Deposit additional ASTR into HydraDX Omnipool

I propose that the Astar treasury make an additional ASTR deposit into the HydraDX Omnipool to further increase on-chain liquidity. I propose adding 5.54M ASTR ($718k) which is 1.5% of the treasury. This would bring the ASTR treasury deposit in the Omnipool up to $1M or 0.1% of FDV.

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The Astar treasury in June 2023 deposited 2,222,231 ASTR into the Omnipool, currently valued at $282,111. https://forum.astar.network/t/listing-astr-in-hydradx-omnipool-seeding-initial-liquidity

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Astar sibling acct on HydraDX: 7LCt6dFnHxYDyomeCEC8nsnBUEC6omC6y7SZQk4ESzDpiDYo

As you can see, the Astar treasury deposit into the Omnipool has maintained its value over time. However, with that liquidity you can only trade 40k ASTR ($5,174) per trade before hitting 2% slippage. Recently in a twitter discussion an investment firm mentioned they tried to buy 600k ASTR but slippage was too high and they had to use a CEX instead.

DCA helps you break up large trades, but this reinforces the fact that we should continue to deepen our liquidity across the Polkadot ecosystem. Let’s bring those fees on-chain to Polkadot!

Another reason to increase ASTR liquidity on-chain is to support larger ASTR money markets. HydraDX and Bifrost are currently launching lending platforms. While neither has committed to an ASTR market yet, increasing substrate Omnipool liquidity would support a larger max cap for lending markets, again enabling another use case for the ASTR token. Once ASTR lending markets launch, I would also encourage the ASTR treasury to deposit ASTR liquidity ($200k?) to enable larger borrowing positions. (a deposit into lending markets would be a separate future Astar forum proposal)

The great thing about all of the proposals above is that they put to use “Treasury Owned Liquidity”

  • earn fees
  • add token use cases
  • deepen liquidity
  • no “listing fee” or reoccurring costs for market making or LM
  • tokens aren’t “spent” and are still controlled by the Astar community.

But how much in fees?
Today the Omnipool shows trading volume of $46k and earning 4.3% on ASTR deposits. HydraDX Omnipool stats page
Deposits into lending would likely earn 4-10% once they are borrowed.

Final notes:

  • This will have a side-effect of increasing the market capitalization of ASTR by $718k because tokens in the treasury acct aren’t counted towards MC but tokens in a DEX are.
  • Disclosure: I am an $HDX token holder. I am not an HDX team member.
  • Interlay treasury has already deposited $750k of INTR and we’re discussing even more. As I outline in this thread, I’d encourage all teams to deposit $1M of liquidity.
5 Likes

I like HydraDX, with that said Astar will be better serve to provide more liquidity in Astar zkEVM eco-system. With Astr/Dot and Astr/Matic pairs. This will attract more crosschain interaction from Polygon to Polkadot.

3 Likes

why not both? my proposal is only for 1.5% of treasury, leaving plenty for zkEVM liquidity initiatives.

2 Likes

Although I’m a big supporter for Hydra, but I disagree by putting more ASTR from treasury on Hydra. From my PoV, those ASTR can be used to nurture our zkEVM ecosystem first.

Astr on Hydra is already big, and its purpose are to introduce ASTR to other retailers who wants to diversify their portfolio.

5 Likes

I agree with JCFishing and souleater. As ASTR is already big on Hydra 700k seems to much for me.

2 Likes

I am also a strong believer and frequent user of Hydra DX, I love among many things, their products and their graphical interface. But, I agree with the opinion of all my peers here.

From Astar we have a strong motivation at the moment: Astar zkEVM and the expansion in the use of the ASTR token in other dApps.

I think that later on, this proposal can be interesting, but at this moment, the priorities are others.

3 Likes

At present, while this proposal may hold future promise, our current focus is Astar zkEVM…

3 Likes

if $700k is too much, what would you propose as a lower amount to deposit into the Omnipool to enable larger trades?

2 Likes

It require a good understanding: someone very familiar with the tokenomics and the one of Astar Network should review it. I would not pronounce myself.

2 Likes

Thanks for sharing the proposal. The current amount of slippage due to the lack of liquidity will deter users to trade ASTR on HydraDX. Increasing the liquidity on HydraDX is much needed as it will potentially bring onboard more users from the Polkadot community into our ecosystem. Overall, I am supportive of this proposal.

5 Likes

I think that providing liquidity for HydraDX is a possibility.
HydraDX’s omnipool design is a single-sided liquidity offering (ASTR only), while at the same time mitigating IL risk.

However, it appears that there are 1.6M ASTRs remaining that are currently acceptable as additional liquidity. In other words, we cannot provide the ASTR as proposed anyway.

Hello @spazcoin,

Interesting proposal. Hydra is one of the gateways to the Astar ecosystem from Polkadot for DOT and native USDT holders.

At the moment, slippage limits big players from swapping large amounts of liquidity. For a $10,000 swap, slippage is 3.57% on Hydra. Adding liquidity from the Treasury is one way of solving this problem. .

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Given that Astar’s Treasury position in the omnipool since the last proposal last year is the same, and that Treasury has earned trading fees, I agree with adding more liquidity.

For those who think we’re focusing on Astar zkEVM, that’s true but we already have a liquidity plan for Astar zkEVM and we mustn’t forget the Polkadot ecosystem where Astar was born, has most of its community and once again is an entry into our ecosystem.

As Astar becomes a multichain ecosystem, we need to have strategies and liquidity for all parts of our network.

The Astar treasury holds 366M ASTR (valued at $52 million) and should be used more for this type of proposal. We have more than enough to accept this proposal. Moreover, the proposal is not to spend the treasury but to make a deposit where the treasury also earns transaction fees.

I support the proposal and the collaboration between parachains :white_check_mark:

8 Likes

After checking with the Hydra team, this won’t be a problem.

The cap to add liquidity is set to 5% of the omnipool’s TVL and it’s for one single transaction.

If we add the liquidity gradually with several transactions, the TVL, and therefore the cap, will also increase and we will be able to add more liquidity.

Furthermore, Hydra had his treasury proposal to add 1M DOT from the Polkadot treasury accepted on Opengov.

Within a month, 1M DOT will enter the omnipool and bring the TVL up to $35M. Our cap will increase to $1.75M.

6 Likes

Thanks for the confirmation! If that is the case, I don’t see a problem with providing liquidity as suggested.
Astar zkEVM is important, but so is the Polkadot. If we can do both, we should do it.

3 Likes

I think at the moment, Astar needs to balance incentives from both Polkadot and Layer 2 sides. Astar zkEVM is very new, and it will require incentives to attract more liquidity.So maybe the treasuty need to focus on L2 side, but I understand that Hydradx ahs a great UI and help onboard some new users

1 Like

Thanks for correcting our point of view , G! Personally I was one of those who believed that our main focus at this time was Astar zkEVM, but with this I realize that there is strategically a division of funds to support the different chains.

In that case, and with the information you provide, I support the proposal, since as you mention, the Polkadot ecosystem remains and will continue to be very important for Astar and its entire ecosystem.

4 Likes

Thanks for the mentioning this @Gaius_sama
However, is it possible for them also for HDX to add liquidity on zkEVM too? Although the step might be quite difficult (need to add token via Starbridge).

2 Likes

Thanks @Gaius_sama for adding the comments and clarification!

By the way, if this liquidity related issue can be occurring next time as well and we have certain liquidity plans, it would also be beneficial to track details, including the frequency of large trade, and so on, so that we know what would be the needs.

2 Likes

Thinking from a business perspective, this is true and important.

Like a government of a city or playing SIM City, the treasury should be used to build the right infra not to hold dear. Understanding that our ASTR price is in good condition, giving our liquidity to the right AMM/DEX/CEX will make our ASTR more price-resistant than keeping it in our treasury. However, adding more liquidity also means our price is not gonna pump in a short time. :laughing:

At first, I hesitate to agree about adding liquidity as it adds chances to exploit in large numbers. But, considering parachain security, and HDX name at stake. I think security should be something we put trust in since we are in Polkadot parachain.

2 Likes
Approve the Liquidity provision of 5.54M ASTR from the Astar Treasury to HydraDX Omipool.
  • Yes
  • No
  • Abstain
0 voters
2 Likes