Create an NFTX vault that provides liquidity to LILNOUN tokens, generating fees from NFTX vault activity while supporting the floor price.
- Note: This proposal is not requesting to remove ETH from DAO control. The DAO will still own all the liquidity, which will be managed via multi-sig. This liquidity provision is a yield generating, capability adding activity. The lil Nouns NFTX liquidity team has not included payment for efforts made within this proposal. Retroactive funding may be requested after analyzing NFTX vault results.
- Floor price support:
- NFTX vault creates an arbitrage opportunity between Opensea, NFTX vault and winning auction bids. Arbitrageurs will bid the auction price up to profit from NFTX’s instant liquidity. A portion of this arbitrage’s profit is directed to the DAO treasury via increased mint prices and vault fees.
- Generates yield for the DAO via vault activity:
- When wallets buy, sell, or swap Lil Nouns using our NFTX vault, we capture a fee. The yield generated will be proportional to the amount of liquidity that we control in the vault.
- Staking capabilities for Lil Nouns:
- “Earn fees from the vault, currently 100% of protocol fees are paid out to those that stake. Liquidity providers earn a share of 80% and inventory providers earn a share of 20% of the fees.”
- “Stakers also receive an ERC20 “xToken” like xLILNOUNWETH that is a claim on the underlying staked SLP, or xLILNOUN which is a claim on the underlying staked inventory. We expect other projects to build use cases for these xTokens.”
- Instant liquidity:
- With NFTX you can always sell at the floor price without searching for a buyer or undercutting the Lil Nouns floor.
- With NFTX you can swap your Lil Noun for Another Lil Noun directly. No buying and selling on the floor, instantly swap your Lil Noun for any other Lil Noun. The fees paid for the swap go to the Nouns DAO treasury and other stakers of the vault.
- All data on vault activity and yield is on chain and is automatically generated upon vault creation in Dune analytics.
- Office hours from the Lil Noun’s NFTX Liquidity team:
- NFTX team will conduct office hours via Discord to offer assistance using and understanding the vault.
- Nuances of Staking in a Fungible Vault:
- When staking in a fungible vault like NFTX, users lose the right to their specific NFT, in exchange for the ability to redeem random or targeted NFTs from the vault.
- Macro Economics & NFT Market Volume:
- Volume in the NFT market is at levels not seen since early 2021, low volume impacts yield and vault performance.
- Arbitrage Edge Case:
- Bots may attempt to drain the liquidity from our NFTX vault by buying low at auction and selling into our vault, extracting ETH for cheaper Nouns. Given demand, impact should be negligible and can be mitigated with vault yield or more active liquidity management.
- Miner/Maximum Extractable Value (MEV):
- Instant liquidity on-chain potentially provides opportunities for attackers to purchase tokens and vote on DAO proposals impacting DAO operations.
- Aforementioned attacks are mitigated by the NFTX pricing curve, slippage, Quorum(enough liquidity to reach quorum is not required to operate vault), and lil Nounders Veto.
- The creation of the vault improves DAO security. NFTX is permissionless, motivated attackers can exploit this attack vector with or without DAO liquidity. If the DAO is not involved via this proposal or related proposals, our lack of involvement will not remove the attack vector, rather makes the DAO less prepared, and less secure in the event of an attack by motivated entities or colluding whales. This proposal improves DAO awareness of MEV attacks, while adding capabilities for holders and yield for the treasury.
- A total of 51 ETH to be used as follows:
- 25 ETH to purchase lil Nouns over the counter from @willprice, for fair market value (to be decided before submitting this proposal).
- 25 ETH to pair the lil Nouns vault tokens with ETH creating ETH lil Noun liquidity token.
- 1 ETH for gas fees, whatever is left remaining in the multisig
- Create a multisig to manage the liquidity tokens.
- Buy Lil Nouns for a total of 25 ETH.
- Create an NFTX vault, deposit Lil Nouns into it for xLILNOUN tokens.
- Deposit the xLILNOUN tokens plus 25ETH on a Sushi LP position.
- Stake LP token in NFTX to receive the vault fees.