[RFC] Treasury Swaps Program GNO x BAL

Motivation

In April 2021, Gnosis and Balancer launched a partnership integration, the Balancer-Gnosis-Protocol (BGP). This proposal looks forward to strengthening the partnership and aligning the DAOs financially.

How?
-Financial incentives alignment: It will promote the Balancer-Gnosis-Protocol outcome in the best interest of both Gnosis and Balancer

  • Treasury diversification
  • Improved token distribution within long term players
  • Voting power for DAO proposals

Specification

Start a pilot program of 4000 ETH-equivalent GNO (BAL) distributed across 8 months. After the program, make a lookback, evaluate the results and define next steps.

Implementation

Use the open price of Coingecko for swaps.
GNO: Gnosis ETH Historical Data | CoinGecko
BAL: https://www.coingecko.com/en/coins/balancer/historical_data/eth

Option 1: GNO/BAL/ETH/DAI pool
Every Monday Gnosis (Balancer) adds 115 ETH-equivalent GNO (BAL) to the GNO/BAL/ETH/DAI pool on Balancer V2 using the last 7 days of open-price historical data average on Coingecko.

This would have the upside of concentrating liquidity in this existing pool and the downside of creating sell pressure for BAL and GNO against ETH and DAI.

Option 2: New GNO/BAL pool
Create a high fee GNO/BAL pool on Balancer V2.
Every Monday Gnosis (Balancer) adds 115 ETH-equivalent GNO (BAL) to the GNO/BALpool on Balancer V2 using the last 7 days of open-price historical data average on Coingecko.

This would have the downside of fragmenting liquidity (a new pool would be created) and the upside of not creating sell pressure for BAL and GNO against ETH and DAI.

Option 3: OTC deal
Every first Monday of the month Gnosis (Balancer) sends 500 ETH-equivalent GNO (BAL) to Balancer (Gnosis) treasury wallet. We use the last 30 days of open-price historical data average on Coingecko.

This would have the upside of not creating sell pressure (like Option 1) and being a simpler swap but the downside of not contributing to liquidity of the two tokens on Balancer like options 1 and 2.

Link to discussion on Gnosisdao forum

2 Likes

Interesting proposal. I like option 1 a lot for a few reasons:

  • Higher fee and inclusion of eth/dai allows for better fee earnings compared to other options. Ideal for long term LP’s, and both parties here would be very long term oriented.

  • Diversifies treasury holdings of both protocols beyond what a GNO/BAL swap would by adding ETH & DAI. There’s been discussion of the value of treasury diversification on this forum lately and this nicely addresses that.

  • On-chain liquidity for GNO and BAL is high enough to comfortably absorb the sell pressure that would be created by this

  • Good way to boost v2 TVL and fee earnings

Only thing to note is until we move to staking contracts, Balancer and Gnosis would be earning BAL rewards from this pool. Which could be fine, or potentially we could blacklist them from the rewards calculation.

One more thing I wanted to touch on here - obviously single asset depositing 115 ETH into this pool has quite a high slippage. The DAO is sensitive about trading due to tax issues.

My suggestion for simplicity of operation (we could split up these additions of liquidity in daily chunks but that would be way too much overhead) is that we create an LBP that converts 49/49/1/1 to 25/25/25/25 (BAL/GNO/DAI/ETH) and then add liquidity to the main existing pool without any price impact.

I’m a little concerned with option 1 because we would introduce a selling pressure to our tokens equivalent to 3/4 of the swap program.

there’s certainly a trade-off here. that is the nature of any treasury diversification tho. maybe you could edit your OP and add a poll to get a soft-signal on sentiment

Another issue with that option is that the single asset adds each week would massively unbalance the pool, as it’s not big enough to support that much BAL & GNO being added without WETH/DAI really.

You’d probably have to chunk it up and wait for the pool to get arbed in order for it to make sense.

We have a price impact of 4% approx for a 100 ETH equivalentn single asset liquidity provision. We’d be giving funds away to arbitrageurs.

I address a way around that here: [RFC] Treasury Swaps Program GNO x BAL - #3 by DavisRamsey

Please select the the implementation option you prefer:

  • Option 1
  • Option 2
  • Option 3

0 voters

What’s the thinking between a high fee on the GNO/BAL pool. Wouldn’t we want it to be a gauntlet pool, so the liquidity is useful to traders? This pool would still have the issue that trades would have to hop through BAL to link GNO with most assets, but with a high fee it would only ever be arbed really.

What about if Balancer sends Gnosis BAL each week, and Gnosis does the same, then we add our GNO to the 80/20 GNO/WETH pool, and you add your BAL to the 80/20 BAL/WETH pool?

primary appeal of option 1 is we earn a decent APY while getting natural diversification. but if we are that strongly against high fee pools then what you propose is better than letting GNO sit in our wallet at least

This has been on the side for a while but I think we should bring it up again.

Taking a look at the few votes/comments there were on the thread on Gnosis’ forum they also seem to favor simplicity.

Even though option 3 doesn’t contribute to Balancer liquidity, the main goal of this proposal seems to be treasury diversification and cross token distribution to Balancer and Gnosis as long term partners. I would therefore suggest that option 3 is the simplest way of achieving/implementing this.

1 Like