Summary
This proposal seeks approval to utilize 5% of the total INST supply, currently held by governance, to establish a protocol-owned liquidity pool. The aim is to address the growing liquidity crunch caused by increased buying demand for INST, ensuring sustainable market depth and price stability.
Context
INST, the governance token of the Fluid protocol, is experiencing unprecedented buying demand, creating a liquidity crunch in the market. While this indicates strong market confidence, it poses a risk of exhausting available liquidity. Currently, the price of INST is approximately $5.5, and current market liquidity could be almost entirely depleted around the $6.5-7 price point.
To address this, we propose increasing market liquidity via a protocol-owned liquidity pool. This approach not only resolves the immediate liquidity issue but also ensures long-term stability and ownership over the pool, reducing reliance on external liquidity providers.
Majority of current liquidity in the current INST pool on Uniswap is of Instadapp’s biggest whale (7 siblings) which they received via the INST airdrop 3 years ago and has been sitting idle in the pool for the past 2-3 years. We really appreciate the “7 siblings” for becoming an LP and providing a deep healthy liquidity for INST. (Note: Fluid/Instadapp team has no contact with 7 siblings)
Proposal
- Allocate 5% of Total INST Supply: Governance will allocate 5% of the total INST supply to seed a protocol-owned liquidity pool.
- Pool Configuration:
- Swap fee: 1%
- Initial Price and Range: Upon deployment, the pool will start with:
- Center Price: $17.320508075688775
- Lower Range: $6 (or more depends on INST price)
- Upper Range: $50
- DEX Pool Deployment: This liquidity will be deployed strategically on Fluid DEX.
- Benefits:
- Prevents liquidity exhaustion amidst growing demand.
- Stabilizes market conditions, avoiding unnecessary price volatility.
- Strengthens governance control and sustainability of liquidity resources.
Note: range order will be created right above current INST price to avoid selling INST in the open market, allowing only new buyers to buy from this pool, having no effect on current INST pools & price.
Implementation Plan
- Team multisig will deploy the INST-ETH pool on Fluid DEX.
- Upon governance proposal execution:
- Governance will transfer 5% INST to team multisig.
- Team multisig will become auth of INST-ETH DEX and Vault to allow setting configs of pools according to market situation.
- Upon team multisig getting funds & becomes auth
- Team multisig will set up the pool & vault.
- Team multisig will create the one sided pool position with received INST.
- Team multisig will send the pool position back to the governance treasury.
Voting Options
- For: Approve the allocation of 5% of total INST supply for the protocol-owned liquidity pool.
- Against: Reject the proposal.