Angel Vault: Let's get 'er done

karmaticacid · June 26, 2022, 9:01pm

Given the current state of the crypto market and the volatility of the GIV token, we want to reintroduce the Angel Vault as a simplified launch proposal, representing the culmination of a few months of discussion in mechanism design that we hope will create positive dynamics to support the Giveth ecosystem.

TL;DR

The Angel Vault is a structured Univ3 liquidity program for GIV/oneGIV that will be initialized & managed by a Giveth core team & ICHI multisig. oneGIV will be a Giveth-branded stable coin that will be initially 100% collateralized by DAI.

Anyone in the community will be able to add liquidity to the vault to earn rewards that are proportional to the amount of liquidity provided. The Angel Vault will provide significant liquidity for GIV on Uniswap, and protect the GIV token from downward volatility thanks to a moving “buy wall”.

Our Benefits

A Giveth-Managed Univ3 Liquidity Pool
- Regular Univ3 liquidity programs benefit expert liquidity providers over regular community supporters. The Angel Vault is the best farming pool we’ve seen, offering fair rewards to liquidity providers while reducing token volatility. If we are going to pay for liquidity, this is the best way to do it.
A Giveth-Branded Stablecoin
- Enables us to compensate the team with a stable token that further supports the Giveth ecosystem and provides the potential for further growth.

Our Requirements

Engagement
- We need confirmation from the community as validation for this solution.
Construction
- The Giveth team will continue to make progress toward the Angel Vault as underlying technical structures are deployed and capital is allocated.
Support
- To increase the liquidity in the Angel Vault after launch, we will need the support of our community to stake Angel Vault LPs while earning a yield from Angel Vault farming.
On-going Maintenance
- As always, new tools increase the technical debt of the ecosystem, and this will be no different. This system will need to be reviewed and maintained over time to ensure it continues to meet the changing and dynamic needs of the community.

Let’s Dig In!

The Angel Vault: Managed Uniswap v3 Liquidity Pool

The Angel Vault will be a structured Univ3 liquidity program, primarily managed by ICHI but with management power in the hands of Giveth core team and 2 members from ICHI in a 4/7 multisig.

The Angel Vault will be created using GIV & a yet-to-be-minted GIV-backed stablecoin, oneGIV. To set up the Angel Vault, the Giveth Community will create a large Univ3 position “buy wall” that consists of about 10% of the total market cap of GIV. This Univ3 position will help protect the GIV price from downward volatility if there are large sell orders.

If the price of GIV goes up, the wall stays where it is to maintain 10% of GIV’s market cap within it. If there is a sell order that eats into the wall (effectively removing stablecoins from it), the wall moves back to the point where its total value is still 10% of GIV’s market cap. The “buy wall” can actually consist of more than 10% of GIV’s market cap, and when that’s the case, it will be at the current price.

Anyone will be able to add liquidity to the Angel Vault, and will earn a yield in GIV for doing so.

oneGIV - A Giveth Branded Stablecoin

The Angel Vault will be based around Univ3 liquidity for GIV/oneGIV pairs. oneGIV will be a branded stablecoin backed by initially 100% DAI, and overcollateralized by GIV. Anyone will be able to mint oneGIV using $1 of DAI, or burn it for $1 of DAI. All these mints & burns will happen with a contract managed by a multisig of Giveth core team members.

Approx. $400k of GIV will be held in the oneGIV contracts (managed by the Giveth oneGIV team multisig) to be used as excess collateral in case there is an issue with DAI. Over time, the multisig may want to change the minting ratio so that minting oneGIV will require some % DAI and some % GIV.

Demand for oneGIV will be created through incentives for adding to the Angel Vault & perhaps additional incentive programs (such as oneGIV/xDAI) in the GIVfarm. To start, the only market for oneGIV will be against GIV, so in order to take advantage of Angel Vault rewards, people will need to sell ETH (for example) for GIV, and then sell GIV for oneGIV. Because 1 oneGIV can be minted/burned for 1 DAI, this also creates an arbitrage opportunity.

The DAI required to initially back the oneGIV to set up the Angel Vault will be provided by “Angel LPs”, i.e. backers who provide the stables to kickstart the program. They benefit from getting Angel Vault LP tokens that they can stake in the GIVfarm to earn rewards.

For more on the subject, there are interesting techniques and opportunities presented by oneGIV, explained at length here.

Angel Vault & oneGIV? What does that mean for GIV holders?

Anyone in the community will be able to add to the Angel Vault by simply adding oneGIV on ICHI’s website which will add to the buy-side of the managed Univ3 position for GIV / oneGIV. They will be able to stake their Angel Vault LP tokens in the GIVfarm and earn rewards proportional to the liquidity provided.

If you recall, we turned off our original Univ3 incentives program after learning that standard Univ3 programs benefit expert liquidity providers significantly more than the average user. This solution works to solve this, offering fair rewards to liquidity providers while getting the benefits of Univ3 liquidity.

A Note: The “Regen Pool” has been put on the shelf

If you’ve been keeping up with this discussion, you’ll recall that we were discussing getting the DAI to collateralize oneGIV initially from a borrowing/lending Pool called the “Regen Pool”. Sadly, Rari has turned off borrowing for Rari Fuse pools as a result of a small exploit, and given that their CEO recently resigned. We have negative trust that borrowing will be turned back on soon.

We have this as an option in the future, but for now, since 10% of the market cap is much less than it was before, we can still move forward with the Angel Vault program, without depending on the Regen Pool.

Incentivizing Angel Vault LPs

As mentioned we want to encourage our community to add liquidity to the Angel Vault so we’ll be providing an Angel Vault LP incentives program within the GIVfarm. When people stake their Angel Vault LPs, they will be able to earn a yield in GIV. Similarly to our other farming programs, part of the earnings will be distributed via the GIVstream.

We hope to sustain around $400k of Angel Vault liquidity with APRs of about 125%. We assumed a GIV price of $0.04, meaning we will need 6 million GIV for a rewards program of 6 months. These calculations are reflected in this spreadsheet

In Conclusion

The Angel Vault and corresponding rewards program will:

Provide significant liquidity for GIV on Uniswap v3
Offer fair rewards to liquidity providers
Protect the GIV token from downward volatility
Create more demand for the GIV token through oneGIV
Create an opportunity to generate funds through arbitrage, and
Open the door to potentially more innovative economics using this system as a starting point

It is requesting the following from the liquidity mining multisig:

Approx. $400k of GIV to over-collateralize oneGIV
6 million GIV to incentivize Angel Vault LPs

Should we start the Angel Vault & corresponding incentives program?

Please vote in Snapshot!

Resources

This forum post was written by @toddxy & @karmaticacid with significant support from @Griff , and feedback from @yass.

mitch · June 27, 2022, 2:00pm

I really enjoy the simplified version now without the Regen Pool. Let’s try it out!

If the managed Univ3 pool proves effective we could move the GIV/DAI LPs from the NICE token revenue to GIV/oneGIV LPs.

chadfi · July 5, 2022, 10:22pm

Great summary followed by a great breakdown - bravo to Lauren, Todd, & the rest of the team who helped bring the to fruition! Very happy to see the awesome support on the snapshot.

karmaticacid · July 11, 2022, 3:37pm

The vote has passed with overwhelming support in Snapshot! We’ll be moving forward with setting up the Angel Vault this Wednesday w/ @Griff & @yass

Griff · July 15, 2022, 8:24pm

THE JAGGED STAIRCASE!

The Angel Vault is not your normal LP position. Lauren and I hacked on how we are going to do the rewards in this spreadsheet:

Here is a walkthru:

In Short, we will reward an alternating amount of GIV (via the GIVstream) at these rates

Beginning of Round	Amount of GIV rewarded in that Round
July 22	485,143
August 5	569,143
August 19	140,000
September 2	653,143
September 16	140,000
September 30	737,143
October 14	140,000
October 28	821,143
November 11	140,000
November 25	905,143
December 9	140,000
December 23	989,143
January 6	140,000
January 20	0.00

mitch · July 18, 2022, 4:50pm

Are there any potential vulnerabilities to the Angel Vault when rewards and perhaps angel vault liquidity is low? perhaps a market shift sends the giv price spiralling during one of these liquidity dips, it would be much harder to recover.

Is the mechanic of offsetting IL in the GIV/oneGIV LP for stakers worth the risk of being exposed for half of the program, albeit intermittantly?

chadfi · July 20, 2022, 4:40pm

From Research call discussion - to maximize transparency, show jagged staircase chart front and center at the deposit user interface. Maybe have a start showing “you are here”, perhaps a feature where you can scroll over and see APR/Date at any period on the staircase.

Cotabe · July 21, 2022, 1:47am

Thanks for all the amazing work guys @Griff and @karmaticacid this is great.

Also thanks @mitch for raising the point of the vulnerability on the liquidity dips. I was thinking about it and I believe the risk doubles because people just removed liquidity on a mix of oneGIV and GIV, so they might be selling a lot of the GIV that ate the wall on those 2 weeks.

I believe we can mitigate that risk if we use part of the 6M in rewards to have an inverted “Jagged Staircase” either on single stacking or a GIV/oneGIV farm to avoid the selling of the GIV that the LP has eaten on the previous 2 weeks.

mitch · July 21, 2022, 9:33pm

I took another harder look at your params, very interesting and very meme-able concept of the Jagged Staircase, I love the name. However I am a bit concerned by the dramatic highs and lows of the staircase, as well as the continued promise of more rewards, which might not be sustainable in the long run.

So they say,

“The higher you stand, the greater the fall”

Well, I actually don’t know if anyone said that, but the point is, if the program continues we couldn’t sustainably offer higher and higher rewards. The opposite would in fact be that we would have to reduce rewards to rein in emissions. Without a robust buyback strategy we should consider becoming more frugal with how we distribute GIV.

We thought we could wrap up the GIVfarm in 6 months, but realistically even with GIVpower I think the GIVfarm will still be relevant and necessary for at least until 2023. Point is, things take longer than we expect, it’s fine, but we should aim to make them sustainable from the start.

With that in mind I would like to present “Ranging Mesas” (No, this is not a macOS release.)

This still takes in the mechanic of APR highs and lows on regular intervals, which with proper communication could incentivize users to constantly rebalance the GIV/oneGIV LP (right?). However with this we can set a steady course of APRs at least for the first 6 months, which if deposits into the Angel Vault flatten (do not increase) then we’re not “overdistributing” GIV without any noticeable growth or success of the Angel Vault.

After the first 6 months we can see if the program is working or not and adjust APRs to perhaps a Jagged Staircase approach or remain with the Ranging Mesas to rework a better promotion strategy.

At any rate whichever method we choose I think a clever communication strategy will be key to get middle to advanced users interest and “playing the game” how it’s supposed to be played. We could consider showing a “map” of the distribution to users can predict APR changes and coordinate their liquidity provision according to what we want them to do.

This is by means only an example but really we’ll need to get creative in intuitive communications to maximize the benefits we’re trying to create from these APR high and lows.

EDIT 27/07

I forgot to attach a copy of my spreadsheet, here it is!

Griff · July 26, 2022, 5:26pm

That seems like way too much development work, at least for launch, lets just get this baby out… but I think we could try to make it happen after launch… it is very relevant a month after launch, but less of a thing at launch

Griff · July 26, 2022, 5:38pm

The Ranging Mesa ends up being a downward staircase if the GIV price goes down… and given our stream and the bear market, I would assume that it will (you basically have to be staking GIV somewhere to beat inflation), so flat reward amounts in GIV, means reducing rewards…

While the ranging Mesa is simpler in the docs, we want to really get people excited about putting stable tokens into the angel vault, and honestly, as time goes on, it is likely that we will have more and more GIV in the angel vault, which I think makes the offer more and more risky (you are buying into a more volatile pool as time goes on), we should increase the rewards due to that risk IMO.

mitch · July 26, 2022, 6:19pm

That would be why you reassess after 6 months to see if rewards need to be higher or lower.

We should consider in moving away from looking at GIV in USD terms and more of its absolute quantity. The price of GIV might go down but our total supply does not increase. The faster we spend GIV the harder it will be once our market cap fully dilutes to try to get that GIV back through programs in the future.

karmaticacid · July 26, 2022, 6:59pm

So are you saying we should decrease the amount of GIV to go out for incentives? Because from your proposal, it seems like you are suggesting the same overall “amount” of GIV in the same time period… only adjusting the way it is distributed.

The 6 million GIV in 6 months was approved via this snapshot

mitch · July 27, 2022, 1:38pm

Ah that’s true, then I suppose the actual amount gone out wouldn’t change after 6 months. In comparison to jagged staircase it distributes a bit more in the beginning and a bit less later on, but it is simply a flat amount of GIV allocated to each mesa.

Maybe my hesitation would be the thought process behind “number go down, give out more”.

Also very sorry but I don’t think I posted my spreadsheet

chadfi · July 27, 2022, 4:23pm

Discussion from Research call - Jagged staircase is acceptable, increase MoM is due to riskier GIV position as time goes on.