OIP-62: Olympus Liquidity Proposal 1 - Setting the stage
Olympus DAO pioneered protocol owned liquidity, and liquidity is in many ways at the core of the protocol and the DAO. One key treasury initiative is to use concentrated liquidity to enable deep liquidity in the Defi landscape - across protocols, side chains and layer 2 solutions. The concentrated liquidity project is now at a stage where it’s possible to start migrating part of current Sushi and Uniswap v2 liquidity to concentrated liquidity positions on Uniswap v3. In line with the Olympus Policy Framework (OIP-22) and the updated Policy Framework (OIP-56), a community vote is needed to add new treasury assets and add liquidity positions on new platforms (such as Uniswap v3).
Motivation
The overall aim of this proposal is to initialise and seed Uniswap v3 concentrated liquidity pools and set up tooling and processes for concentrated liquidity management at Olympus. Liquidity management is, and will be, a big topic with many moving parts. To keep tempo high the liquidity team is proposing a stepwise approach where processes and ways of working are built with limited risk. Once these processes are in place and better tooling is developed, high level goals can be set and larger positions can be moved or added.
The aim of the first three points below is to initialise, seed and in the case of 1. also deploy capital into concentrated liquidity positions on Uniswap v3.
The aim of the fourth point is to enable deep liquidity on Uniswap v3 by leveraging concentrated positions and treasury OHM. OHM can be used to provide matching liquidity depth above the range of any concentrated positions. This will ensure full range liquidity and allows for much higher capital efficiency in other liquidity positions.
1. Migration of OHM-FRAX according to OIP-26
The migration of OHM-FRAX liquidity from Uniswap v2 to Uniswap v3 was already proposed and accepted in OIP-26. This is just a confirmation that tooling and internal processes have been developed and a stepwise migration now will be done.
Actions:
- Creation of Uniswap v3 OHM-FRAX pools and initiate stepwise migration of current Uniswap v2 liquidity.
2. Seed OHM-DAI and OHM-ETH liquidity on Uniswap
As a first step towards deep Uniswap V3 liquidity pools on Ethereum, we propose that two pools, OHM-DAI and OHM-ETH, be set up and seeded after OHM-FRAX. This ensures the new pools are ready, balanced and provides us with an opportunity to study potential trade volume, routing, arbitrage and ability to capture trading fees on Uniswap before adding more liquidity. The proposal seeks permission to move up to 10M USD of liquidity from each Sushi pair to Uniswap v3.
10M USD in the OHM-DAI pool is 2.8% of the Sushi liquidity for the pair. 10M USD in the OHM-ETH pool is 8.2% of the Sushi liquidity as of December 10, 2021.
Actions:
Create pools and vaults on Uniswap v3
Migrate up to 10M USD from OHM-DAI on Sushi to OHM-DAI on Uniswap v3
Migrate up to 10M USD from OHM-ETH on Sushi to OHM-ETH on Uniswap v3
3. Enable and seed L2 liquidity on Uniswap
Proteus’s (OIP-45) goal is to seed gOHM liquidity across chains and L2’s using mining incentives. This action point aims to prepare Olympus to deploy deep liquidity on supported L2’s by leveraging concentrated liquidity on Uniswap v3. However, cross chain OHM is not launched yet, the utility of OHM on L2 is small at the moment and both Arbitrum and Optimism still have low activity compared to Ethereum L1. Therefore, only a limited amount of up to 1M in each target pool will be migrated. 1M USD is 0.28% of the current OHM-DAI Sushi liquidity and 0.82% of the current Sushi OHM-ETH liquidity.
Actions:
Create Uniswap v3 pools for OHM-DAI and OHM-ETH on Arbitrum and Optimism
Migrate up to 1M USD from OHM-DAI on Sushi to OHM-DAI on Uniswap v3 on both Arbitrum and Optimism
Migrate up to 1M USD from OHM-ETH on Sushi to OHM-ETH on Uniswap v3 on both Arbitrum and Optimism
4. Permission to deploy OHM for liquidity provision use
Treasury and/or DAO OHM can be used to provide one sided liquidity above the current market price in Uniswal v3 pools. By earmarking OHM for liquidity provision use, the Olympus treasury team gets a clearer long term view of OHM needs and the liquidity team can develop processes and gradually deploy OHM to match the new Uniswap v3 positions described above.
The earmarked OHM is calculated to enable a duplication of the present Sushi liquidity depth for OHM-DAI and OHM-ETH on Uniswap v3. At current prices, 250k OHM is needed. Future liquidity migration from Sushi will be combined with LP bonds to ensure that liquidity is not fragmented and at least the current depth is maintained.
Actions:
- Permission to deploy up to 250k OHM for liquidity provision use in OHM-DAI and OHM-ETH pools on Uniswap L1, Uniswap Arbitrum and Uniswap Optimism.