AIP 84 : Manage AST Liquidity Position

[Koploseus]

Summary

This AIP proposes to use the treasury to deposit AST and a small portion of ETH to increase the Uniswap LP pool with the goal of reducing slippage between AST/ETH pairs on the platform.

• AIP 63 proposed to research different ways to add liquidity to the AST/ETH pair
• AirSwap DAO currently has $21K of AST and ETH deposited in Uniswap v3.
• This AIP proposes to withdraw the claimable assets from the current LP and create a new LP
• Use the LP revenue to pay Contributors
• Add $122K of AST in LP
• Add $25K of ETH in LP

Specification

This AIP proposes to withdraw ~$150K worth of AST from the Treasury to supply $122K worth of AST (~1M AST at time of writing) and 14.9 ETH (14.9 ETH at time of writing) to the LP on Uniswap V3, with a price range from minus 15% of the current price to infinity. This means that AirSwap will provide most of the $AST liquidity on the buy side, which will reduce slippage for those who are interested in getting $AST to join the DAO.

Contributors will monitor the LP position occasionally and update the range to dilute it.

Uniswap v3 allows people to add liquidity with a different weight.

In this example, the DAO would be able to deposit $122K worth of AST for only 14.9 ETH. The liquidity will be provided between -15% of the current value, with no maximum price.With this mechanism, the price impact for buying $AST on-chain will be reduced.

The pool will be initiated with a pool fee of 1%.

Rationale

AirSwap currently provides $21K in liquidity on the AST/ETH pair on Uniswap v3. There are several problems with low liquidity pools on Uniswap:

• MEV bots are attracted to low liquidity pools as it is easy to sandwich attacks.
• Significant price impact for large swaps relative to the size of the liquidity pool.
• Liquidity attracted through liquidity mining programs is temporary and will decrease once the promotion period is over.

We believe that a suitable amount of liquidity should be able to support a $10K swap of AST for ETH with a maximum price impact of < 2.5%. This would require a TVL of about $300K. There is currently $150K TVL in the AST/ETH pool. Thus, we will need to manage an additional LP position of $150K (AST/ETH) in order to offer an optimal LP on Uniswap with a full range in the future.

However, the DAO currently does not have sufficient ETH to provide liquidity across the full range. As a result, we propose to begin by adding more AST than ETH to the Uniswap v3 LP, effectively only providing liquidity on the buy side. This would at least help reduce slippage for people who want to join our DAO.

By adding to the AirSwap LP position, the DAO would also earn additional fees. The fees generated from the DAO LP will be used to help finance AirSwap’s operational costs, thus reducing the reliance on its treasury.

Copyright

All proposals are public domain via CC0

[agriimony]

Will also need to state that the DAO will need to market sell AST to raise 14.9 ETH to deposit LP.
And will need to sell in batches to prevent a big price impact.

Also I think the summary needs to be clarified some more.
Is this the correct reading of the AIP?

Summary:

• AIP 84 proposes to withdraw claimable assets from current Uniswap V3 position
• The claimable assets will be used to create a new LP on Uniswap V3 with 1% fees
• This AIP further requests to withdraw 1.2M AST from the Treasury
• 200K AST will be swapped to ETH (~14.9 ETH)
• Remaining 1M AST and ~14.9 ETH will be deposited into the new Uniswap V3 LP
• LP fees generated will be used to fund future contributor activities