Stargaze LiquidityDAO Proposal
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Proposal #249 description
In collaboration with Stargaze Foundation, MantaDAO, and Rarma, we have revised and aligned the previous proposals on this new LiquidityDAO proposal. This proposal combines the four previous proposals presented to the community:
Expanding Mint Denoms and Protocol Owned Liquidity Stargaze Liquidity Mining Program: Incentive Proposal Sustainable Liquidity Building Proposal for STARS/USK on Kujira Use OSMO in the community pool as PoL
Into one dedicated proposal to strategically enhance and manage the protocol-owned liquidity for STARS.
The core elements of this proposal include: Establishment of LiquidityDAO: An initial request from the Community Pool of 25 million STARS will be dedicated to founding the LiquidityDAO. This substantial investment is pivotal in establishing a robust foundation for the DAO's liquidity management initiatives. It is important to note that this capital will only be used to build Protocol-Owned Liquidity (PoL) that remains under the ownership of the Community Fund. Therefore, most of this capital will be put to work with the expectation to grow over time. It is not an expense for the DAO. It is an investment that should bring long-term benefits to the protocol and STARS holders by deepening liquidity. Additionally, the DAO will use Polytone and cross-chain accounts to deploy and manage liquidity across chains and DEX.
Redirection of Mint Fees to LiquidityDAO: We propose redirecting existing mint fees that are not $STARS from the LaunchPad to the LiquidityDAO. These fees will constitute half of the Protocol-Owned Liquidity. This revenue from mint fees will be paired with STARS and added as PoL to the selected DEXs and pools, continually adding liquidity to strengthen the STARS token. Token swaps in the alternate denominations may occur to ensure liquidity is being provided where needed. At the discretion of the LiquidityDAO, mint fees might also be used to repay any loans contracted by the LiquidityDAO.
Discretionary Liquidity Deployment: The LiquidityDAO will maintain full autonomy in allocating liquidity across various decentralized exchanges (DEXs) and liquidity pools. This flexibility enables the DAO to target strategically beneficial areas for STARS. The DAO will submit signalling proposals on DAO DAO, allowing the Stargaze community to provide feedback or express concerns regarding proposed activities before implementation.
Diversification via Loans: The LiquidityDAO will open loans using $STARS tokens from the treasury as collateral. This approach is intended to diversify the LiquidityDAO's treasury, forming the other half of the required PoL and ensuring a balanced liquidity management strategy. The LiquidityDAO will use a conservative approach to risk, opening debt positions at a maximum of 20-30% LTV (allowing a 40-50% price decline before the position becomes at risk) and monitoring them closely. If a debt position becomes at risk, the LiquidityDAO would have several options to remedy the situation, including depositing more collateral, using revenue from mint fees to repay some of the debt, or withdrawing assets from the POL to repay some of the debt or increase collateral. Monthly reports will be provided to the community to inform you of the loan position health.
Restrictions on $STARS Token Sales: The LiquidityDAO will not have the authority to sell STARS tokens directly on the open market or engage in Dollar-Cost Averaging (DCA) based applications or OTC-type deals. This restriction is crucial for maintaining the token's value and ensuring that the focus remains on managing and enhancing protocol-owned liquidity. Once sufficient liquidity has been built against the STARS token, the DAO may submit additional proposals to Stargaze governance for additional asks or to enable the sale of $STARS using DCA or OTC-type strategies.
LiquidityDAOs first actions: MantaDAO Collaboration Expansion: We are set to bolster our collaboration with MantaDAO. Our plan includes receiving 68.4k USK from MantaDAO (see proposal mentioned above), matched with $68.4k STARS provided by the Stargaze Liquidity DAO, resulting in a total of $136.8k in STARS/USK liquidity on FIN. STARS LiquidityDAO would own 50% of this liquidity, and Manta DAO would own 50%.
An additional injection of $11k in liquidity on FIN will be achieved by matching 5.5 USK mint proceeds (from Kujira-based NFT projects) with $5.5k STARS. This action will elevate our total contribution in this pool to $147.8k.
STARS/USDC Liquidity on Osmosis: Utilizing 213.5k stOSMO from the Community Pool, we will mint approximately 74k USK (~28% LTV based on current stOSMO price). These funds will be swapped for USDC and matched with an equivalent amount of STARS, creating a new STARS/USDC Concentrated Liquidity pool on Osmosis with an estimated value of ~$148k. Ghost has a 1% Interest for minting USK against stOSMO, vs ~8% for borrowing against USDC on other platforms such as Mars or Umee/Ux.
Proposal for Osmosis Collaboration: We are currently reaching out to Osmosis with a proposal for them to contribute approximately $78k in stable coins, which would match the commitment made by MantaDAO. The allocation of proceeds from our leveraged activities, including the $74k generated from minting USK with stOSMO, will be determined based on Osmosis's response to our proposal. If Osmosis agrees to participate, LiquidityDAO and Osmosis will each own 50% of the resulting liquidity that gets deployed to the Pool. Similar to the Manta DAO PoL.
Members: The initial DAO membership will be a minimum 4/6 multisig comprised of the following members:
Ruwan (Stargaze) - stars130dutns64jh3d57sl8tclr4rr5wjydxry40gj2 Jorge (Stargaze) - stars1s8lnvw0m20868d63ds8pjaxj7c5aq4nk3a50ku Pragmatic Monkey (Manta DAO) - stars1cyglcvuqt5nzvlst6ehhgquhz0c7nzcsk5paw5 Johnny Whyles (Osmosis) - stars1dplx2zw3mjk5lam6fnv5q2yxldcshs3wrk52u5 Rarma - stars15hfzjddg3hrjwfgyf8m6xy67yp2ssk27qz40ty Seppmos - stars1vl0qfa3gkm6hlqpdhe244kw7398y9pjaw9mycz
The Stargaze Liquidity DAO address is stars12he2ldxl950wfypvelqwkac4mdul7clzgd8wdlnmjvll8z2cc47qsatvl2
The DAO will manage membership internally on an ongoing basis, as required. However, it will always remain a minimum 4/6 multisig. Duration: We propose running the LiquidityDAO for an initial period of 12 months. Past this period, the continuation will be subject to a Stargaze governance vote.
In summary, this collaborative proposal with the Stargaze Foundation, Manta DAO and Rarma outlines a comprehensive strategy for enhancing protocol-owned liquidity for STARS through the LiquidityDAO. By utilizing a combination of mint fees, loans, and incentivization mechanisms, this initiative aims to strengthen STARS liquidity support, the token price and, therefore, the STARS community.