RGP-11: Seed rETH-THETA / ETH Liquidity Pool

1

Summary

We are partnering with Gamma Strategies [1] to launch a trial Uniswap V3 pool for the rETH-THETA / ETH pair, which they will actively manage to minimize slippage.

Proposal

We propose to seed the pool with an initial 90 ETH and 90 rETH-THETA funded by the Ribbon treasury. At time of writing, this is about ~$500K.

We think this is a worthwhile allocation of the ETH because it kills two birds with one stone:

  1. we allow users to enter/exit positions during this week. This creates a liquid secondary market for degens to trade in and out of. If they don’t want to lock up for 1 week, they don’t have to! Sell a call option one day, ape into NFT the next. We expect this to expand the demographic of users willing to interact with our protocol since now there is virtually no friction in participation.
  2. this pool allows for a thriving borrowing ecosystem on fuse. Most liquidation bots rely on flashloans – they don’t hold inventory. A pool lets liquidators atomically exchange to ETH and pocket the liquidation discount. Now there is a reliable network of liquidators for all market conditions. Fuse pool will be launched once we tune the v3 pool and scale it up.

We expect both of these reasons to contribute to TVL growth, which will further fuel the veRBN architecture feedback loop (more TVL = more protocol revenue for RBN lockers = RBN uponly = more vault token staking yield = more TVL). We expect seeding the pool will impact existing vault participants and RBN lockers from day 1 of execution.

If this trial pool is successful, we will expand to other vault pairs (rstETH-THETA / ETH, rBTC-THETA / ETH, ryvUSDC / USDC, etc).

Voting

Each voter will be able to vote either “Yes” or “No”. We will leave this open for 3 days after which we will initiate a snapshot proposal.

References:

  1. https://www.gammastrategies.org/
2 Likes
2

Are there more details about how Gamma Strategies will manage the LP?

90 ETH on full range would not provide much liquidity, and narrower ranges require more precise valuations of the short option position or risk getting run over.

3

Good question. We backtested rETH-THETA deviation relative to ETH from v1 / v2. Price per share deviates ~ 0.3% a week (with little std). We are starting with 5% range. Will work to wriggle it down over the course of the coming weeks.

1 Like
4

There is always an unlocking mathod for the locking iterms, LMAO
Still got some Qs:
1, Has the possible trading volume of rETH-THETA / ETH pair been evaluated before? Why a ~$500K pool, based on what metrics?
2, Will the trading fees be distributed to veRBN holders?

5
  1. we are just seeding with ~$500K. But we will work towards increasing more protocol owned liquidity.
  2. no
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6

I’m in favor of this, though I think Curve might be a slightly better fit than Uniswap since it’s an AMM for pegged assets.

7

Unfortunately its not quite pegged because it can go considerably down (if option ITM) and considerably up (if high premiums). But it is very “correlated”.