at a fixed spread (± 2.5%) outside the FMV price. It will simply buy at a 2.5% discount and sell at a 2.5% premium.
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Update the charm vault strategy to provide very concentrated within a 5% band around the market price (ie the concentrated band will be between -2.5% below to +2.5% above). It reduces IL by providing concentrated liquidity when market price is close to the FMV (±5%), if price is outside this zone it simply reverts to a full range liquidity position (similar to univ2).
Closing thoughts:
Given that we are anticipating an influx of demand from usdAF, we want to ensure that that’s deep on-chain liquidity so that new entrants can trade with minimal slippage. This should also help integrations with other DeFi protocols and bolster SPOT’s usecase as a collateral asset in DAO treasuries. The charm vault has an annualized yield of roughly 30% since inception (from fees and enrichment). With deeper liquidity and higher volume, I speculate it might naturally have a high terminal yield compared to other stable-stable pairings.
A well capitalized bill broker brings SPOT demand during downturns and benefits the long term health of SPOT, stAMPL and AMPL. However given that it trades only during certain windows, its organic yield might NOT be competitive (roughly ~18% annualized based on the last 30 days). The DAO can be a major player here through incentives and protocol owned liquidity.
Thank you to @Togenkyo and @gemini for the feedback on discord.
