Introducing Liquidity-as-a-Service from Fei Protocol and Ondo Finance
If you are part of a DAO or protocol that wants to create liquidity for your token without sacrificing your Treasury to create AMM pairs or unsustainable incentives for liquidity mining, this service is for you.
As we have seen, traditional liquidity mining is unsustainable, while inviting mercenary capital. As rewards dry up, the capital leaves.
There are a few approaches to address these issues. New Approaches to Liquidity in Defi discusses the leading available options, and we expect projects to explore these offerings tailored to their needs at different stages of growth. This article focuses on the lowest barrier to entry option provided through LaaS.
DeFi moves at warp speed, so we at Fei partnered with Ondo to deliver an offering to allow teams to access LaaS with no upfront costs or long term commitments. LaaS enables teams to have the flexibility they need. If a new alternative emerges or sufficient capital is available to own all liquidity, teams can pivot and redeem their position to leave LaaS.
LaaS Specification
LaaS will use Ondo’s unique liquidity vaults for this offering. These vaults are structured financial products that allow different parties to take on different risks when they contribute liquidity to a common AMM pair.
Approved projects can deposit their project token into an Ondo liquidity vault with a flexible duration, and Fei Protocol will match their deposit with an equivalent amount of FEI. The tokens are deployed as liquidity onto DEXs, such as Uniswap or SushiSwap.
This arrangement provides immediate liquidity, and essentially doubles the liquidity (for example: 5M supplied by ABC DAO + 5M FEI). Double the liquidity means a healthier market with less slippage for users interested in buying the token. After a predetermined duration, the Ondo vault returns all remaining FEI to Fei Protocol plus a small fixed fee, and returns all remaining project tokens back to the project. The project keeps trading fees and assumes any impermanent loss. LaaS can be a source of revenue for DAOs, rather than a sunk cost. Even with negative price action, LaaS can still cost less than traditional liquidity mining incentives. You can use this worksheet to input your own scenarios to determine the sensitivity based on assumptions.
LaaS Launch Group
We are currently finalizing the selection of a cohort of launch partners for LaaS. In the next few weeks, we will hold AMAs and set up calls with issuers interested in joining this limited launch group. Those selected to be part of the launch group can benefit from the low fees associated with the group (only 2–3%!).
Interested protocols or DAOs can inquire about being part of the launch group by filling out this intake form.
LaaS Summary
The partnership between Fei and Ondo offers cost-effective and flexible term liquidity as a service (LaaS). Projects can get immediate liquidity on their token without upfront capital costs, double their liquidity, earn trading fees, and ease into full liquidity ownership.
Follow us on Twitter and join our Tribe on Discord! 🌲
