Supply $1,500,000 USD worth of BPRO (~170,000 BPRO) to a single-sided range order on the BPRO/ETH Uniswap v3 pool. Visor Finance will manage that range order as it converts to ~50/50 BPRO/ETH. Upon conversion, Visor will widen the liquidity range and manage protocol-owned BPRO/ETH liquidity to optimize for slippage, yield, and availability of liquidity.
This will allow B Protocol to:
- Increase the BPRO liquidity on the most capital efficient BPRO/ETH pool
- Build protocol-owned BPRO liquidity
- Generate swap fee income for the treasury
I believe this is the most efficient, cost-effective way to build BPRO liquidity and protocol-owned liquidity at this point in time. This approach is particularly useful for BPRO liquidity due to the simple fact that liquidity can be provided 100% in the form of BPRO.
This proposal aims to provide liquidity and generate yield on BPRO tokens provided by B Protocol using Visor Finance to initiate and manage the liquidity provisioning process. Concentrated liquidity provisioning on Uniswap v3 involves managing price ranges and manually re-investing earned fees. The advantages to using Visor Finance include active management of price ranges and reinvestment of earned fees. Price range adjustments and fee re-investments are done according to top-of-the-line strategies developed by Gamma Strategies (https://gammastrategies.org), which is a research organization funded by Visor.
The strategy to be employed is to place a single-sided range order from one tick above the current price tick to 25% above the current price tick. As the current price of ETH/BPRO moves into the range, the position will gradually convert to ETH. Once a 50/50 ratio of ETH to BPRO is reached, the position will be rebalanced over a +/- 50% range and managed according to the strategies developed by Gamma Strategies.
Base motivation for this strategy is to build BPRO DEX liquidity on a capital efficient DEX like Uniswap v3.
Why Uniswap v3?
- Capital Efficiency: By concentrating the liquidity around the current price tick, you have the ability to lower slippage on less liquidity than on Uni v2 or Sushi. For example, by concentrating liquidity around a +/-50% band, as opposed to providing liquidity at all prices, you can potentially achieve a 4x capital efficiency. What that means is with approximately 24% of the capital of Uni v2, you can achieve the same slippage on Uni v3.
- Higher Fees: By concentrating liquidity within a tighter band, the liquidity provider can potentially earn a higher fee multiple than on Uni v2 or Sushi. Additionally, the added TVL to the Uni v3 pool will absorb more volume as slippage is lowered for traders.
- Ability to use the Uniswap v3 Price Oracle: The performance of TWAP oracles has improved significantly. It is faster and cheaper to check the recent prices of assets. If requested, all the recent TWAPs calculated within the last nine days can be checked
- Ability to set single-sided range orders: Unlike Uni v2 and Sushi where a 50/50 ratio of assets are needed to provide liquidity, on Uni v3, you may set liquidity ranges consisting of 100% BPRO or 100% ETH. This proposal is suggesting a single-sided range order of 100% BPRO position above the current price tick. As buy orders push the current price into the range, BPRO is converted to ETH while also earning trading fees at the same time. The single sided range order of BPRO above the current price tick has the additional benefit of lowering buyside slippage for BPRO purchasers.
Why a Single-side Range Order?
- Advantages: The main benefits are that it takes all the advantages of the capital efficiency of Uniswap v3 as mentioned earlier, it does not involve market selling tokens at a discount to obtain the other side of the pair in ETH, and it significantly lowers buyside slippage for purchasers.
- Disadvantages: There can potentially be a delay if the range order is not “bought into” especially if the price of BPRO were to decline relative to ETH or if ETH were to rise in relation to BPRO. However, in the worst case scenario, B Protocol would remain at status quo with a 100% BPRO position.
Why protocol-owned liquidity?
- Control over your own liquidity: B Protocol need not rely on external liquidity providers who can be mercenary and have interests at odds with the protocol. Additionally, B Protocol can ensure that liquidity is centered around the current price while also being able to control slippage for buy orders by placing more BPRO in a single-sided range order above the current price tick.
- Fee revenue: The fee revenues from providing liquidity on Uniswap v3 can be used to scale the total liquidity with the growth of the platform. Alternatively, the fees can be used as an additional source of revenue to fund the operations of B Protocol.
B Protocol will supply $1,500,000 USD of BPRO to the Visor position manager contract called the Hypervisor (hypervisor/Hypervisor.sol at master · VisorFinance/hypervisor · GitHub) , which will mint fungible ERC-20 LP tokens to a whitelisted address provided by B Protocol.
Only the whitelisted address provided by B Protocol will have the right to deposit / withdraw assets to and from the Hypervisors. The position manager contract has the right to a few managerial functions which are to set price ranges, set range orders, collect fees, rebalance, and mint/burn LP tokens to the whitelisted address. Therefore, the Hypervisor contract is non-custodial in that only the provided whitelisted address may deposit / withdraw assets into and out of the contract.
Visor Finance takes 10% of the Uniswap swap fees, which get distributed to VISR stakers. 90% of the swap fees will be automatically re-invested into the LP position upon each rebalance. Visor Finance will cover all gas fees for rebalancing positions and re-investing earned fees.
In terms of the placement of liquidity on Uniswap v3, $1,500,000 USD worth of BPRO tokens will be placed 1 tick above the current price tick to 25% above the current price tick. Assuming the price of ETH remains constant, the 50/50 ratio of BPRO being converted to ETH will occur at approximately $9.75 price of BPRO. At that point, the position will be rebalanced over a wider range of +/- 50% range.
In terms of slippage, the current slippage at the time of writing this proposal is 8.75% for a 10 ETH buy order. The initial set up of $1.5M BPRO placed in the concentrated 25% range order, will incur 0.5949% slippage on a 10 ETH buy order, due to the concentration of a large amount of BPRO right above the current price tick. After the rebalance upon 50/50 ratio, the buyside slippage for a 10 ETH order will be approximately ~2.86%*. However, all of these approximations are subject to change based on the characteristics of external liquidity and the price of ETH relative to BPRO. See and toggle calculations here: BPRO Calculations - Google Sheets
Temperature Check Poll
Supply $1,500,000 USD of BPRO to the BPRO-WETH pool on Uniswap v3 as a single-sided range order and have Visor Finance manage the position?
- Agree with the proposal as is
- Agree but wish it was more aggressive in terms of BPRO supplied
- Agree but wish it was less aggressive in terms of BPRO supplied
Given the community’s thoughts that 1.5M USD of BPRO is too much, I’ve run the simulation with 750K USD of BPRO which is around ~100K of BPRO. In this simulation, we’d have 2.68% slippage for a 5 ETH purchase, which is a little more than 1/2 the current slippage on Uniswap right now of 5.02%
Supply $750,000 USD or ~100k of BPRO to the BPRO-WETH pool on Uniswap v3 as a single-sided range order and have Visor Finance manage the position?
- Still too aggressive