Proposal Summary

Efficient Frontier is publishing this proposal to seek the KYVE community’s approval for a market making agreement. The proposal would entail the following:

• Authorizing Efficient Frontier as an official KYVE market maker
• KYVE Foundation transferring $1,225,000 worth of KYVE and additional $125,000 worth of USDC to Efficient Frontier over a series of tranches as a loan for the purpose of market making
• The ultimate amount of KYVE that is transferred will be calculated based on the prices at the time of delivery of tokens to Efficient Frontier.
• Efficient Frontier will commit to make markets on CeFi exchanges and on the Osmosis pool (DEX).
• Efficient Frontier will either return the loaned amount at the end of the market making period or purchase the tokens at a series of strike prices (The strike price calculations are elaborated below).

Proposal Details

About Efficient Frontier

• Efficient Frontier is a cryptocurrency algorithmic trading and market making firm. We spun out of a traditional finance high-frequency trading firm in 2017 and have since grown to become one of the leading market makers in the cryptocurrency ecosystem. Our team is composed of traditional finance quants and traders, as well as experienced crypto-natives, all of whom share a passion for making cryptocurrency markets transparent and fair. As a designated market maker, we are proud to provide the highest standard of service and ethics in Web 3 markets.

Services

CeFi

• Efficient Frontier will make markets for the KYVE token on centralized exchanges. We provide two-sided quotes on the token’s order books so that traders and users can trade efficiently.
• All trading is done through the exchange API, with 24/7 human monitoring to adjust the parameters based upon market conditions.

DeFi

• Efficient Frontier will provide liquidity to the Osmosis pool so that traders and users can also trade KYVE on-chain.

Commercial Terms

Loan Terms

Initial Funding	Loan Repayment	Explanation
$1,225,000 worth of KYVE and $125,000 worth of USDC (to purchase OSMO)	$1,350,000 worth of KYVE at the time of the transfer	EF will take out a loan in KYVE and USDC, which is ultimately only returned in KYVE. If only part of the options are exercised, then the remaining loan shall be returned to the KYVE Foundation

Option Terms

Option Tranche	Size	Strike and Explanation
18 Month Option - Tranche 1	$250,000 worth of KYVE	Option to purchase the KYVE token. At the end of the 18 month period, Efficient Frontier can exercise the option. Strike price is set at the listing price on Osmosis relative to $OSMO.
18 Month Option - Tranche 2	$400,000 worth of KYVE	Strike price is set at the average price of the first 7 days of trading starting from the first supported CeFi listing.
15 Month Option - Tranche 3	$300,000 worth of KYVE	Strike price is set at the average price of the first 7 days of trading starting 90 days from the first supported CeFi listing.
12 Month Option - Tranche 4	$200,000 worth of KYVE	Strike price is set at the average price of the first 7 days of trading starting 180 from the first supported CeFi listing.
9 Month Option - Tranche 5	$200,000 worth of KYVE	Strike price is set at the average price of the first 7 days of trading starting 270 days from the first supported CeFi listing.

Additional Terms

Service	Cost	Explanation
CeFi Market Making	Included with Option	Includes Market Making, Dedicated Account Manager, Telegram Support, 24/7 Monitoring, Reporting.
DeFi Liquidity Provision	Included with Option	Liquidity providing and rebalancing on Osmosis. We will LP with 60% of the $250K DeFi tranche ($150K) to start and rebalance the pool as the price moves.

Objective: To provide healthy liquidity for the KYVE ecosystem on both centralized and decentralized exchanges

Benefits: Liquidity is very important for traders and users to be able to properly buy and sell the KYVE token. Our goal here is to make markets and provide liquidity to the KYVE ecosystem so that people can easily and efficiently enter and exit their holdings.

Covered Exchanges and Pairs:

With the full loan size (including all tranches), we can cover up to 6 pairs.

Impact Assessment:

• Technical Impact: N/A
• Economic Impact: Market making plays a key role in facilitating liquidity for the ecosystem and allows buyers and sellers to be able to efficiently trade.
• Social Impact: In the long run, the market will naturally find price discovery, regardless of whether this is upwards or downwards. A market maker is a facilitator of this price discovery but shouldn’t directly move the price up or down.

Efficient Frontier Warrants:

• Authority and Competence – Efficient Frontier has the full right, power and capacity to perform its obligations and provide the services under the offer and it shall exercise a degree of competence and professionalism which would reasonably be expected from a skilled and experienced provider engaged in the same type of business as Efficient Frontier;
• No conflict - performing the market making services shall under the offer not breach any regulatory or contractual requirement governing Efficient Frontier is subject to;
• No actions - To Efficient Frontier’s knowledge, there is no action or threatened action against Efficient Frontier which would substantially impair its right to perform the market making services or adversely affect its financial condition;
• Efficient Frontier shall defend and hold harmless the DAO, the KYVE Foundation and DAO members from and against all third-party claims or actions, costs and expenses arising from or in connection with (a) any claims by third parties resulting from or in connection with the provision by Efficient Frontier of the market making Services, or (c) any breach by Efficient Frontier or its agents or sub-contractors of applicable laws or regulations. The indemnification shall be subject to the following conditions: (i) the party seeking indemnification shall notify Efficient Frontier in writing of the applicable claim, promptly after becoming aware of the claim, and (ii) the party seeking indemnification shall provide Efficient Frontier with the right to exclusively conduct the defense of such claim, and shall assist with such defense as may be reasonably requested by Efficient Frontier. In the event that any DAO members seek indemnification, they must appoint one representative with the full authority to represent them vis-à-vis Efficient Frontier with respect to such matter, and Efficient Frontier will be required to interact only with such representative
• Efficient Frontier shall have sole responsibility for complying with all legislative and regulatory requirements relating to the market making services and has the means, resources and know-how to satisfy such requirements.

Voting Options:

Voting YES A YES vote on this proposal indicates that the above terms for market making SHOULD be approved, AND the KYVE tokens should be lent to Efficient Frontier and Efficient Frontier shall have the option to either (i) return the loan in KYVE or (ii) purchase the loan in whole or in part at the strike prices (and return any remaining part of the KYVE loan).

Voting NO A NO vote on this proposal indicates that the above terms for market making SHOULD NOT be approved, and there should be NO lending of KYVE tokens to Efficient Frontier for market making.

Voting NO WITH VETO A NO WITH VETO vote on this proposal indicates that the above terms for market making SHOULD NOT be approved and there should be no lending of KYVE tokens to Efficient Frontier for market making; and that the proposal depositors should be penalized.

Voting ABSTAIN An ABSTAIN vote on this proposal indicates that you decline to give a specific opinion on this proposal while maintaining active governance participation.

Conclusion:

Market making is a key function to building efficient markets. Efficient Frontier proposes to make markets for KYVE with a loan and option model, which we take a loan in the KYVE token and receive an option to purchase this loan after the term ends. We look forward to answering any questions here and working together with the KYVE DAO to provide liquidity to the KYVE ecosystem.