Market Maker Proposal

So we’ve talked to a couple market makers at this point, but we think only one will work for us with the sticking point that they’re the only one who does Uniswap V3 LP strategies. Given that we’re not currently on many cexes, it doesn’t make very much sense to partner before with someone if they can’t help much immediately.

The services they provide:

We’re most interested in: Uniswap V3 trading strategies, expertise in how we can adjust our rewards to maximize liquidity, and connections to cexes. Although getting on a cex is never a sure thing and the primary focus is volume, they can aid in that regard and having an MM with us already is a very good look.

The cost is a 1 year loan option of $1.5M worth of ARMOR tokens with a strike price at the 7 day average of the first week of trading. This means that if ARMOR has an average price of $0.10 during their first 7 days of trading, we will send them 15M tokens to use for trading. After 1 year, they have the option to either return the 15M tokens or purchase them from us at $0.10. This plan usually entails they liquidate a portion of the tokens for Ether as a pairing token, but we would prefer using a bit of our treasury to also send the pair to avoid market impact with the low liquidity we have at the moment (amount to be decided, likely $100k or so worth of Ether).

I believe we can share the name of the company if needed, but they preferred we don’t make it too public given contract details are usually private (they said it was fine to share within the community if we ask you keep it private, but I don’t think private is much of a thing on public forums so I suggested just sharing contract details without company name).

What are the community’s thoughts? I believe this is absolutely necessary as we’ve seen in the past few weeks even a few influencers can affect price dramatically with the current liquidity we have. We will also be able to use their expertise to optimize our rewards strategy and liquidity provided by the community and protocol in addition to what they’ll provide.

Other thoughts are: is $1.5M worth of ARMOR tokens too much to provide, should we look for that to be lowered? Is it a good time to start at current prices? Kinda sucks to start now, but liquidity will be very important in recovering. Should we set specific performance indicators they need to meet? Any dissenting opinions on not having one at all or taking another strategy?

P.S. Also to be clear about this, they do not do wash trading at all. Their DeFi strategy entails no trades but simply V3 LP strategies. When using cexes in combination with dexes, they make trades when profitable in the same way arbitrageurs would. With cexes alone they make markets in the traditional sense.

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$1.5M sounds quite high, but I have no frame of reference. Is this standard in the industry or is this MM particularly expensive (I assume they have an amazing track record and the team knows of examples of projects that they successfully supported?)

Edit: but then again- it’s not cash, it’s options. So they still need to pay the ‘exercise price’ which means they only gain from a price increase (i.e. if they do a good job they gain more, and so do we as holders) so maybe that makes sense.

Ya, not a cash payment but that’s the amount of tokens (in USD) they’ll receive in a loan that they can then exercise at strike price, which I believe we can work with them on since we’ve seen weird market movements recently, in 1 year. I believe the main source of revenue for them is the trading/LPing itself.

Makes sense. If you’ve done your due dil on the MM and they have a legit track record then it seems like a good next step for the project.
What do you need in order to make the decision? Would you put it up as a proposal in the DAO?

Yes the plan will be to submit a DAO proposal, which will include executable code of how many tokens to send and to what address. So holders have the final say in the loan.

Update on proposal: after talking more, we’ve been proposed a $900,000 loan & option with a strike price of $0.135. Loan went down because Sushiswap was taken out of the equation and they’ll be supporting Uniswap V3 and (definitely worth the drop in price). This’ll represent a loan of 6,666,666.666 (repeating, of course) tokens and it makes sense for us to do no cash down. I think this is a very solid deal. EDIT: I misinterpreted these token amounts, it’ll be somewhere between now and the original quoted $0.135 (which is very nice flexibility they’re allowing us cause of token movements)

Talked again this morning. Gonna get started on a contract in which one of us is representative, then approval by DAO will essentially just be the transfer of tokens.

Ok so there was a bit of miscommunication that leads to us needing to do a bit more tokens. Final calculations are:

If current spot price is $0.0575, 15,652,173 tokens will be lent, in one year, 13,304,347 may be purchased at a price of $0.09625, with the remaining ~2.3M tokens being returned (if option is executed, otherwise all tokens are returned).

It obviously kinda sucks “selling” at this price, but it’s what’s needed for them to do their job efficiently.

I’m guessing you can’t let the cat out of the bag on who this MM is, understandably so, but my guess is that you and the team wouldn’t propose going this route unless this mystery MM was of high caliber and has a high user base/identity/track record. Yes, it sucks the amount is based on current market price, but again if you believe that this could bring new customers, a fresh identity, increased community confidence and support, I can definitely get behind that. I believe a successful team is willing to do what most may be unwilling to do and a move like this always comes with some amount of risk, but in my experience with business is that calculated risk=reward. Here to support boss!! :muscle:t3:

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By the way, update here is that we’re going to hold off until the rebrand as it doesn’t make too much sense to start now then immediately move to another token. And ideally it won’t cost such a large number of tokens at that point.

Late to this thread but FWIW I think the loan (versus grant) of options at that strike price is smart. They have incentive to do well, and the dilutive factor isn’t bad. I like the idea so long as, as has been said here, the MM is of high caliber and unquestioned reputation and for sure no wash sales.

Might not be a reply for this specific thread, but would be curious if this MM or the team has identified major CEXs and DEXs to be listed on?and if so, are contracts in final delivery?

$APE being listed on major exchanges on the same day was crazy, but IMO smart. Just my 2 cents.