One thing few people point out is that MKR only has about 1M tokens, A good chunk of those are required for governance to function.
I have posted elsewhere a DeepLiquidity thesis regarding how to build community value via a v2 Uniswap contract (not v3) via Token-Stablecoin pair. The conclusions in my own analysis was that if one could get about 1/3 of the available liquidity paired with a stablecoin the Token price support would be limited to no lower than a 90% drop. In fact if you figure out actual open market liquidity it simply couldn’t be this bad (you need all the other 66% tokens to come out and sell which is unlikely). This also presumes LP suppliers don’t pull and sell. The whole point was to focus trading and liquidity into a single DEX venue where all LPs shared equally in fees and where liquidity and trading could be focused.
CEX’s liquidity doesn’t really do dink for providing community value because these MM players can come and go as the winds blow. Same is true of LP providers BUT if the dominant LP provider IS the community then it is rather unlikely the community governance would pull liquidity. BTW. All of this has issues for MKR simply because such a collection of liquidity could be used to attack governance itself (this has already been discussed).
I always come back to the prime questions here. What is the goal of additional liquidity? Is it to stay listed, is it to backstop community value (so if MKR needs to sell it can get a good price with decent liquidity). Is it governance activities.?
I am back to using MKR as a rewards token honestly because this would get us a good chunk more cycling liquidity, deeper MKR markets generally, etc. Put simply with a MC of what 2-2.5B there just is no way 200M is going to enter or exit this market without significant price impact. In fact even 1-2% (10-20K MKR) or 30-60M could move the price around 5-10% easily. This is just the nature of this market and I don’t see how greasing the wheels for other players to trade here satisfies any of the key goals because there is no reason to believe these players care one whit about MKR valuation. They are Market neutral which means they will not hold a position so they don’t care which way MKRs price blows.
I am not against this because I believe they will move the price, price is going to do what it does. I am generally against this because I don’t believe the community has any real clear goals.
For this reason I was more for creating an additional MKR-R reward token that under conditions could be swapped for MKR, and also could burn in conjunction with MKR (buy MKR to burn then use some MKR to buy MKR-R to burn to form the long term value proposition for MKR-R with MKR etc.) and this way we could finally get a rewards token that has value, with a mint (say 1B instead of this 1M) to focus the value of MKR into a different more highly traded and much more liquid token which focuses back its value on the governance MKR token.
The point here isn’t the issues with disconnecting governance value from actual governance but building somewhat separate token to add value in multiple ways to the protocol enhancing the overall value to the protocol in many different ways.
- rewarding borrowers expanding deposits and DAI borrow.
- with possibility of negative rates.
- Building a collection of token values around the Maker protocol not just MKR
- Creating a potential to explore new governance models using MKR-R
- Bringing new people into the Maker governance system.
- With 1B outstanding and even a price of $1-3 US if MKR holds it’s value MKR-R addition would double Maker community Market cap and give it additional monetary and governance tools.
Maker doesn’t need to be stuck as a one token pony but can use two or more.
I honestly really like the two token model of /r/ethtrader where they have the financial token coupled with a contribution token to create the vote=min(DONUT,CONTRIB) where DONUT is the financial and CONTRIB is a earned token that does NOT move from a wallet once acquired.
I am not saying we should follow this particular model. But with two tokens there are many more possibilites for governance and value building than with one token.
In the end:
I am against this because I think there are a lot more discussion that needs to happen here before governance considers doing deals with MM’s on the MKR token. Maker needed this in the past I am not entirely sure it needs this today, or at least not via this particular style of liquidity providing and MM making.