Summary
HIP 6, Hifi’s Liquidity Bootstrapping Program, proposes a significant expansion of the protocol’s liquidity. This will be achieved through purchasing and owning liquidity, a strategy based on comprehensive research of other DeFi protocol’s liquidity programs. The program involves minting 20M HIFI tokens and, over a ten-month period, purchasing USDC and adding it to the protocol. The HIFI tokens and all proceeds from this program are fully owned by HIFI token holders.
Motivation
The initiative is driven by the need to accelerate Hifi’s growth and increase its Total Value Locked (TVL) by over 25x. Achieving this ambitious goal is not possible with the limited liquidity currently available. Despite the core team’s contributions, further action is needed. Purchasing and owning liquidity is viewed as a sustainable method to foster long-term growth and impact.
Details
- Approach: The proposal will have Hifi DAO purchasing and owning liquidity financed by new token emissions.
- Ownership: The acquired liquidity will be completely owned by HIFI token holders, adding valuable backing to the HIFI token. No resources will be allocated to Hifi Labs.
- Research and Observations: The decision is backed by research of various DeFi protocol’s liquidity programs. Key findings highlight the importance of market timing, potential exploitation of economic incentives, and the success of systems leveraging time in their program design.
- Criteria: The proposal seeks to prevent negative outcomes like unwarranted token emissions during economic downturns. It emphasizes sustainable resource allocation over time, avoiding discounts.
- Budget: 2M HIFI per month for ten months.
- Refunds: Full refund option for participants after one year. Denominated in USDC or hUSDC tokens.
- Administration: Managed by Hifi Labs.
- Participant Qualifications: KYC compliance, restrictions for US residents (accredited investors only), and a minimum transaction size of 100K USDC or USD are required.
Additional details can be found in the following blog posts:
Governance Update
Included in HIP 6 is an update to the votingDelay parameter on Hifi’s Governor Bravo Smart Contract, aligning with best practices used by Uniswap and Compound.
Benefits
The HIP 6 Liquidity Bootstrapping Program marks a strategic shift in Hifi’s liquidity approach, targeting a more robust and long-lasting growth model and presents several key benefits to the Hifi ecosystem and its stakeholders:
- Enhanced Growth and Scalability: By significantly increasing the Total Value Locked (TVL), the program sets the stage for accelerated growth and scalability of the Hifi protocol. This is crucial for achieving the ambitious goal of expanding the TVL by more than 25 times.
- Sustainable Liquidity Model: The decision to purchase and own liquidity, as opposed to renting it, offers a more sustainable and long-term approach. This model is expected to provide a stable foundation for Hifi’s growth and operations.
- Strategic Utilization of Resources: The proposal’s approach to token emission and resource allocation is strategic and mindful of market conditions. By choosing to emit tokens only during stronger economic periods and spreading the transactions over ten months, the program mitigates risks associated with market volatility and sudden economic shifts. The option for a full refund to participants after one year offers a safety net, reducing the risk associated with their investment. This feature could attract more participants, further bolstering the program’s success.
Action Items
- Set voting Delay to 13,140 blocks (~2 days)
- Mint 20M HIFI to multi-sig wallet address: 0x999540BF17c9A6EA03cD39B97476Af172Ddd04e1
Voting
Upon majority approval, Hifi DAO will issue resources to Hifi Labs for administration and execution of the Liquidity Bootstrapping Program and update the votingDelay governance parameter. If the majority vote disapproves, no further action will be taken regarding this proposal.
This proposal can be found here on Tally.xyz
