The aim of this proposal is to enable tradability and make GROW a liquid token through listing on decentralised exchanges. In order to do so, we will be minting new tokens, enabling tradability and establishing a liquidity pool.
Overview
Rationale
The decision to launch GROW to the general public comes from a desire to promote broader adoption, engagement, and utilisation of the ValleyDAO platform and its offerings. As the digital economy continues to grow and evolve, particularly in DeSci, we believe that publicly launching the GROW token can play a significant role in empowering individuals, fostering trust, and enabling participation in the funding of translational research for Climate Synthetic Biology. By making GROW tradeable, we aim to:
Democratise Access: Ensure that a wider audience can participate in the value and utility that GROW offers.
Fuel Ecosystem Growth: Enable developers, partners, and other stakeholders to integrate with our platform, bringing novel applications and use-cases for the GROW Token.
Enhance Liquidity: Provide current and future GROW holders with the flexibility to manage their assets, thereby attracting new contributors and users.
Expectations
Price Volatility: As with any new asset entering the open market, there may be initial price volatility. Rest assured, this is a natural consequence of price discovery and varying supply/demand dynamics. We intend to launch GROW at the fair market price of $0.13 USD/GROW which was established during the recent OTC round VIP-5 OTC Raise - Proposal - Discourse (valleydao.bio).
Ecosystem Expansion: We anticipate that as GROW becomes tradeable, there will be an influx of third-party applications, services, and platforms that wish to integrate or partner with us including new contributors and voters in our governance process. This is a necessary step in our ongoing commitment to true decentralisation of the organisation and our operations.
Who will it affect?
Current Token Holders: Those already in possession of GROW may experience changes in token value, enhanced liquidity, and potential new utilities. As the currency becomes more widely adopted, token holders might find more avenues to use GROW, benefiting from expanded services and integrations.
The Wider DeSci Community: As GROW joins the broader crypto market, it contributes to the evolving narrative of DeSci, its role in funding translational research, and its position in the global crypto economy. We believe expanding the DeSci offering will help to consolidate the field as a viable alternative to traditional research funding and translation.
What will it involve?
Bridging GROW to Optimism
Activation of the tradeability function is a very simple process that will be automatically enabled once we bridge GROW to Optimism (L2). Once activated, GROW can be exchanged for other cryptocurrencies via a DEX or traded peer-to-peer. Bridging to L2 will also result in lower gas fees for transactions which we anticipate will save the DAO and its contributors significant amounts of money.
Establishment of a Liquidity Pool
Liquidity Pool Details
Trading Pair: The trading pair for our liquidity pool will be GROW/ETH. This ensures that traders can easily swap between Ethereum, the de-facto platform for decentralised applications and smart contracts, and GROW.
Platform: The GROW/ETH liquidity pool will be set up on Uniswap v3 due to its higher trading volume than competing platforms like Balancer. This will help to ensure that GROW has the highest possible potential for community growth.
Liquidity Setup: We will initially seed the pool with ~300k USD in liquidity. The exact numbers are difficult to calculate but we intend to supply 20% of the position in ETH and the remaining 80% in GROW. This will be roughly 60k USD in ETH and 240k USD in GROW. Users may therefore find it easier and cheaper to buy GROW due to there being a greater supply relative to ETH.
Liquidity Provision: Initial liquidity will come from the ValleyDAO multisig. Community members are invited to participate in the pool once it has launched and may benefit from trading fees for trades conducted through the pool.
As GROW embarks on this new chapter, ensuring its smooth tradeability is our utmost priority. The establishment of a robust liquidity pool is a crucial step in achieving this goal and guaranteeing a favourable trading environment for our users.
Minting of New Tokens
In order to provide sufficient liquidity to the pool, ValleyDAO will need to mint up to 2M new tokens. As we make strides to establish a liquidity pool, it is necessary to ensure there is sufficient volume of GROW to satisfy demand. This not only maintains the integrity of the trading system but also bolsters user confidence and trading efficiency. These tokens will by nature become distributed on the open market, furthering our commitment to true decentralisation of the ValleyDAO ecosystem.
Some further context on why we need to set up a Liquidity Pool (for non-web3 folks):
Rationale
The introduction of a token like GROW into the broader market requires more than just the activation of its tradeability. For seamless trading and sustained adoption, a liquidity pool plays a pivotal role for the following reasons:
Efficient Price Discovery: Liquidity pools help in determining the fair market price of a token based on real-time supply and demand.
Reduced Price Slippage: A deep liquidity pool ensures that large trades have minimal impact on the token’s price, providing stability and reducing drastic price fluctuations for the GROW Token.
Increased Confidence: Potential traders and investors often gauge the credibility and strength of a token by its liquidity. A well-maintained pool can instil confidence and encourage more users to engage with the ValleyDAO Ecosystem.
Trading Volume: Liquidity pools can stimulate trading activity by reducing fees and slippage, leading to higher overall trade volumes which will positively impact the growth of the ValleyDAO Ecosystem.
Integration with DApps and Platforms: Many decentralised applications and platforms require tokens to have substantial liquidity. By setting up a liquidity pool, GROW becomes more attractive for integration and partnerships which we may seek in the near future.
Great proposal Morgan and in support of pretty much every decision you all have chosen. One (philosophical / economic outlook) disagreement I have is around using ETH as the paired token. Although I am extremely bullish on ETH, I fear that we are about to enter a market downturn. If that happens, and ETH were to decrease in value relative to stables, then so would GROW, despite having to pay researchers in fiat currencies. I think in the short term, it may make more sense to opt for USDC as token2 in the liquidity pool, and open up an ETH if/when markets stabilize.
Would hate to see the treasury / token price take a hit because of a larger crypto market downturn, which GROW would already be exposed to irrespective of whether the LP is USDC or ETH. Am voting yes on this proposal either way because I think launching the LP with either is more important, but curious how you and others are thinking given macroeconomic conditions. HAIR is taking a hit right now just because of ETH prices.
I’m probably misunderstanding something, but maybe you could help me understand this? If price of Eth were to decrease after the pool is set up, it would introduce an arbitrage opportunity causing Eth to be sold into the pool, correct? The value of GROW relative to ETH in the pool should in theory increase.
I’m not super familiar with LPs and AMMs, so I’m probably missing something. I know typically all tokens move with Eth price, but not sure how that ties in with the LP.
Firstly, Benji, I appreciate your perspective on the potential market downturn and the implications of pairing with ETH. Your concerns are valid, especially considering the volatility of the crypto market and the need to maintain a stable treasury for operational expenses.
Madhuran, you’re on the right track. In AMMs (Automated Market Makers), when the price of one asset (like ETH) drops externally, it does create an arbitrage opportunity. Arbitrageurs would buy the cheaper ETH externally and sell it in the pool for GROW, thus increasing the relative value of GROW in the pool. However, this also means that the pool would end up with a higher proportion of ETH and a lower proportion of GROW. So, while the relative value of GROW might increase in the short term, the pool’s composition would shift, which might not be ideal for the project’s treasury, especially if we needed to liquidate assets for operational expenses.
Benji’s point about the treasury and token price taking a hit is crucial. If the broader crypto market faces a downturn and ETH’s value drops significantly, the treasury’s value (if heavily reliant on ETH) would decrease. Pairing with a stablecoin like USDC could provide more stability in such scenarios. However, currently, most of our treasury is held in either USD/USDC. This limited amount entering the pool does not leave us heavily exposed IMO. This is something we’ve been (perhaps overly) cautious of in the past and will continue to monitor very closely.
It’s essential to weigh the benefits of potential price appreciation (if the market remains bullish) against the risks of a downturn when deciding on the pairing. Both perspectives are valuable, and it’s great to see this critical discussion taking place.
I’ll bring it up again at Friday’s Tokenomics call to make sure everyone’s on the same page!
Firstly, Benji, I appreciate your perspective on the potential market downturn and the implications of pairing with ETH. Your concerns are valid, especially considering the volatility of the crypto market and the need to maintain a stable treasury for operational expenses.
Madhuran, you’re on the right track. In AMMs (Automated Market Makers), when the price of one asset (like ETH) drops externally, it does create an arbitrage opportunity. Arbitrageurs would buy the cheaper ETH externally and sell it in the pool for GROW, thus increasing the relative value of GROW in the pool. However, this also means that the pool would end up with a higher proportion of ETH and a lower proportion of GROW. So, while the relative value of GROW might increase in the short term, the pool’s composition would shift, which might not be ideal for the project’s treasury, especially if we needed to liquidate assets for operational expenses.
Benji’s point about the treasury and token price taking a hit is crucial. If the broader crypto market faces a downturn and ETH’s value drops significantly, the treasury’s value (if heavily reliant on ETH) would decrease. Pairing with a stablecoin like USDC could provide more stability in such scenarios. However, currently, most of our treasury is held in either USD/USDC. This limited amount entering the pool does not leave us heavily exposed IMO. This is something we’ve been (perhaps overly) cautious of in the past and will continue to monitor very closely.
It’s essential to weigh the benefits of potential price appreciation (if the market remains bullish) against the risks of a downturn when deciding on the pairing. Both perspectives are valuable, and it’s great to see this critical discussion taking place.
I’ll bring it up again at Friday’s Tokenomics call to make sure everyone’s on the same page!
think having some liquidity on optimism makes sense, but the initial liquidity will be mainly on ethereum right? which i think is way preferable because it still has most users and liquidity