📈Market Making Activities
MantaDAO’s Market Making arm focuses on deepening liquidity on FIN’s orderbook via long-term protocol-owned liquidity and sustainable market making programs (i.e. not requiring token incentives).
There is a total supply of 100m MNTA, of which 5.0% was airdropped to KUJI stakers at the DAO’s inception. The remaining 95m supply is DAO-governed and being utilized in a controlled, data-driven manner to build POL (mostly), and to a lesser extent, fund the development of new revenue generating products.
Methods of funding for POL include:
Treasury swap deals: Mutually beneficial deals where the DAO exchanges MNTA tokens from the treasury for a partner protocol tokens (usually at a 1:1 ratio based on 10d TWAP, but every deal is a unique case and we are also exploring deals with asymmetric exchange ratios) and each party commits to match the tokens received with an equivalent value of their own token into a BOW LP, resulting in sustainable, protocol owned liquidity that doesn’t requires any incentives.
Public OTC deals: Selling MNTA tokens from the treasury using a public OTC deal platform such as plasma.fuzion.app, usually at a small discount to current MNTA price.
Bond sales: Selling MNTA tokens from the treasury for a target token (incl. BOW LP tokens instead of individual tokens) using a bonding platform such as fuzion.app, usually at a discount to current MNTA price, and with a vesting period (the longer the vesting period, the higher the discount).
DCA-out strategies: Selling MNTA tokens from the treasury on the secondary market in small increments over an extended period of time (typically a few weeks to a few months), using calculated.fi to automate the process.
Minting USK: Since Kujira on-chain governance proposal 466, MNTA has been added as a collateral type to mint USK (with a mint cap at 450k USK currently). This provides MantaDAO with a very cost-efficient solution (1.0% APR) to access USK capital to fund POL expansion while sustainably increasing USK supply to the benefits of the entire Kujira ecosystem. At present, the DAO only uses MNTA collateral to mint USK, but in the future, we also aim at using other forms of collateral, such as wstETH, wBTC and PAXG.
Borrowing on Ghost: The DAO can use MNTA from the treasury as collateral to borrow tokens (usually stablecoins) on Ghost, Kujira’s Money Market. Borrowing on Ghost is sustainable for as long as the price performance + net trading profit of MantaDAO’s LPs outpace the borrowing cost + price performance of the borrowed tokens.
Leveraged LP: Kujira enables BOW users to provide liquidity with more tokens than they initially deposit by borrowing additional tokens on Ghost, using their LP tokens as collateral. Leveraged LPing is sustainable for as long as the price performance + net trading profit of the levered LP outpace the borrowing cost + price performance of the borrowed tokens.
Note on leverage and risk management:
MantaDAO’s policy on leverage is to target a conservative 10% LTV for any form of debt against MNTA collateral (USK minting and borrowing on Ghost).
The DAO might periodically increase its borrowing as collateral value increases and LTV decreases.
In the event of a material drop in MNTA price pushing LTV beyond 20%, we will deposit more MNTA from the treasury as collateral.
In an extreme event, we could repay the loans via assets held in the DAO’s treasury or by withdrawing some assets from our self-funded LP positions.
MantaDAO takes risk management very seriously, we monitor LTV and other risk metrics (such as risk of 51% attack) closely and share a comprehensive report on the state of the DAO's finances every month with the community.
MantaDAO POL can be divided into two categories:
Treasury swap deals
This is the liquidity built as the result of business development efforts and is the most capital-efficient way for the DAO to build up POL. Assuming a typical $50k swap deal with commitment from each party to match the received token with another $50k into a BOW LP, a $100k MNTA investment from the DAO results in $200k of additional liquidity on FIN ($100k owned by MantaDAO and $100k owned by the partner protocol) without the need to sell any tokens.
The downside of those deals is that they usually require the support of both communities to go through (via a governance vote on each side), which takes time to negotiate and means the DAO is not in full control of the outcome.
As of 29-Feb-2024, MantaDAO has successfully completed 9 treasury swap deals with Kujira (KUJI), Stargaze (STARS), Shade Protocol (SHD), Sommelier (SOMM), Osmosis (OSMO) and WhiteWhale (WHALE), Cheqd (CHEQ), Fuzion (FUZN) and Neutron (NTRN).
Self-funded POL
This is the liquidity built by purchasing target tokens on the secondary market, it is therefore a less capital-efficient way for the DAO to build up POL as it requires first to either sell some MNTA from the treasury or to borrow funds, to fund half of the LP (assuming the other half is paired with MNTA) and there is no party matching the liquidity.
The benefit of this approach is that the DAO is in full control of the target tokens it decides to accumulate.
As of 29-Feb-2024, MantaDAO has self-funded liquidity for over 30 different tokens, including wBTC, wETH, yieldETH, wstETH, ATOM, stATOM, LINK, DOT, INJ, etc.
If you are a protocol looking to build sustainable liquidity for your token (i.e. not requiring any token incentives), do not hesitate to reach out on our Telegram (Biz Dev channel), we are always open to explore new market making partnerships, subject to due diligence and governance vote.
Last updated