Proposal Overview
This Liquidity Initiative aims to efficiently utilize funds to optimize both immediate and long-term returns for BOLD holders, SMARDEX and the Liquity v2 protocol.
As commitment, SMARDEX will make a strategic purchase on the open market of $150k BOLD to seed a new v3 BOLD / wUSDN pool on Balancer, concentrated around true price, and will opportunistically acquire 0.02% of the LQTY staked in order to obtain sufficient voting power to permissionlessly propose this initiative (2x the current minimum). wUSDN is the compounding version of USDN, a decentralized, yield-bearing token benefitting from the cash-carry trade, currently yielding above 50% APR.
By pioneering this approach, SMARDEX intends to demonstrate the versatility and value of LQTY as a key component in cross-protocol treasury management and liquidity provision. This initiative not only benefits BOLD and its holders but also paves the way for innovative inter-protocol collaborations.
Usage of Funds Received
- 100% of the BOLD received will be used as bribes on Paladin for the wUSD/BOLD Balancer V3 pool.
- veBAL and vlAURA voters will vote for the BOLD/wUSDN Balancer gauge and receive BOLD bribes.
- The gauge system will allocate BAL rewards to the pool based on how many votes it receives.
In addition:
- SMARDEX will seed the pool with $300,000 (150,000 BOLD / $150,000 worth of wUSDN).
Impact for BOLD
This approach will improve the overall BOLD liquidity and create a dual yield opportunity for BOLD holders:
- Liquidity pool rewards from gauge mechanism (BAL emission)
- Balancer pool Native yield from wUSDN
- Incentives from Smardex’s team
Liquidity Provision Strategy
SMARDEX will purchase $150,000 worth of BOLD and pair it with an equal amount of wUSDN in a Balancer V3 pool. The liquidity will be concentrated around the optimal price point (to be determined, precise to 5 decimal places) to mitigate toxic flow.
USDN Protocol and Oracle Integration
The USDN Protocol relies on accurate and up-to-date prices for proper functioning. Two types of oracles are utilized:
- Pyth (Pull-Based): is the primary oracle, offering frequent updates (every 400ms) with neutral prices adjusted by 40% of the confidence interval to manage risk. For instance, a $1,000 price with a ±$10 interval is adjusted to $996 for minting and $1,004 for redeeming.
- Chainlink (Push-Based): serves as a backup, providing regular on-chain prices triggered by market changes (0.5%-1%) or hourly updates. The Protocol defaults to Chainlink if Pyth fails, ensuring uninterrupted operation.
The wUSDN oracle calculates the amount of wstETH in the system to determine the USDN price, considering the rebase mechanism that activates above $1.005.
Governance can modify oracle use to adopt new technologies or address issues.
Additional Initiatives
SMARDEX plans to acquire 0.02% of LQTY staked supply to gain sufficient voting power. This move aims to position SMARDEX as a pioneer in the LQTY v2 bribe and governance system PoL utility for Diversified defi-participating projects.
SMARDEX also intends to utilize their native $SDEX tokens to support this initiative. These tokens can be used either as LP incentives and/or bribes, with the specific allocation to be determined based on the success and participation of the community to this initiative. The preference is to maintain flexibility in the allocation of these incentives, this approach allows SMARDEX to adapt to changing market conditions and optimize the impact of their $SDEX tokens in supporting the BOLD liquidity pool. But we’re always open to your ideas and suggestions.
Threshold & Target
There is no minimum amount of BOLD required for this proposal to be delivered. All BOLD received will be allocated to bribes on Paladin for the wUSD/BOLD pool.
Impact Measurement and Key Metrics
- More liquidity
- Yield of the pool
Parts in [Brackets] will be filled as progress is made on the described setup.
[Balancer LP address]
- Bribes
[Paladin Quest address]
Reporting
- TVL, Yield : [Balancer LP address]
- Bribes utilization: [Paladin Quest address]
- (Later) Dune Dashboard to track TVL / users in the Pool
Practical Information
Recipient: [Paladin Quest address]
Nature: Smart Contract
About SMARDEX
Recently, SMARDEX introduced USDN, a synthetic stablecoin that utilizes a decentralized delta-neutral strategy. Unlike other stablecoins of the same type, USDN will be decentralized, and will operate by using SMARDEX’s perpetual DEX for cash/carry trade operations. wUSDN wrapped version and an ERC-20 value-accruing token wrapper for USDN.
To broaden its appeal and user base, SMARDEX is expanding its ecosystem by integrating gaming elements, particularly through SMARDEX Poker Pro and a strategic partnership with Stake, an online gaming and sports betting platform. This fusion of DeFi, poker, and online gaming uses USDN as the stable currency, offering a unique advantage to players: their balances grow automatically through USDN’s built-in yield. This innovative approach aims to attract both DeFi enthusiasts and online gaming communities, creating a seamless experience where players can enjoy their favorite games while their funds generate passive income.
Authors: Telos Consilium SA - MajeStyle, Starny, commissioned by SMARDEX. Telos Consilium is a web3 service provider based in Switzerland.
We invite the Liquity community to support this initiative, promoting deeper liquidity, broader adoption for BOLD, and collaborative governance development for Liquity and SMARDEX.