[ARCHIVED] Provide liquidity for BIT-ETH on Integral SIZE

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Proposal Title: [Proposal] Provide liquidity for BIT-ETH on Integral SIZE, a cost-saving and capital efficient liquidity venue for $BIT on-chain.

Authors: Integral Team

Date: 5/12/2021

How will your proposal, if activated, benefit BitDAO?

  • Deepen on-chain liquidity for BIT-ETH

  • BitDAO’s treasury and community members can trade USDC, ETH, SUSHI, CVX, and more tokens (in the near future) on Integral SIZE in large quantity with zero price impact and low fees.

TLDR

BitDAO recently passed BIP-10: BitDAO Owned Liquidity for $BIT to provide liquidity on Uniswap V3. Integral is proposing to be an alternative venue for BitDAO in order to deepen on-chain liquidity for BIT-ETH. BitDAO community and treasury can enjoy zero price impact trading on Integral SIZE.

Summary

Integral SIZE is a DeFi primitive to facilitate large on-chain trades. It allows traders to execute token swaps at 30-min time-weighted-average-price (TWAP) with zero price impact relative to price oracles provided by DEXes such as Uniswap.

We previously responded to the initial version of BIT-10 here and would like to formally propose Integral SIZE as an additional venue for BIT-ETH pair and explore this further.

Details

We propose that BitDAO to allocate $2.5mm BIT and $2.5mm ETH in the BIT-ETH pool on Integral SIZE to deepen the on-chain liquidity of $BIT token.

We show the benefits of having a BIT-ETH pool on Integral SIZE by comparing the following two hypothetical scenarios. For simplicity, we assume that:

  1. there is $60mm total capital for BIT and ETH, and
  2. it’s a 50/50 DEX. Note that the current implementation of full-range liquidity on Uniswap v3 is similar, if not identical to Uniswap v2 50/50 DEX.

Scenario 1: Put $60mm in the BIT-ETH pool on Uniswap v3 with full-range liquidity.

Scenario 2: Put $30mm in the BIT-ETH pool on Uniswap v3 with full-range liquidity AND $30mm on Integral SIZE.

Under Scenario 1, a trade of $300,000 would cause 1% price impact. A trade of $1,500,000 would cause 5% price impact. This is assuming no fees and no sandwich attack.

price impact

Under Scenario 2, traders who would like to transact in large quantities of BIT can save a lot of transaction costs by trading on Integral SIZE.

  • Assuming the $30mm pool on Integral SIZE is 50/50, a trader can execute a swap between BIT and ETH up to $15mm with zero price impact relative to the 30-min TWAP based on the price oracle from Uniswap v3.
  • Scenario 2 is much more capital efficient for BitDAO and beneficial to its community members who trade BIT.
  • Further, BitDAO’s treasury and community members can interact with Integral SIZE within Gnosis Safe App. (Details below)

Additional Benefits

BitDAO’s treasury and community members can trade USDC, ETH, SUSHI, CVX, and more tokens (in the near future) on Integral SIZE in large quantity with zero price impact and low fees.

  • Price impact saving. Integral SIZE currently offers execution of USDC <> ETH, CVX <> ETH, and SUSHI-ETH at 30-min TWAP with zero price impact based on price oracles from DEX such as Uniswap.
  • Fee saving. Use SUSHI-ETH transactions as an example below. The fee saving is less extreme for USDC-ETH swaps.
    • 1 bp on Integral SIZE.
    • 30 bps on SushiSwap and Uniswap.

More about Integral SIZE

Integral SIZE is a decentralized exchange built for large trades of ERC-20 tokens. It allows trades to be executed at 30-minute TWAP with zero price impact. (Details below.)

Key features:

  • For Traders: zero price impact of large trades (including less liquid tokens).
  • For LPs: passive accrual of yield while achieving mean zero IL.
  • Rely on an external price oracle (such as SushiSwap) for price discovery over time.

What are the projected outcomes?

  • BitDAO can transact large amounts of BIT and other coins with zero price impact and minimal fees.

  • Further deepen on chain liquidity for BIT

Specifications:

Twitter: https
://twitter.com/integralhq

Latest Blog: https
://integral.link/post/myth-or-reality-zero-price-impact-trading-in-defi

Documentation: https
://docs.integral.link/size

Discord: https
://bit.ly/3vFGihK

Gnosis Safe: https
://docs.integral.link/size/concepts/advanced-topics/use-size-on-gnosis-safe

Website: https
://integral.link/

Announcement: https
://twitter.com/IntegralHQ/status/1506254024764403715?s=20&t=lU83at0GwVJR4cbvtbz97g

Whitepaper: https
://assets.integral.link/pdfs/SIZE-Whitepaper.pdf

(Sorry, had to break the links!)

Next Steps? If this proposal is accepted, what are the immediate action items?

  • BitDAO allocates $2.5mm BIT and $2.5mm ETH in the BIT-ETH pool on Integral SIZE to deepen the on-chain liquidity of $BIT token and to provide a venue of zero price impact and minimal fee trading for BIT token traders.

Review Process

The BIT Community and delegates might discuss and verify the following before considering proposals.

Personnel

  • Is the team credible?
  • Are they qualified to do this work?

Technical

  • Does the proposal make sense technically?
  • Does this fit into, or compliment, other projects in the BitDAO ecosystem?

Temperature Check Poll

Would you like to see this proposal go to vote?
  • Yes
  • No
  • Needs work

0 voters

35 Likes

Thanks for proposal.

It’s not clear about how you can ensure zero price impact for any trade ? Also, it will help, if you can dwell more about why & how you are better alternative than any other DEX in the market.

3 Likes

Because Integral SIZE adjusts its internal price state lazily (via an external price oracle) without the requirement of trading to convey price updates, the design mechanism eliminates the systemic role of arbitrageurs’ profit in typical AMMs, and its resulting impermanent loss on LPs.

This also allows for no price impact since trades submitted on SIZE will have no effect on the ratio of the assets in the pool, rather the protocol calculates the 30 minute TWAP and it is executed at that price. As a result, LPs on Integral SIZE would not be harmed by adverse flows and on average enjoys mean-zero ILs.

8 Likes

I’m hearing about the TWAP trading concept for the first time and just researched it a bit. I find it interesting and think the above proposal would benefit the BitDAO community.

5 Likes

TL;DR
A recent analysis of BIT <> ETH swaps reveal approximately $3.6m lost to price impact, that of which can be significantly reduced via Integral SIZE.

We recently have submitted a proposal on your forum here, proposing for BitDAO to allocate BIT and ETH to deepen on-chain liquidity for BIT/ETH pair on Integral SIZE. This would also serve to provide the BitDAO community with zero price impact and minimal fee trading of BIT.

The proposal has since seen some significant traction, amassing 293 views, 11 likes, and 14 total votes for the initial temperature check.

The proposal highlighted two scenarios for BITDAO to allocate liquidity on-chain:

Scenario 1: Put $60mm in the BIT-ETH pool on Uniswap v3 with full-range liquidity.

Scenario 2: Put $30mm in the BIT-ETH pool on Uniswap v3 with full-range liquidity AND $30mm on Integral SIZE.

We have conducted this analysis with the implications highlighted in Scenario 2. We would like to provide some insight how not only can members of the BitDAO community enjoy zero price impact and minimal fee trading, but how the BitDAO treasury can benefit and save from the use of Integral SIZE.

Let’s take into account all of the BIT <> ETH swaps with more than $100k volume from Sushiswap based on data pulled from Dune Analytics. There were 2,281 trades that met these conditions, with the first such trade occurring on Sept 10, 2021.

The total volume among all the trades that have more than $100k of volume is $571,142,587. The median order size for orders that are greater than $100k in volume is $177k, with the 90th percentile being $443.9k.

Further, we approximate the price impact based on TVL and trade size, which can be done given it is a Uniswap v2 like pool. The price impact cost for a trade can be estimated as trade_in_usd x trade_in_usd / (TVL/2). It is important to note that this is an estimate and assumes no fees and no sandwich attack.

The total cumulative price impact cost of all these > 100k trades is $3,681,736. This is about 64 bps of the total volume traded. The following histogram shows the distribution of the price impact (in percentage) among all trades > $100k. The median price impact is 22 bps. The 90th percentile is 59 bps.

It is estimated that the total price impact for trades greater than 100k in volume, beginning from September 2021, is around 3.6 million dollars, and counting. We believe that of which can significantly be reduced via Integral SIZE, providing a better trading environment for the Bit community and treasury, as well as anyone looking to acquire/transact large amounts of Bit.

@kravi @ompong @Chenkw @nr890

16 Likes

@0xMitch,
Thanks for latest update.

Would you mind clarifying about why “full-range liquidity" is being considered here, as "concentrated liquidity” is a better capital efficient option, to compare with !!

Is the trade guaranteed, to happen, given that Integral’s based on order book, that too of exceptionally large trade sizes?

There’s been good measures to contain price impact in Uniswap V3. It helps if you can elucidate how SIZE fares compared to it, rather than with Uniswap V2.

How the price impact is estimated here, is not clear !

2 Likes

Nice Approach I love this

1 Like

1.) We chose full-range liquidity on v3 because this is how BitDAO is deploying on v3 at the moment. Snapshot

TWAP makes SIZE have de facto “Concentrated Liquidity”. Uniqswap V3 allows a trader to set the price range for their liquidity, but Integral SIZE concentrates liquidity in the pool based on time weighted average price (TWAP)

2.) Integral SIZE is not based on an order book system. The execution price only comes from time-weighted average price, which is calculated based on Uniswap oracle. (No curve, no orderbook, no price impact)
Our system design creates the effect that the WHOLE liquidity of the pool is concentrated on the price point of TWAP. In theory, you can even swap all the liquidity out of the pool with 1 single TWAP.

3.) We are working hard to support Uniswap v3 pool as oracle for BIT-ETH. So we’ll only talk about the pricing performance between v3 and SIZE.
Long story short, SIZE always executes orders with TWAP price based on price from BIT-ETH pool on Uniswap v3.

To understand how much price impact we can help save, you can learn more from the table below (sorry for not including BIT-ETH in this analysis, but I’m sure you can get what we offer from these numbers).

4.) Sorry for the confusion. The equation should be trade_in_usd/(TVL/2)

7 Likes

Check out the recording of our Community Call with Kamado from the Integral team for more info on Integral, SIZE, and a deep dive into the proposal.

Plenty of additional context was provided for stakeholders interested in digging in to learn more.

(Integral discussion begins at 13:23)

https://twitter.com/i/spaces/1vAGRkkEYokJl?s=20

4 Likes

Do you have any data on BitDAO trading volume excluding large block trades? I’d be interested in exactly what proportion of the community this proposal benefits since you’re talking transactions sized for accredited investors.

3 Likes

Hi @0xMitch ,
would you please clarify :point_down:

  1. How come you are only asking for liquidity, but nowhere mentioned anything about APY details?

  2. If Integral’s forte is in arresting price impacts, how it’s better solution compared to any good OTC desk?

Thank you.

3 Likes

Hi @kravi ,
You can take a look at the pools/current APY here. Also Integrals solution allows for all the benefits of an OTC desk with less hassle and without sacrificing the permissionless and openness of DeFi.

2 Likes

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