Liquidity is critical to the success of crypto-native financial markets. The LAO is building infrastructure to support DeFi protocols beyond just providing capital through venture-backed financing. Today we introduce the first steps towards pooling liquidity through a DAO structure. If you’re interested in staying up to date on the Liquidity DAO, sign-up here.
One of the most promising developments in Ethereum and decentralized finance (DeFi) are liquidity pools that automate returns for capital providers purely with code. For example, adding collateral to a DeFi token exchange, like Uniswap or Balancer, has earned providers fees simply for parking their funds into blockchain programming, as well as potential stakes in these projects in the form of governance tokens (as in the case of Balancer, Compound, and soon Curve). These innovations bring to life the adage that with Ethereum, you can “kick back, relax, and let money robots do the rest with smart contracts.”
Not missing a beat, Ethereum entrepreneurs have run quite fast in designing ways to make it even easier to enter and exit these liquidity positions, such as the aggregating dApp, zapper.fi, that can take raw Ether and convert it automatically into tokenized liquidity shares on Uniswap, Curve or Balancer pools.
The long term vision for The LAO is not just to serve as a way to invest in blockchain-based projects through equity investments. We’re aiming to build an entire network of DAOs that serve blockchain-based projects in whatever form they take. We want to support projects for the long run and do so through a community-driven approach that can’t be matched by traditional structures.
We’ve fully inhaled “ether,” here at The LAO, and are building out the infrastructure to ensure that DeFi protocols and other blockchain-based protocols do not just receive capital, mentorship, and a community-based approach to building, but also have crowd-sourced liquidity as they launch and begin to tackle the world.
In that spirit, we have internally implemented designs for DAOs to expand the kinds of DeFi opportunities LAO members can pursue and execute on using legal code using the LAO Proxy (Minion) framework. Check out a brief snap showing how LAOs Proxies can ZAP into a Uniswap liquidity pool based entirely on the votes of LAO members:
Our initial Liquidity DAO scheme involves funding a LAO Proxy (Minion) with wETH by way of member vote (Proxy would unwrap the wETH into ETH for ease of certain liquidity transactions). In this escrow design, the Liquidity DAO’s ETH only enters a given pool and interacts with external smart contracts after members vote to approve; as featured above, the smart contracts provided by zapper.fi (or a similar service) can easily plug this value into a UniSwap Pool, such as DAI/ETH, by calling Zapperfi’s ZapIn contract to batch entry transactions. Following entry, the LAO Proxy would then receive pool tokens tracking this position and right to redeem for fees. Whenever the Liquidity DAO wants to exit the pool, the ZapOut contract would simply be called, causing escrowed pool tokens to be sent back to UniSwap and the LAO Proxy to get back the ETH it had staked (that’s a wrap and ZAP).
The Liquidity DAO is still several weeks away from launching, but if you’re interested in staying up to speed with development sign-up here.
And hit us up if you’re interested at hello@thelao.io, join our telegram, or follow us on twitter for updates.
