| Author | Emilio Cazares |
|---|---|
| Status | Implemented |
| Type | Treasury Management |
| Implementor | DAO Council |
| Sponsor(s) | Nick Tomaino |
| Temperature Check Poll | LINK |
| Created Date | 03/23/2022 |
Summary
Allocate $RARE from the treasury to engage market makers and liquidity providers to improve liquidity and price stability
Motivation
Currently, the only $RARE tokens in circulation are the ~150,000,000 tokens originally made available to the Artists and Collectors who made SuperRare what it is today. Market making buttresses efficient markets, reduces vulnerability to price swings, and in the case of $RARE – increases opportunities for potential buyers seeking to leverage the utility of of the worlds finest curation token. Some market making measures involving increased $RARE circulation are important for ensuring stable and healthy markets, but not without responsible process and transparent decision making situating the community at the helm.
Abstract
This SIP contemplates several methods to improve $RARE liquidity and acts as an ongoing request for comment from the $RARE community to suggest market making measures to improve $RARE liquidity. In the interest of efficiency, this Proposal seeks to establish the Council’s independent authority to enter into transactions with third party market makers and/or liquidity providers subject to procedural and transparency obligations. In the spirit of decentralization, this proposal also acts as a call to the community to suggest more user oriented, trustless forms of liquidity provision.
Specification
Up to 30,000,000 $RARE (or equivalent value in ETH or USDC) may be made available over the one (1) year period following the approval of this Proposal for certain liquidity and market making activities designed to improve liquidity for $RARE as identified below.
Approved Methods of Providing Liquidity
- Loan Agreements (including purchase options) with Council-Approved Market Makers
- Discounted Purchase of $RARE to Council-Approved Market Makers
- Incentivized Liquidity Mining Program
- Direct Provision of Liquidity from DAO Treasury
Procedure for Council Approving Transactions Related to this Proposal
The Council may only enter into, execute, and deploy a subsequent transaction or program fulfilling this Proposal’s purpose and relating to an approved method of providing liquidity if the following conditions are met:
- the transaction is approved by an informed consent from a majority of Council;
- the transaction is approved by independent legal counsel; and
- the Council provides at least fourteen (14) days public notice before each DAO Treasury transaction performed within the scope of this Proposal
Any unused $RARE upon the expiry of this Proposal shall be immediately relinquished back to the DAO Treasury. Nothing in this Proposal should serve as an ongoing basis of authority for the Council to use DAO Treasury funds for market making activities after this Proposal’s expiration.
Requests for Proposals
Up to 5,000,000 additional $RARE shall be set aside for the Council to dedicate to community-originated liquidity improvement proposals passed through the SuperRare Improvement Proposal (”SIP”) procedures. The passage of this Proposal would serve as a request for any community member to propose any program or transaction fulfilling this Proposal’s goals. Such community-originated Proposals must survive the ordinary SIP requirements to qualify for $RARE designated by this Proposal for market making activities. The Council may use any portion of the dedicated funds to incentivize related proposal development.
Benefits
Improved liquidity, the potential to further decentralize $RARE holdings, and greater access to the $RARE ecosystem. Establishing a regulatory and community friendly precedent for coordinating market making decisions at the community level.
Drawbacks
Regulatory risks associated with market making activities and unpredictable governance/market outcomes associated with increasing the circulating $RARE supply. Empowering the Council to make decisions approved by the DAO pursuant to this Proposal enables flexibility and quick decision making but potentially increases information asymmetries between the Council and Community, which creates certain insider trading or securities risks. Such informational asymmetries should be mitigated as provided in this Proposal, or as otherwise deemed appropriate by the Community or Council.
Outcomes
This Proposal will be deemed a success if the Council is able to successfully enter into market making transactions (or implement community-generated and approved proposals) while observing the transparency and notice obligations defined herein. Accordingly, the Council should attempt to disclose material aspects of transactions entered into pursuant to this Proposal to the extent such disclosure doesn’t violate any duties of confidentiality. In order to reduce information asymmetries, the Council should make its best efforts to provide early notice and details about the anticipated aggregate sum of $RARE to be released into the market. The Council should consider nominating or otherwise deferring to community members who can provide technical insights on $RARE markets routinely after market making transactions made pursuant to this Proposal.
