DCP-1: Market Making Proposal

Header Content
Author Radek Ostrowski
Created 2021-8-17
Status Planned

Motivation

dHEDGE core team is hard at work trying to expand our presence on centralized exchanges. We are already on Huobi and OKEx, but the markets aren’t very active. Expanding market access to DHT will help to grow our ecosystem in various ways.

For one, many traders and speculators only use CEXes, so a strong presence there will help us to expand the number of token holders. Hopefully we can convert some of these speculators into DeFi users as well.

Secondly, if we have healthy markets in both DEXs and CEXs, then it will give us highly reliable price feeds from Chainlink. This is a highly desirable pre-requisite to have DHT integrated into other DeFi platforms and even list DHT on dHEDGE itself.

Higher volumes on CEXes will also facilitate new listings, so we need to ensure that the markets on existing exchanges are healthy enough to allow for trading.

Description

The dHEDGE team proposes to engage Market Making firms for DHT trading pairs. By enlisting the services of market makers, we can ensure tighter spreads and less slippage, creating a healthy trading environment on the exchanges.

Most of the deals offered by Market Makers include lending them the tokens (and sometimes stables/eth) with an option to buy the tokens in the future around the current market price.

Implementation

The core team will reach out to and compare various market makers and pick the best solution.
Average expected loan amount is around $3M worth of DHT/stables for 12-24 months.

Vote

Vote passed

3 Likes

This is great idea! Which MMs are we looking to partner with? Wintermute, Cumberland, Alameda?

Should we create each individual proposal for each of MM?

1 Like

Hi, thanks, we have already started chatting to them.

Would not incentivizing defi liqudiity in AMM lead to more holders rather than paying a 1-3 paid CEX market makers? I would think these market makers tend to dump their tokens for profits, while this would not hold for all AMM makers. Any way these CEX market makers can be incentivized to hold tokens in escrow for some period?

I honestly have mixed feelings about paying for CEX liquiidity, but that’s my bias being deep in DEFI with 0 exposure on CEXes.

I’m also not such a fan of cex-listings in general. Although the higher volume can more easily drive the price up, there are projects which do just fine without whitespread cex-listings (rocketpool).
Offering cex’s a discount on the market-price is also a way to just facilitate a dump.
The users on cex have no real interest in dhedge I think at the moment. If any dht is offered, it should be the current market-price and nothing else. This will also disadvantage the current dht-holders, should they get a cheaper price.

So, I do not see the real advantage of listing on a cex at the moment. Dhedge invests already a lot in social platform marketing, expanding its userbase.
If the cex’s can allow their users to invest into the dhedge-pools directly, that is something else, but I don’t think that’s possible at th moment.

One has to consider whether this 3M investment can not be spent in a better way than a cex-listing? Create a progressive web/mobile app for dhedge for example …

Some good points there. Our biggest market is Uni V3, and we have neglected CEXes so far. Unfortunately, it seems the only way for us to get Chainlink feed atm is to increase volumes on Huobi/OKEx. We are not the only project in those circumstances (e.g. Alchemix had a similar vote). We have thought of the implications of engaging third party market makers and might try doing it ourselves first. Just to clarify, 3M will not be spent, it can be lend out.

If this goes through, maybe try crypto.com? I’m not so knowledgeable about these cex’s, but crypto.com has been bought by trustswap. Not sure if it lives up by its name, but maybe they have reasonable demands then. That’s the only thing if this is required for chainlink. The current dht-holder shouldn’t be punished for a price-feed. I suppose demand will come if the dhedge becomes more popular. That’s the goal I suppose.

Higher volume is required for adding a secure DHT chainlink feed. Having a chainlink feed for DHT is required for adding DHT as an enabled asset for dHEDGE managers/pools