The Summary
Dexter has positioned itself as a strong value-add to the Persistence ecosystem, attracting ~$3M of TVL and ~$2.5M of Volume since launch, despite only having 2 liquidity pools. To create even more alignment between Dexter & the Persistence ecosystem, Dexter will soon start relying on XPRT-stakers for Dexter governance, and for deciding which pools get added onto Dexter.
Meanwhile, in order to continue the growth of Dexter and thereby the Persistence chain, both teams have been ideating together on a good and scalable way of bootstrapping these new pools on Dexter, in line with the interests of the Persistence ecosystem and have come up with the following concept: Persistence Community Owned Liquidity (PCOL).
This forum discussion shares the ideas for PCOL, dives into the specifics of the first experiment for PCOL (the PSTAKE/XPRT pool), and aims to gather feedback from the community before a proposal is posted on-chain for voting.
TLDR: This proposal suggests to use 41,000 XPRT tokens (~$10,000) from the Persistence Community Pool to bootstrap the PSTAKE/XPRT pool on Dexter as the first experiment of PCOL. The Liquidity will be bonded on Dexter and all rewards generated will be sent back to the Community Pool at fixed intervals.
The Context
Typically, projects bootstrap a pool on a DEX with some of their treasury funds, followed by users adding liquidity. From the DEX team perspective, there are a lot of moving parts involved like constant coordination with the projects, pool composition, source of initial token liquidity, bootstrapping incentives etc.
As Dexter aims to be the source of liquidity within the persistence ecosystem, and many pools will be created, the team wants to make this process seamless, transparent, and scalable, yet selective and focused. Moreover, Dexter aims to have a high signal to noise ratio, which means the goal is to have very efficient trading for all pairs on Dexter, and each of these pairs should make sense to the overall Persistence ecosystem.
Low value pools create distractions for the teams and for users, so Dexter only wants to host pools in which the community truly believes, meaning they expect TVL & Trading Volume to increase and overall add value to the ecosystem. In a way, the goal for Dexter is to attract other projects to build a big chunk of their liquidity on Dexter, which only works if there is alignment between the communities, and both believe that it’s a win-win.
The idea: Persistence Community Owned Liquidity (PCOL)
Pool creation on Dexter will be driven by XPRT governance, so the thought process is that pool bootstrapping should be aligned too. If the community supports a new pool on Dexter, the community should also support bootstrapping it from the Community Pool, or otherwise it means there is no true belief that the pool will do well (create TVL & Volume). It’s basically asking the community to put their money where their mouth (vote) is. The size of the PCOL can show the amount of belief and support the community has for a specific pool, but it should be non-zero initially to launch any pool.
As a reminder, the Persistence Community Pool is a type of on-chain funding for the Persistence Ecosystem. It is funded through XPRT token inflation and can be used by the community in a way that they think will create the most value to the ecosystem. In certain cases, token expenditures are granted for good reasons. An example:
Dexter received a 450k XPRT grant from the community pool in Proposal 13. This grant has majorly been used for liquidity incentives and driving traction on the dApp via features such as the Tradooor Rebate Program, as per the governance mandate. Since launch, Dexter has attracted ~$3M in liquidity for stkATOM and XPRT, and generated ~$2.5M in volume. This proves to be a great example of the community pool put to use.
While one-off Community Pool grants for growth are great for the Persistence ecosystem, they are not long-term sustainable, especially not as inflation decreases and the issuance towards the community pool dries up. To set itself apart, the Persistence Community should consider new ways that grow the community pool while also benefiting the chain ecosystem. This is where PCOL comes in. Rather than having unstaked assets sit idle in the community pool, they can be put to good use to propel the ecosystem growth, and even grow the community pool at the same time.
The next level: Reciprocal Community Owned Liquidity (RCOL)
With greater alignment comes greater reciprocity. Imagine the Persistence Community bootstraps a token from ecosystem ABC into an ABC/XPRT pool, and truly supports it all the way (Liquidity building on Dexter, Liquid Staking with pSTAKE, potential Mesh security from Core-1 should the Persistence chain adopt it, etc), it would make sense for that community to also contribute to the Persistence ecosystem in return. Requesting Community Owned Liquidity from other communities now becomes a lot more logical and reasonable, as both projects’ incentives are now better aligned.
The experiment: XPRT/PSTAKE pool
While the implementation of XPRT governance for Dexter is still in the works, this post suggests to already launch a PSTAKE/XPRT pool on Dexter and bootstrap it with $10,000 worth of liquidity, funded by the Community Pool (~41,000XPRT at the time of writing, will be adjusted at the time of posting the proposal).
The value-add and alignment between Persistence, pSTAKE, and Dexter is crystal clear, so no better pool on Dexter to experiment with than XPRT/PSTAKE.
The Details: On-chain Implementation
A. XPRT Governance proposal:
While Dexter pool creation is not gated by XPRT governance at the moment, this forum post suggests that it goes through governance regardless. The proposal should include:
- Creation of the pool and all details (pooltype, swap fee, incentives, etc).
- Request to approve ~10k worth of XPRT to be sent from the community pool to a dedicated multisig for Dexter pool creation.
=> XPRT-holders should only vote yes if they agree with both parts of the proposal.
B. Follow-up actions:
The pool bootstrapping and liquidity provisioning will be managed by a multi-sig, governed by the Persistence Community. A â…” multi-sig is proposed with following members:
- Mikhil Pandey (Chief Strategy Officer, Persistence)
- Jeroen Develter (Ecosystem Director of Products, Persistence)
- Rajesh Iyer (Product Manager, Dexter)
All on-chain actions associated with this multi-sig will be subject to XPRT governance. Here are the proposed flow of events for the overall process and multi-sig actions to bootstrap the PSTAKE/XPRT pool on Dexter:
- The multisig will receive ~$10,000 worth of XPRT from the Community Pool
- Approximately half of it will be IBC transferred to Osmosis and systematically swapped for PSTAKE tokens for the best possible rate
- Those PSTAKE tokens will be IBC transferred to Persistence
- A new PSTAKE/XPRT (50:50 weighted pool) with 0.3% swap fee (to be a configurable parameter with XPRT governance in the future) will be created on Dexter
- The new pool will be bootstrapped with available PSTAKE and XPRT token balances on the multi-sig
- LP shares will be bonded indefinitely
- All fees generated will accumulate into the position, all rewards generated will be sent back to the Community Pool roughly every 2 months
Any further changes to the LP position, such as removing liquidity after the initial bootstrapping phase, or compounding rewards into more liquidity, will be solely at the helm of the Persistence Community. The multi-sig will be powerless apart from the above proposed on-chain actions.
The Benefits: win-win-win
Community Pool
- For the first time, the Persistence Community will be owning liquidity, better aligning Ecosystem Growth and Community buy-in.
- The community pool will diversify by accumulating tokens other than XPRT. The pSTAKE protocol is expected to allocate PSTAKE incentives to this liquidity pool through its governance.
- A PCOL system will set a precedent for other projects to bootstrap liquidity on Dexter in the future.
Dexter, pSTAKE, Persistence
- PSTAKE liquidity will be bootstrapped on Persistence, its native IBC home for the first time. This will give pSTAKE users and Dexter LPs a better User Experience for their LP incentives.
- A PSTAKE/XPRT pool is expected to bring in more volumes on Dexter. For context, the PSTAKE/OSMO pool on Osmosis has generated ~$744k monthly average volume since its inception in March 2022.
The Concluding Thoughts
Bootstrapping the PSTAKE/XPRT pool with a PCOL system is meant to be a pilot program. The community can review the working and benefits of PCOL at a later stage before setting it into stone for new projects to build token liquidity on Dexter.
The proposed 41,000 XPRT tokens amount to ~1.7% of the Persistence Community Pool as of writing this forum post. This small % allows for a sustainable yet exciting community experiment to take place.
The proposed PCOL system aligns the three major aspects of any prospering DeFi Ecosystem:
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dApp Traction: The pSTAKE protocol incentivizes the stkATOM Metastable pool on Dexter with PSTAKE tokens. Currently, ~16.7M PSTAKE (~$600k) illiquid tokens are present on the Persistence chain. A PSTAKE/XPRT liquidity pool opens the door for these tokens to be liquid and also adds LP utility to them.
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Ecosystem Alignment: The Persistence Community will have a vested interest and be even more aligned with the product suite on the chain. User Retention within the Persistence Ecosystem is expected to increase as a user would be able to liquid stake ATOM with pSTAKE, add liquidity to the stkATOM pool on Dexter, get rewarded with PSTAKE, and also add liquidity to the PSTAKE pool on Dexter again.
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Community Buy-in: The Persistence Community will have the final (and only) say for bootstrapping new token liquidity on Dexter under the PCOL system. The future potential of the PCOL system is immense as the community will truly be responsible for building liquidity for new projects coming into the Persistence Ecosystem.
The request
The Persistence Community is encouraged to share their thoughts, comments, questions, or feedback on this proposed PCOL approach.