Two plans to gather more liquidity

The goal of Foundry is to build financial liberty systems. Things like DAIHard, which allows people to interact with others to allow trust-less trade to happen, trade that cannot be stopped by anyone except the parties in the transaction.

To this end Foundry needs to be an autonomous being (a true DAO) but it also needs a war chest with which it can fund these projects. Currently it is 304 buckets into a long term auction of 2000 buckets, to distribute 60 million FRY and raise funds in the process. To accomplish this in turn, it needs visibility. To accomplish visibility is tricky. It involves both traditional marketing (SEO, ad buying, etc), but in the current environment it has become apparent that it also requires liquidity and the co-operation of yield farmers, since the majority of capital is currently tied up in these programs.

So to accomplish the goal of filling up the treasury I propose to Foundry the following 2 part plan to raise liquidity, lock much of it away permanently, and raise awareness of Foundry.

Part A - Permafrost
The first part of the plan involves aims to generate liquidity that is permanently locked away. The goal with this is to support any other participants in knowing that they can never be “rug pulled”, the rug being forever affixed to the floor.

We accomplish this by launching a parallel bucket sale contract at permafrost.foundrydao.com. This sale will operate in exactly the same way as the existing sale, with the following 3 differences.

  1. Instead of selling FRY for DAI, it will sell FRY for FRYETH liquidity on Uniswap.
  2. Instead of selling 30,000 FRY per bucket, this sale will sell 15,000.
  3. Instead of sending the received tokens to the treasury, it will send them to the 0x0 address. This will guarantee this liquidity is forever available and the exchange fees will deepen this liquidity over time.

As far as I can tell this will be an entirely novel thing to do. It will guarantee all participants that the rug cannot be pulled from under them, or rather that some significant part of the liquidity will always be around to exit against if needed. This should create visibility due to both it’s novelty and the increase of liquidity on various ranking sites.

The permanent availability of liquidity also creates some guarantees for the participants of the next part of the plan.

Part B - Yield farming
The majority of active capital on Ethereum appears to be moving from yield farm to yield farm at the moment. This has the side-effect that very little capital is deployed against less well understood plays, because all capital is currently scanning for a very specific type of opportunity; the yield farm.

What I propose is that we present a yield farming opportunity to liquidity providers and in return we get Foundry exposure which will benefit the permafrost program above and the existing sale (sale.foundrydao.com) through arbitrage between the secondary market and the sale itself.

The strategy is

  1. We create a Balancer pool with the following tokens yDAI(94%) - DAI(2%) - ETH (2%) - FRY (2%)
  2. We set up a farming program at yieldfarm.foundrydao.com that allows liquidity providers to stake the liquidity tokens of the above pool for FRY distributed at a pace equivalent 15,000 FRY per 7 hours period.

The pool as described minimizes risk for the liquidity provider (LP) in that:

  • They still have exposure to cutting edge yield strategies via yearn.finance’s yDAI
  • The pool gains fees through the inclusion of DAI and ETH, which attracts routing bots and arbitrage bots.
  • The LP’s impermanent loss exposure to FRY is minimized because FRY is only 2% of the pool.

Because there will now be permanently locked liquidity and the pool represents very good yield via yDAI and limited downside, we suspect that the staking could attract a lot of funds, which will necessarily have to increase the price of FRY to have it account for 2% thereof. This increase in the price of FRY will allow arbitrage between the sale, increasing the treasury holdings and the permafrost program, increasing the permanently locked liquidity.

So the desired outcomes hit 3 goals.

  1. We gain a lot of exposure through novel experimentation with liquidity provision.
  2. We gain treasury funds through both market exposure and arbitrage between the sale and secondary markets.
  3. We provide a permanent liquidity guarantee, something not done before to my knowledge at this scale.

What say you FRY holders?
Head on over to https://dashboard.foundrydao.com/#/sentiment and tell us what you think.

PS A discerning Foundrarian would note that implementing the above would increase the FRY supply beyond the 100M for the after sale target. This is indeed the case and the dilution would either need to be accepted or accounted for. I will comment below how I think we can deal with the dilution such as to protect everyone’s current share of issued FRY.

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Dilution concerns
My recommendation is, that since the issuance rate of FRY would essentially double if the above two programs are enacted, that we double all existing FRY balances immediately before commencing with the above programs.

The one exception would be the liquidity pool. In that case we can calculate the number of FRY held by the LPs’ liquidity tokens and issue that amount of FRY to their addresses.

This would move the post-sale target from 100M to 200M, but ensure that everyone still has the same total share of Foundry as they do currently.

If you have any other recommendations, please drop me a reply.

I really, really love all of this. I love the proposal, and I also must commend you for the clear writing on the topic.

Really eager to hear from other community members, and to see how the sentiment polling goes!

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Project management concerns
The above plan was also selected for it’s ease of execution.

  1. The bucket sale is functional and fully audited, only the parameters need to be adjusted to point to ETHFRY instead of DAI and the treasury should be set to 0x0
  2. The interface for the sale already exists and works.
  3. The $BASED staking contract (stake.based.com) can be modified to have a continuous instead of step wise reward function, and to run over a longer period.
  4. The staking (yieldfarm.foundrydao.com) only requires 3 interactions. Stake, claim FRY rewards, claim and unstake.

Some due diligence will have to be done to consider potential unintended side effects but none are visible at the moment.

I estimate we can execute on this within a 2 week window of opportunity and farm some of the work out to perhaps get that time window even shorter.

How will this impact the existing liquidity on UniSwap?

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I love that we can leverage existing tools to get this done.

The novelty of the liquidity locking makes me excited. Like when I was 5, and about to go buy ice-cream.

Personally I am excited to hear what the FRY community thinks about this!

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All liquidity providers still have their liquidity tokens. They will now simply have the option of selling them for FRY on permafrost.foundrydao.com. The market will determine the value, but the rational holder would obviously only sell them if they believed they could get a higher $ value in FRY than the ETHFRY tokens were worth.

We also have the option of making the permafrosted liquidity tokens another balancer pool, like a ETHFRY pool with 10% fees. This would have the effect of increasing the permanently locked liquidity, possibly significantly, whenever there was FOMO buying or panic selling. This is a great things for FRY holders.

Which pool do you think would serve us better?

Cool, makes sense.

I’m relatively new to crypto and all it’s working parts, but the way I see it is that UniSwap is then potentially for the speculators and “moon boys”, whereas the balancer pool outlined in your OP would be for long-term holders, i.e. 2 years plus.

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The choice of which pool to use, I think, can be based mostly on what would be best for FRY holders. Since the liquidity is locked away, impermanent loss is not an obstacle. The goals of the permafrost would be to ensure that FRY has a guaranteed pool of liquidity to trade against.

A secondary goal would be to stick to the ethos of turning irrational action into long term benefit. Here’s where a higher trading fee might come in handy. If we set it to 10%, that means the pool will likely only be traded occasionally, but when it is it will grow significantly, deepening the permafrost even more. Of course I can argue the counterpoint that a lower fee, like Uniswap’s 0.3% accomplishes exactly the same thing but by allowing a higher frequency of trades.

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To add to the point where, currently FRY hodlers will get additional FRY because increase of total supply, i would recommend giving that in month by month basis, like 25% each both to be fully completed in 4 months.

Or to keep the same supply; sale, permafrost, yield, each can have 10,000 FRY allocation per 7 hours, then 15k so that current token economics is maintained, which is 30k per 7 hours, I would refer this than increasing total supply.

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This is indeed preferable. We do have a technical constraint though and that is that the minting key given to the BucketSale contract is irrevocable, so that bad boy is going to keep minting 30,000 FRY until it’s last bucket.

Outside of the “magic” 100,000,000 number, is there a reason you would not want the total supply to change if it is done in a non-dilutive way to FRY holders and LPs?

yeah, then i will go with my first option where a snapshot will be taken on a date and then those address will get drip supply in coming months in chunks, doing 2x in same time for everyone will cause sell pressure so it might be bad for exiting holders itself

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We could look into vesting those tokens, but that’ll be a few 1000USD in gas prices to accomplish. But let me check.

Love both ideas. Really cool new novel concept for the Permafrosting. I bet other projects will pick this up. Hope Foundry gets recognition for coming up with this!

I do have one question concerning the proposed Dilution recommendation. So I understand the doubling of tokens to existing holders and the liquidity pool exception, but what happens to the DAI locked into future buckets?

So let’s say I’ve estimated the value of a 30000 FRY bucket to be 300 DAI (for example) and I’ve placed a bid on a bucket 4 days from now for 300 DAI. If the dilution happens before the bucket that I bid on concludes I’d make a loss since the effective price of a bucket would be 150 DAI instead of 300 DAI with the doubling of the supply.

So what I’m saying is that Foundry should maybe make everyone aware of this effect if the above proposal is accepted so that people don’t overbid on future buckets.

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That’s a very good catch. I think we should pick a low value bucket as the launch date for the program if we go ahead.

Agreed, there should definitely be ample warning of the change, so that the community can adjust their bidding strategies on the buckets.

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Regarding Liquidity Providers (LP).
Once you provide liquidity, your $FRY are no longer in your wallet and obviously cannot count toward voting.
What incentive/workaround is there for LPs to not withdraw liquidity from UniSwap in order to retrieve tokens, aka voting power, and kill the arbitrage market?

I’ve been thinking about this. How dies a 98% FRY, 2% DAI pool sound as a gov token instead of FRY directly?

This has the added bonus of rekking the governers if they make bad decisions as ppl will exit into their liquidity.

Alternative I guess we can build a loan system where your can lian FRY against liquidity and use that in Gov.

Both are interesting options to consider

A “bad” decision is not necessarily a wrong decision