DCP-13: Migrate and Concentrate DHT liquidity

dHEDGE Capital Proposals (DCPs)
#1
Header Content
Author Edson Ayllon (@relativeread)
Created 2023-2-2
Status Draft

Motivation

The current DHT liquidity is inappropriate for large purchases of DHT. When DHT is purchased in a large amount, traders incur slippage and increase the price, after which arbitrage is done by other users from liquidity of other chains, reducing the price again. This leaves the original large purchase of DHT with DHT at an immediately lower price than they purchased.

Additionally, staking V2 will stop staking on Ethereum L1. This liquidity may be much better utilized on chains where staking will take place.

Description

Currently, the liquidity of the $DHT token is divided into 4 pools, on 3 different chains.

The proposal is to move existing liquidity into a single chain. As Optimism is the chain with the most activity for dHEDGE, liquidity will be moved there and deposited into a DEX such as Velodrome or Uniswap.

Bridging DHT to and from Ethereum and Polygon to Optimism will still be available.

Implementation

Protocol controlled liquidity will be removed from Ethereum and Polygon, and moved onto Optimism, executed via multisig.

Vote

Vote

3 Likes
#2

Previous discussion: Improve the $DHT liquidity.

1 Like
#3

What are the technical benefits of this movement? How will this impact long-term holders in the short-term price wise?

From a security perspective, why is it better?

How will Ethereum/Polygon holders migrate existing DHT?

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#4

Security wise, it’s better to have large liquidity for more reliable oracles when adding DHT as an asset to dHEDGE for managers. It leads to a higher requirement when trying to do any oracle style attacks.

Though, this means DHT won’t be available as an asset for managers on Polygon. DHT will only be an asset for managers on Optimism. But this also means for managers buying DHT on Optimism, they’ll experience much lower slippage compared to what it currently is on Polygon, so it’ll be a better experience for managers.

Benefits for holders are, there’s a lower barrier of entry to buying the token as fees are much cheaper on Optimism than Ethereum mainnet. And, this DCP facilitates migration to Staking V2, which is waiting to be released soon.

For existing Ethereum/Polygon holders, bridges to Optimism already exist for DHT via Multichain’s bridge. As mentioned in the DCP description.

2 Likes
#5

Okay, good answer. I will consider upon voting

1 Like