SIP-X: Clipper <> Saddle

Summary

Proposal to make SDL more easily tradable by more people by (a) bridging it to Polygon and (b) ensuring competitive prices by committing $200K SDL in liquidity and mining incentives to a Clipper SDL pool. Clipper is integrated into 1inch, so prices will permeate the market instantly. Clipper is the most capital-efficient way to ensure <1% slippage on the average trade size against WBTC, MATIC, USDC, USDT, and DAI. By making trades cheap and ensuring low spreads, volume and the number of holders should increase.

Background

Polygon is a side chain built on top of Ethereum. It is faster and cheaper at the tradeoff of slightly less security, which makes it great for retail traders making small swaps. For this reason, the average trade size on Ethereum Mainnet is more than 30x larger than the average trade size on Polygon. Of course, because there are more retail traders than whales and because lower gas means lower trading costs, there are also many more swaps on Polygon. Polygon has become the most liquid Layer 2 for small trades.

Clipper is a DEX focused on retail trades developed by Shipyardsoftware and governed by Admiral DAO. Clipper has the best prices on trades <$50K (at the tradeoff of worse prices on larger trades). It accomplishes this by (a) capping TVL, which enables much lower trading fees without materially impacting slippage for small trades, netting out to lower prices, and (b) consolidating short-tail assets (WBTC/ETH/Stables) into one pool (Clipper Core) and then using those LP tokens in a series of two-asset pools (Clipper Coves) with each long-tail token (e.g. a SDL + Clipper LP Token pool). The result is 20x more capital efficiency than Uniswap. Specifically, a SDL<>ClipperLP pool would require only $15k in SDL and $15k in short-tail assets (WBTC, ETH, or stables) to achieve <5% slippage and only $100k in SDL and $100K in short-tail assets ($200k total) to achieve <1% slippage. Since Clipper is integrated into 1inch, most traders and wallets would instantly see price improvements for their SDL swaps.

Motivation

One way to increase volume is by making it less expensive to trade. The main cost to trade is gas on Ethereum. This can be reduced by bridging to Polygon, which has much lower gas fees. The second cost to trade is slippage. This can be reduced by providing liquidity to a DEX on Polygon. The community should do so in whichever DEX provides the best prices while requiring the least liquidity (capital efficiency). That implies creating an SDL pool on Clipper.

To ensure <1% slippage on the $350 average size polygon trade, I propose the Treasury should deposit $100k in SDL directly into the Clipper SDL pool and provide another $100k in SDL as liquidity mining rewards to incentivize an equal amount of short-tail assets (e.g. WBTC, ETH or USDC), or for exchange and deposit if more efficient.

Specification

The community can deposit $100k in SDL directly into the relevant Clipper pool. This is noncustodial, so will remain on the DAOs balance sheet. The other $100K should be distributed to LPs who provide other assets. The DAO can do this themselves or ask AdmiralDAO to manage the distribution process.

Poll:

  • For: Bridge 200K USD worth of SDL, calculated using Uniswap’s V3 TWAP price on Euler at the time the proposal ends, from multisig 0x3F8E527aF4e0c6e763e8f368AC679c44C45626aE, to Polygon. With intent to establish an incentivized Clipper pool on the network.
  • Against: No change

0 voters