Pros and Cons of increased liquidity / additional round of sale?

[marsrobertson]

Current valuation (21st June 2023)

Recent treasury (1st March 2023), source: Kleros Project Update - May 2023

A possibility:

More liquidity is good.

The opportunity cost is low.

The smart contract risk is low (Uni V2 has been around for ages)

More token distrubution is good: Telegram

Current distrubution chart: https://etherscan.io/token/tokenholderchart/0x93ed3fbe21207ec2e8f2d3c3de6e058cb73bc04d

Additional round of sale?

According to the financials, there is a few years on runway, no immediate needs to raise additional funds.

But maybe use that opportunity to increase the warchest, liquidity, distribution?

Pros? Cons? Thoughts?

[Juan]

Hey Mars, thanks for your interest on the topic.

Regarding funding, I agree that is not necessary at the moment.

Regarding liquidity, we are actually providing U$ 2.8 M (23/6/2023) on Uniswap v2 (Ethereum Mainnet) of ETH/PNK and around 300k on Swapr (Gnosis).

I would say that the amount of liquidity deployed is okay. To have a greater capital efficiency we could use Uni V3 and set liquidity across different ranges and always leaving some liquidity on V2 to have some full range liquidity.

For example, deploying 30% on a smaller price range, 35% on a much wider range, and the rest on V2, achieving a much greater capital efficiency (less slippage for traders with same capital) while having covered all price ranges.

This is something we had previously discussed, and didn’t reach consensus, but I think is a better option than LPing more Eth & PNk.

[marsrobertson]

@Juan

and didn’t reach consensus

This is non obvious, there will be always divergent opinions.

My opinioin is: higher liquidity is better, smart contract risk is low, no need to overcomplicate with a variety of concentrated liquidity features, we can just stay at V2, blockchain code does not get rusty as it is becoming older.

Quite the contrary - more resilient, more battle tested. See Lindy effect - Wikipedia and recent reentrancy issue in UniV4.

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I’ve also heard stories about guys who are not investing coins due to lack of exit liquidity.

More liquidity - more serious business can buy PNK.

[Juan]

Higher liquidity is better for the user, I agree.

Why can achieve more liquidity deploy on shorter ranges on Univ3 instead of deploying more Ether which represents a higher opportunity cost imo. (we can have more liquidity with even less $)

[marsrobertson]

The problem that I see with V3 (or V4) and concentrated liquidity: what if it goes out of range and Kleros Coop will run out of PNK?

Another issue - att some point the range will be “out of bounds” and no more PNK to buy.

I get the point about capital efficiency but the ETH stack is sufficiently big and there are no imminent capital expenses.

[Juan]

That is why I mentioned allocating a part to in a V2 pool and the rest on different ranges (some tighter and some wider) on V3 to have deeper liquidity but being covered at all ranges.

Regarding running out of PNK; The Cooperative has more PNK than the one that is LPing, so it won’t run out of PNK.

[Laurence]

Governance is able to mint PNK if it is really required.

[marsrobertson]

I think there is 1b limit set by “social consensus” in the whitepaper.

I’m enthusiastic about getting entire circuluation out there and increasing the liquidity.

Kleros Cooperative can still hold strategic reserves (not staking, not voting).