Liquid reserves, dah

Now, with Kyber, Bancor, water melon (former Melonport) and Uniswap in place, and DAICO being around the corner, isn’t it obviously attractive idea to start supporting liquid reserves?

I don’t see volatility as an “enemy of state”, however illiquidity is quite a burden to carry for community.
Relying on centralized exchanges for liquidity also exposes the whole project beyond what is necessary.
Also, in various cases of suppressed minorities - those minorities could use liquid reserves as an escape route.

Are there obvious objections against this idea?

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I have been thinking quite a lot about this recently. Since we are already heavily invested in bonding curves research-wise. It totally makes sense.

If The AA (or whoever the liquidity provider will be) is the state, then I beg to differ. Liquidity provider’s stake can go down despite income from fees, as any change in the price would result in a reduction of the value of the stake relative to just hodling the individual assets.
In theory, liquidity providers make this back in fees. The deeper the liquidity, the more fees can be generated as traders suffer less slippage and volume begets volume.
However if price movements big enough, they will result in losses much greater than the return from fees. Of course, this risk will be largely negated when ANT moves towards being a stable(ish) token, not sure if this is still a thing @lkingtn

This is also true and IMO trumps the potential for short term loss, especially as those can be mitigated. In any case, I think we should be experimenting and supporting at least one of the protocols mentioned.

Also, in various cases of suppressed minorities - those minorities could use liquid reserves as an escape route.

This concept of selling as an exit mechanism is something I went into a bit in my post on trust-minimized governance tokens, and it was one of the underlying motivations in the stability reserve concept which has been proposed for ANT in previous versions of the whitepaper and on the forum (and what @Aaron is referring to with regard to ANT being a stable(ish) token.

I’m not immediately opposed to some sort of liquidity policy for ANT, whether that is simply providing liquidity on uniswap or something more complicated… but I think that such a policy would need to be proposed formally and then looked at on its merits very carefully. There are some clear benefits and clear risks… off the top of my head:


  • Does increased liquidity of ANT, also increase risks of manipulation of AGP votes? (probably, so if we create policies to increase liquidity we should also prioritize changes to the voting process to mitigate these issues in tandem)
  • Does this create unwanted exposure to volatility risk?
  • Does the association taking on an active role in trading of ANT create legal/regulatory risk for the project? (this may be why things like buy backs or ant burning are currently on the Associations AGP blacklist)


  • Possibly reduce barriers for people to get involved and participate, are people on the sidelines because they are scared of a lack of liquidity associated with taking a position in ANT?
  • Possibly result in better, more engaged community, by allowing those who want to leave leave, and those who want to stick around stick around.
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Thanks. Could you please expand your statements, as I am currently looking from opposite paradigm.

  • The whole story of liquidity == manipulation (?) risk is unclear to me.
  • I see that some buybacks are blacklisted, and I would to explicitly highlight that my goal is not to pump the price or whatever, but to address the issue of illiquidity.
    Who knows, maybe we could overcome blacklisting from this perspective.
  • Bancor told many strories about preventing volatility risk, as in my view it is a lack of liquidity depth that makes token vulnerable to volatility. To me question is - do we have fair © market volatility. And best definition of fare market price that I have is a market price observed on market with significant © number of participants and liquidity depth.

I do agree that issue should be investigated carefully, but I am not sure it should be delayed. Emerging DAOs looking at the lessons that Aragon learns, and what I see so far, is that NOT having liquidity policy is hardly an option for new DAOs.

Deployment of ANT/ETH liquidity reserves, growing from 0.5% up to 1% over 6 months looks like very attractive option.

P.S. I am open to critique and counterarguments, but ANT liquidity seems substandard now, as Bittrex holds 11% of ANT, but price slippages are quite significant. And from this perspective ANT is largely illiquid which means that Aragon itself is not doing its best job being exemplar DAO.

I feel like it is worth to expand this one. If liquidity provider holds “constant product liquid reserves”, in which ETH*ANT =constant (and this is offered by Uniswap, Bancor and Kyber). And I don’t see how it is arithmetically possible to get better outcome from “just hodling” assets that are also partially illiquid.

If there is more liquidity it is possible to buy/sell/borrow ANT briefly in order to swing a vote with little/no exposure to the downsides associated with a vote outcome.

Yeah this is pure speculation on my part, shouldn’t prevent submitting a proposal.

I’m not suggesting a delay, in fact I encourage you to create a formal proposal. Its tough to really evaluate the pros and cons unless its clear what exactly is being proposed. (is it a uniswap liquidity pool, or some other mechanism), what are the capital commitments, and what is the risk on that capital.

And from this perspective ANT is largely illiquid which means that Aragon itself is not doing its best job being exemplar DAO.

I think this is an oversimplification. Some DAOs will be based on membership or reputation for example and they will not have any liquidity at all. I’m not suggesting that more liquidity for ANT wouldnt be a positive change… but I don’t think that a low/moderate liquidity is necessarilly a bad thing for a DAO

There is a deep dive into uniswap profitability here and a fantastic tool by the same guy here

But the tldr basically is that while you do have a constant product of the two tokens, the dollar or DAI denominated value of your portion of each pool is reduced the further away the price moves away from your original valuation (the ratio of your deposit) when compared to hodling.

  • a 1.50x price change results in a 2.0% loss relative to HODL
  • a 2x price change results in a 5.7% loss relative to HODL
  • a 3x price change results in a 13.4% loss relative to HODL
  • a 4x price change results in a 20.0% loss relative to HODL
  • a 5x price change results in a 25.5% loss relative to HODL

In theory, you could buy a bunch of ant before the snapshot took place and sell on the next block thereby buying voting power with the only cost being the slippage from the bonding curve. The deeper the liquidity the cheaper this is to do. There may be others but that’s at the forefront of my mind.

Given we are talking about adding liquidity to a bonding curve for liquidity and not paying binance, this would not fall foul IMO.

I’m definitely in favor, especially of its a small amount in uniswap built up over time. But it isn’t simply a case of just adding liquidity without modelling the various scenarios with regards to profit and loss. Then there is the management, this may potentially cause extra regulatory burden

I’ve ran numbers (hopefully correctly), and here is a graph for ANT:
We see how “dust holders” are holding like 1.5% of tokens (up to 200 ANT)
~11 % (up to 9800 ANT)
~ 20% (up to 170 000 ANT)
rest is “fat” accounts (team, exchanges, whales)

Sure, my hypothesis is that having significant liquid reserves would make Aragon friendly to extra small holders if they don’t feel welcome.

Ok, I get the idea, but it is challenging for me to come up with reasonable numbers for example scenario.
To be clear I was thinking about low single digits percentage of supply liquidity depth scenarios.

Also it is kinda challenging for me to understand how such scenarios impossible with current centralized exchanges or where exactly is the line between “evil exploitation” and “smart ownership strategy”.

Well, plan was to get meaningful feedback and to start formulating proposal out of it.
The way I see it, core conclusions of such proposal would include:

  1. Amount of resources to commit
  2. Structure of resources to commit (ETH/DAI/USDC/ANT etc.)
  3. Liquid reserve contract choice (Uniswap, Kyber)
  4. Reserve ratio and valuation (current spot price, ICO price, etc)

It sounds like you guys have some thoughts on the topic, so again - your input is totally welcome.

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The manipulation issue is serious but just being cognizant of it is enough when thinking about the amount of capital to assign. I don’t think it’s necessary or feasible to model that. I was making reference to the expected profit and loss taking into account various factors such as trade volume future price etc.

I’m happy to work with you on it. I’ll send you a dm

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