I propose that the Bifrost treasury make an additional BNC deposit into the HydraDX Omnipool to further increase on-chain liquidity. I propose adding 1.216M BNC ($639.3k) which is 5.8% of the treasury. This would bring the BNC treasury deposit in the Omnipool up to $1M or 2.3% of FDV.
The Bifrost treasury in August 2023 deposited 700k BNC into the Omnipool, currently valued at $360,665. https://bifrost.subsquare.io/democracy/referenda/61
Real-time value of the Bifrost treasury BNC deposit in the Omnipool at:
https://app.hydradx.io/wallet/assets?account=7LCt6dFs6sraSg31uKfbRH7soQ66GRb3LAkGZJ1ie3369crq
The 24-hour trading volume of BNC in the Omnipool is $20k and can be seen at: https://app.hydradx.io/stats/overview
As you can see, the Bifrost treasury deposit into the Omnipool has maintained its value over time. However, with that liquidity you can only trade 13.7k BNC ($7,088) per trade before hitting 2% slippage. Recently in twitter discussions an investment firm mentioned they tried to buy 600k ASTR ($76k) but slippage was too high and they had to use a CEX instead.
https://twitter.com/Portela_Capital/status/1770811859525923256
DCA helps you break up large trades, but this reinforces the fact that we should continue to deepen our liquidity across the Polkadot ecosystem. Let’s bring those fees on-chain to Polkadot!
Another reason to increase BNC liquidity on-chain is to support larger money markets for BNC. Interlay is adding BNC to their money market (https://app.interlay.io/lending), Bifrost has launched Loop Stake, and HydraDX is launching a lending platform soon. Since large liquidation trades would likely be serviced by the Omnipool, increasing Omnipool liquidity would support a larger max cap for lending markets. This enables another use case for BNC hodlers. Again with my thesis of using treasury-controlled funds to increase liquidity across the entire Polkadot ecosystem I would separately encourage the BNC treasury to deposit BNC liquidity ($200k?) into Interlay and HydraDX lending markets to enable larger borrowing positions. (but that would be a separate future Bifrost proposal) If Bifrost were to add money markets for INTR and HDX I’d propose deposits going the other way as well, but Bifrost is only rolling out lending markets for vTokens which parachain treasuries don't hold.
The great thing about all of the proposals above is that they put to use “Treasury Owned Liquidity”.
- earn fees
- add token use cases
- deepen liquidity
- no “listing fee” or reoccurring costs for market making or LM
- tokens aren’t “spent” and are still controlled by the Bifrost community.
Q: But how much in fees?
A: Omnipool stats show BNC deposits earning 1.4% from swap fees. Deposits into lending would likely earn 3-8% once they are borrowed.
Q: But $639k from the treasury is a lot!!
A: Interlay treasury already deposited $750k of INTR and we’re discussing boosting it to $1.2M. Astar governance is currently voting to add another $718k of ASTR to the Omnipool. (https://forum.astar.network/t/deposit-additional-astr-into-hydradx-omnipool/6507)
I’m certainly open to discussing deposit amounts other than 1.2M BNC, but as I outline in this thread, I’m encouraging multiple teams to deposit $1M of liquidity to send a strong “we’re open for business” signal from a cohesive Polkadot community, with minimal risk for each treasury and demonstrating the power of XCM to control funds on other chains.
https://twitter.com/spazvt/status/1770665393352225142
Final notes:
- This will have a side-effect of increasing the market capitalization of BNC by $639k because tokens in the treasury acct aren’t counted towards MC but tokens in a DEX are.
- Disclosure: I am a $VDOT and $HDX token holder as well as an Interlay vault operator. I am not a HydraDX or Interlay team member.
I fully support this proposal. I see no reason why this would be questionable or unacceptable. Soon the Snowbridge and DOT<>KSM. Time to grow!