[BIP-664] Engage with market makers to enhance BAL liquidity on central exchanges

Governance General Proposal
1

Authors: @0xDanko, @Xeonus, @gosuto

PR with Payload

Summary

Balancer OpCo Limited is seeking to engage with a professional market maker to enhance the liquidity and trading experience for BAL tokens in central exchanges. As a leading player in the rapidly growing DeFi space, Balancer recognizes the importance of providing a seamless and efficient trading environment for its governance token.

By partnering with a reputable market maker, Balancer will aim to achieve increased liquidity that enables traders to enter and exit positions with minimal slippage, attracting a wider range of participants and fostering greater adoption of the Balancer protocol. This improved market depth will enhance price stability across exchanges, while reducing volatility and instilling confidence in BAL token holders, fostering governance participation.

A robust presence in central exchanges will contribute to a healthier and more vibrant ecosystem, benefiting all stakeholders involved in the Balancer project.

Given the recent announcement from Binance to include BAL in its Monitoring Tag list as of July 1st, 2024, due to heightened volatility and risk concerns, it has now become a focus of the Balancer community to address and mitigate these issues.

Given the competitive nature of the DeFi landscape, Balancer believes this engagement is a strategic imperative, ensuring its continued listing and long-term success. By partnering with a firm that possesses the expertise, resources, and track record to deliver exceptional results, Balancer is confident in its ability to further solidify its position as a leading player in the DeFi space and continue to drive innovation.

Proposal:

In order to facilitate the business negotiation process where signing of mutual NDAs are required and comply with regulatory requirements, we request this to be done from within the Foundation/OpCo environment, with the advisory of different Balancer DAO contributors, including Karpatkey.

To address the challenges outlined above and achieve our objectives, the core terms of this engagement may include:

  1. Token Loan: Balancer DAO will grant 1,000,000 BAL tokens to Balancer OpCo, which will be able to lend out this partial/full amount to the selected market maker for a maximum period of 18 months.
  2. Call Options: Balancer OpCo is open to negotiating call options for the market maker, allowing them to purchase loaned or additional BAL tokens at pre-determined strike prices.
  3. Repayment Terms and Strikes: Repayment terms and strike prices ranges will be determined through a collaborative negotiation process, taking into account the desired outcomes for both parties.
  4. Multiple Tranches and Tenors: The loan can be structured into multiple tranches with varying tenors, allowing for greater flexibility and customization based on the desirable strategies.
  5. Compliant Onboarding: Balancer OpCo is committed to ensuring the market maker has a compliant onboarding process for Balancer. This includes adhering to all relevant regulations and conducting thorough due diligence to mitigate any potential risks.
  6. Additional Listings: Balancer OpCo may weigh in the negotiations with market makers and potential Tier 2 exchanges listings of interest, increasing BAL participation on the global market, such as OKX, Bybit, Kucoin etc.

Results are to be followed by DAO contributors and Karpatkey, and published on the forum regularly by OpCo.

Technical Specification

The Balancer DAO multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will interact with BAL 0xba100000625a3754423978a60c9317c58a424e3d by writing transfer passing the OpCo multisig 0x3B8910F378034FD6E103Df958863e5c684072693 as recipient (verifiable in DAO address book) and amount as 1000000 BAL 1000000000000000000000000.

8 Likes
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This program seems like a necessity in order to keep liquidity flowing at centralized exchanges. I’ll admit, I was short sighted when discussions came up on this subject came up before. I was thinking only about decentralized exchanges where the 80/20 pool provides ample liquidity. There will be added potential benefits if we are able to layer in call options on top of loaning BAL to the MMs. There is also hope that these MMs will generate new interest in the protocol.

3 Likes
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Given the current state of things I wanted to provide some additional context:

  • We are currently in initial conversations with multiple market makers
  • OpCo would be the entity to KYC/KYB with the market maker(s) we choose to work with
  • The goal is to get set up a contract between 12-18 months with European call options and different tranches in mind - full details can only be shared at a later time point
  • Any stables acquired through exercising of call options by the market maker would need to remain in OpCo’s wallet but can be used to fund runway for KYC’d SPs
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https://snapshot.org/#/balancer.eth/proposal/0x0ea2055f9ae746dcf14c1107dbd1355add527d83cfe7b58093dfce3a003127c4

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The core of DeFi lies on-chain, yet maintaining liquidity across multiple centralized exchanges (CEXs) is crucial for onboarding new investors and ensuring BAL is fairly priced at all times.

At present, 2.16Mn BAL are held on Binance, 320k BAL on OKX, and 45k BAL on Bitget, totalling $6.8 million in liquidity across CEXs. With a token trading volume of $3.8 million in the past 24 hours, 56% of reserves are used daily. By comparison, MakerDAO has $149 million in liquidity across CEXs, with MKR seeing a 24-hour volume of around $24.5 million, which translates to a 16% daily utilization rate and a more liquid market*.

In volatile market conditions, such liquidity can significantly impact order books across any and all CEXs. Improving liquidity for BAL and expanding its reach across different markets is a highly advantageous proposition.

*Displayed numbers are approximations at the time of writing.

2 Likes
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Dear Balancer community,

We would like to inform that after several discussions with multiple market makers, an agreement has been reached and signed with Amber to be our service provider for BAL liquidity on major exchanges for the next 18mo, focusing on Binance, OKX, Gate and Bitget at this point.

The Balancer Foundation, through its operating subsidiary OpCo, will monitor results and report accordingly as needed.

5 Likes
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Any possible legal issues w/ hiring market makers? At a prior project, counsel recommended against MMs, but didn’t provide specifics beyond a general hand waving at “regulatory compliance.”

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Yeah, I would agree that sounds a bit abstract. We took necessary measures and due diligence to make sure we are fully complaint.

1 Like
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The original post includes negotiating call options.
What are the terms at which the deal was negotiated with Amber?

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The business term cannot be disclosed and are part of the mandate of this proposal.