SUMR LIQUIDITY PLAN v0.1
Mandate
- Secure $1M of TVL in vAMM_SMR/ETH
- Develop side pools such as vAMM_SMR/stbl to support volume.
- Harness relevant partnership and any other relevant tool (POL, fee structure, etc.) to minimize the cost of incentivization
Budget
| POL | Incentivization | |
| Launch Month | $135k pairing + SUMR eq | $45k SUMR/month |
| Following three months | // | $30k SUMR/month |
This liquidity plan uses $100k of stablecoin + $35k of ETH + $170k of SUMR from treasury for seeding/Protocol Owned Liquidity.
The cost of incentivization is ~$45k for the first month under very safe assumptions, with a high likelihood of being able to bring it down to ~$30k/month after.
Pairing Asset
- ETH is the main pairing asset.
- Stablecoins are secondary, with a preference for those with possible partnerships which have strong liquidity against USDC.
- Other pairings are not a priority.
Liquidity Structure
Considering this is a new token launch, with price discovery bound to happen, our choices of liquidity structure are constrained, as CL would be irresponsible at this stage: severely heightened volatility, high likelihood of out-of-range/thin liquidity area, etc. Before reaching CL, we need to build a sizable vAMM liquidity baseline, which this plan focuses on.
⇒ vAMM only for launch/around. A CL pool could be launched later to increase liquidity efficiency.
Fee Structure
We are optimizing for TVL in the pool, with a secondary mandate of cost reduction, therefore we can be more aggressive fee-wise, as the main downside of higher fees, lower volume and increased price impact are secondary concerns in our perspective.
- The main SUMR/ETH pool is set at 50 bps / 0.5% fee.
- Arbitrage/secondary pools set at 30 bps / 0.3% fee.
Protocol Owned Liquidity
The treasury controls $100k in stablecoins and $35k in ETH which can be used for seeding and POL:
- 50k in stablecoin to be swapped to ETH
- +35k existing ETH ⇒ $85k ETH + SUMR = $170k POL on the main pool
- 50k in stablecoin + SUMR = $100k POL on the secondary pool
Incentivization
Given the POL specified above, we can clarify our current projected status against the objective:
- $170k/$1M TVL in SUMR/ETH ⇒ we need to source at least $830k through incentivization
- $100k TVL in SUMR/stbl sidepool
Assumptions:
- SUMR token will be highly volatile around launch time
- The pool will be able to attract depositors as long as it is paying ~100%APY in the first month.
Calculation:
Total incentives for month 1: 100%/year => 8.33% of their principal in one month = $69139
Total Cost of Incentives for Month 1: 69139/1.5 (Safe Bribe Multiplier Assumption) = $46 092.66
⇒ ~$45k of SUMR is needed to confidently meet our objective month 1. Please keep in mind that a lot of assumptions are on the very cautious side of the spectrum, as for month 1, meeting the $1M TVL target promptly is absolute priority. The strategy can be refined in the following months as more data is available, especially regarding the LPs’ appetite for SUMR.
Collaborations
Several projects already manifested interested in collaborating with SUMR for liquidity:
OETH
Pete from OETH, on the governance forum, offered a special type of collaboration with OETH, in the form of yield forwarding. OETH is a yield-bearing ETH LST. While OETH is deployed in a liquidity pool, OETH can enable Yield Forwarding, which redirects the underlying yield of the OETH in the pool, where we see fit: such as bribes for voters of the pool to reduce its costs of incentivization.
While this is of high interest for reducing cost of incentivization, it also comes with costs to consider: if SUMR/OETH is the main pool, pretty much every swap will have one extra step (+ associated 4bps fees), and the routing will worsen.
It is my opinion that strong liquidity should be built against a major and well routed token first, such as ETH or USDC.
BOLD
BOLD has a strong presence on Base with north of $5.5M of liquidity against USDC and other stablecoins. BOLD pools are supported by The DeFi Collective ~500k veAERO, as well as a share of the BOLD Protocol Incentivized Liquidity system, currently around 16% amounting for $3k of BOLD distributed to voters weekly.
The Collective is open to co-support BOLD-involving pools, and already doing so with BOTTO/BOLD, and POOL/BOLD. Was the community open to the endeavour, it could take several steps:
- Designating BOLD as the stable asset to pair with for the secondary pool ⇒ it will receive veAERO voting support from The DeFi Collective
- If further support is needed, The DeFi Collective also provides “permaLP” agreements, where, following a donation of SUMR, permanent liquidity is provided on the asset. Such agreements are ongoing with POOL and BOTTO.
Aerodrome
Whitelisting
This plan assumes SUMR capacity to obtain a whitelisting for Aerodrome rewards. Considering the project, this step should be a formality, but still shouldn’t be overlooked as it can impact the deployment schedule. The sooner the process is started, the better. The Aerodrome team will need the SUMR token address on Base to start the process, and will likely have further questions – a point of contact with good understanding of the SUMR contracts would be ideal to facilitate the exchanges. I can introduce and support the process.
Communications and Marketing
The marketing support the Aerodrome team is expected to provide to the SUMR launch was a key deciding factor. It can take the form of tweets, spaces, etc. I’ll let the person competent in that area input and lead in due time.