The use of small offers to drive Dexie Treasury Revenue.
I’ve been playing around with the UniSwapV3 formula for providing liquidity. It has been working well so far. Using ChiaSwap to create offers works well for automating the process. There is a bot running that is pushing offers to TibetSwap that will get accepted by the protocol.
I noticed that using small offer values (Ones that don’t meet the Incentive Requirements for dexie) tend to get traded at a higher frequrency. This is because it’s easier to meet the tibetswap threashold on small amounts any time Tibetswap itself accepts a market order.
Here’s an example:
Lets say I want to provide 30 XCH in liquidity for wUSDC.b/XCH between the price of 12 -16 usd and the Current price is 14/xch and a fee of 0.5% and a total of 300 trades to get from 12 to 16.
Your first 5 trades on each side would look like this:
| type | amm_offered_amount | fee | offered_amount | requested_amount | amm_price_per_xch | final_price_per_xch |
|---|---|---|---|---|---|---|
| sell | 3.184 | 0.016 | 0.224057631 | 3.2 | 14.211 | 14.282 |
| sell | 3.187 | 0.016 | 0.224057629 | 3.203 | 14.224 | 14.295 |
| sell | 3.19 | 0.016 | 0.224057628 | 3.206 | 14.237 | 14.309 |
| sell | 3.193 | 0.016 | 0.224057626 | 3.209 | 14.251 | 14.322 |
| sell | 3.196 | 0.016 | 0.224057641 | 3.212 | 14.264 | 14.336 |
| buy | 3.135 | 0.016 | 3.119 | 0.224057687 | 13.992 | 13.921 |
| buy | 3.132 | 0.016 | 3.116 | 0.224057707 | 13.979 | 13.907 |
| buy | 3.129 | 0.016 | 3.113 | 0.224057669 | 13.965 | 13.894 |
| buy | 3.126 | 0.016 | 3.11 | 0.224057677 | 13.952 | 13.88 |
| buy | 3.123 | 0.016 | 3.107 | 0.224057677 | 13.938 | 13.867 |
None of these offers qualify for incentives even though a total amount of XCH/USD qualify.
Using combined offers and TibetSwap
Here’s the main thought of this article. What if dexie, autocombined these offers and sent them to tibetswap? The Liquidity provider benefits with the fees they set in the app from the spread of buy/sell price. Dexie benefits from increasing its treasury and TibetSwap LP token holders also benefit also benefit from this.
What’s wrong with this model??
Well, there are a few things. First, it’s inefficient. There’s no reason the person running the bot couldn’t do all of this themself and just watch TibetSwap to execute the trades they want. Second, it makes a lot of coins to track. It also makes the offers “Expensive” for the blockchain to process. If the blocks are full, this method might not work well. Third, there will be a fight with arbitrage bots that try to accept these offers faster than dexie.
What could be done?
What if these offers pay out a premium in DBX if used in a combined swap? The math would need to be worked out, but a 1% fee to dexie should discourage self trading to harvest fees. On the above table, the fee collected for dexie would be 0.00224 XCH or 0.003 USD. As of today, 1DBX = 0.00141593 XCH on tibetswap. If we converted the XCH fee directly to DBX, then the fee in DBX is 1.582DBX. Dexie could pay out 30% of the fee to the offer creator if it is accepted though a swap. It would be easiest to pay the fee in the native token of the trade, but it would be cooler to convert it to DBX and pay out in DBX. And even cooler if the DBX is acquired by purchasing it off TibetSwap/Dexie offers (making a kind of a stock buy back program).
I think it would also be helpful if the incentive requirements were lowered to 0.1 XCH and 1 USD. This way it’s easier to make offers on both sides of the pool in equal amounts. Right now with the 1XCH and 50 USD requirements, you have to provide liquidity in steps of 3.3 XCH if you want to earn on both sides of the pool.