CLOUD-2: Should Sanctum deploy up to 10M CLOUD in HawkFi CLOUD-USDC Vaults and/or Meteora DLMM pools? [ ON HOLD ]

[fplee]

CLOUD-2: Should Sanctum deploy up to 10M CLOUD in HawkFi CLOUD-USDC Vaults and/or Meteora DLMM pools?

Changelog

Proposal

All proposals have a deliberation process before officially tabled up to governance. This proposal has the following timeline:

- 7 days deliberation

- 3 days voting

Several firms have approached us wanting to buy CLOUD, but it’s difficult to buy CLOUD in size onchain without incurring large price impact. Current price impact ranges at about 6% for any trade size about 80k USD notional value. For example, trying to market buy 1M CLOUD on chain incurs a 5.60% price impact. It has thus been suggested that we deploy more CLOUD to boost on-chain liquidity.

As I’m not an expert on token liquidity, I am putting this proposal up to the community to answer the following questions:

Is this actually a problem we need to solve? How important is deep on-chain liquidity for the CLOUD token, really? There is such a thing as “too much” liquidity, just as there is “too little”. What’s the golden mean? How much CLOUD should we deploy, if any? What would count as success?

For CLOUD-002, I want to take a more collaborative approach in drafting the proposal, rather than doing “take-it-or-leave-it”. So, I want to present two options we’re currently considering in collaboration with the Meteora and Hawkfi teams:

Option 1: Deploy 7M CLOUD into a Meteora DLMM pool, and set aside 3M CLOUD for long-term incentives to liquidity providers.

A capital efficient manner of bootstrapping liquidity while providing more liquidity depth around CLOUD is to deploy CLOUD on a single-sided DLMM pool while simultaneously providing long term incentives on a liquidity pool.

With a spot-wide strategy, we would allocate 4M CLOUD uniformly between 0.11-0.24 to fill the current liquidity gaps. An additional 3M CLOUD between 0.24-0.60 reinforces the higher range and makes up for the impermanent loss on the first position if price goes up.

3M CLOUD would be set aside for LP incentives, rewarding LPs for actively providing liquidity into the pool (weighted by trading fees generated to the pool). Pool incentives would be deployed over the long term, for at least 18 months, but we can and should cut these incentives over time if our objectives are not met.

This would achieve several key benefits:

• Liquidity providers would be incentivized to keep their positions within range, earning long-term rewards allocated to the pool.
• Enhances on-chain trading volume and overall experience for CLOUD.
• CLOUD incentives would be directly distributed to LPs, allowing them to reinvest and provide deeper CLOUD liquidity by redeploying funds into the LP.
• As more participants optimize their liquidity concentration across different price levels to maximize fees, price impact would decrease significantly.
• Individual LPs would supply both USDC and CLOUD liquidity, naturally mitigating price impact on sell orders.
• Liquidity would be available across various price levels, further reducing price impact and improving the on-chain trading experience for CLOUD.

Deployment would take place in this Meteora DLMM pool, which currently accounts for 99.9% of all CLOUD trading volume on Solana.

Option 2: Deploy 5M CLOUD into Meteora DLMM pool for wide-range base liquidity. Deploy 3M CLOUD through HawkFi for tight-range autorebalanced liquidity to deepen liquidity at market price. Set aside 3M CLOUD for long-term incentives to liquidity providers.

With a spot-wide strategy, we would allocate 5M CLOUD uniformly between 0.11-0.60 to fill current liquidity gaps. 2M CLOUD would be set aside for LP incentives, rewarding LPs for actively providing liquidity into the pool. Pool Incentives would be deployed uniformly across 18 months.

Furthermore, in order to deepen liquidity and mitigate slippage & volatility especially at CLOUD market price, we would deploy 3M CLOUD through HawkFi into Meteora for tight-range autorebalanced liquidity to concentrate liquidity at prevailing CLOUD market prices.

Compared to the first approach, this approach would support CLOUD trading at wider price ranges, while tight-range autorebalanced liquidity supports deeper CLOUD trading at market prices to mitigate slippage & volatility

Of course, a third option is also possible – do something else entirely (or nothing at all). Every CLOUD is precious, and should not be frivolously spent. I look forward to your thoughts here and in the Discord, where a special subforum has been set up.

[Azrangar]

If slippage is in issue for whoever is buying then they can DCA. As someone who provided liquidity on $CLOUD-USDC, I found the yield to be decent so Im not a fan of 3M incentivie. I don’t see the yield as low enough to warrant that.

The 7M one sided liquidity in a DLMM is a good idea. I say place the entire 10M in a DLMM. Re the range, too tight of a range will be selling CLOUD for cheap which is what the buyer wants. Too wide and you will still have slippage. Current FDV is around $110 million. I dont think we should be selling CLOUD for cheap considering our TVL. CLOUD should be placed in a fair value range.

[skicia]

Yes we should
I don’t know what is HawkFi but I know DLMM on Meteora is good.

[piuuuu]

i guess it is good idea

[Judeeex]

I can see beautiful write ups and suggestions but the link to the actual proposal is hard to find. This should be worked on and make the voting link visible for those reading

[Judeeex]

Option 1 appeals more to me especially to kinda appreciate long term LPs

[TDegen]

Being a relatively experienced LPer (back in the day), and living through bear + current market on Solana, my humble thoughts:

1. Sanctum originally prided itself on not giving in to selling cheap to such firms as mentioned in this proposal. I understand the desire to minimize price impact / gain their involvement, but I do wonder what their intentions are, and of course if negative, it could lead to issues for $CLOUD price / Sanctum in the long run. If they seek to really be Cloudpeople and are Sanctum aligned, it could be helpful to gain their support but… Too much is up in the air.

2. Sanctum currently has… checks notes $3.73M in liquidity according to Birdeye. This is by no means a low liquidity pool. Granted, having a larger liquidity pool will help whales / large firms feel better about jumping into $CLOUD with size, but does that really help Sanctum itself? This proposal really depends on the size that the mentioned firms want to enter with – Without that kind of transparency, I believe it’s hard and irresponsible to make a decision on this proposal. Of course, a $3.73M pool is sufficient for DCA and slow entry but Sanctum (and their $CLOUD stores) potentially stand to gain much more if the size were to be directly pushed without an increase in liquidity.

3. LPing with incentives is good… until I’m forced to choose between staking $CLOUD and LPing $CLOUD. Liquidity providers, from my personal experience (many friends are LPers), only really seek to gain fees / dump rewards, which is NOT what this proposal has in mind. (and a large majority will just dump the rewards, I’m just saying it straight).

Overall, while I look forward to seeing what others have to say regarding this proposal, I think as a $CLOUD aligned person that LPing $CLOUD in order to bring these unnamed firms / large entries in has large potential drawbacks (hostile takeovers, misaligned governance, etc) and not enough benefit to Sanctum itself (if the buys end up moving price drastically, not only will Sanctum have less $CLOUD for the future, you will possibly have lost a lot of potential treasury power to IL AND the rewards will most likely not make up for the losses, leaving Sanctum in an overall worse spot than previously).

[Deiro]

A couple of things with this proposal, please if this information is available elsewhere kindly let me know so i can edit this answer or submit another one:

1. There’s already 26M cloud on that Meteora pool, adding 4m to that would impact it that much? How can we measure that?
2. Why wouldn’t these firms approach a DCA in these pools to achieve their goal holdings?

[TDegen]

Because they want all of their buys to be at these dirt low prices.

DCA would allow too much time for price to recover before they could fully enter their desired position, is what I’m gathering from this.

[Bengshark]

I agree with @Azrangar , if the main issue is slippage, investor can always DCA to the market. Providing high liquidity on the upside (CLOUD) is the same like giving selling pressure in my opinion, it makes price move harder to the upside.

In my personal view, I’m against this proposal because it makes market less free.

I support third opinion and really want to discuss with other cloudman about supercharging our liquidity that incentivise marketcap growth

Personally summon my super earnest LP friend @Halfa to discuss third option

[DeFIDeRekt]

GM skicia and everyone! Derek from HawkFi here.

HawkFi is an analytics & automation platform for on-chain market makers. We help liquidity providers optimize their strategy with automation tools like autocompound, autorebalance, and auto TP/SL, alongside deeper analytics for LP-ing.

If Option 2 moves forward, HawkFi will enable a tight-range autorebalance strategy to automate liquidity concentration and dynamically adjust based on market price, deepening CLOUD’s DLMM market liquidity in real-time.

[Halfa]

I’m chiming in here!

First of all, I’m so glad that this is finally being proposed!!! I’ve been a proponent for some sort of LP incentivisation since the start of Sanctum Research… You can check the discussion we had previously here:

Vote for CLOUD/INF Pool Incentivisation for S2 & S3

Seeing that we are coming close to the launch of our CLOUD token… I was wondering if we can also put up a vote with regards to incentivising LP Pools for Sanctum. Would also love to vote on a proposal of incentivised CLOUD/INF pools on Meteora, using our locked/unlocked CLOUD tokens. This is to increase LP TVL incentives in S2 and S3 and maybe can be initiative to new and old token holders, see below. Could also have CLOUD governance work like: Stake CLOUD Weighted Governance voting on SVP Re…

Secondly, let me just say that an incentive program with regards to LP was done months before by @richard_ISC. You can find the results of said LP incentives utilising cloud here:

[Proposal] ISC x INF - The yielding future

Alright, we are concluding our incentives program on HawkFi. Results: [image] [image] Similar TVL as for the Orca incentives. I was planning on less incentives (35k → 20k), but AGAIN, the moment we start, CLOUD pumps… [image] I know unrelated… but… The downside is that we’re trying to REDUCE incentives, and the price makes it so that it remains too high. The reason we want to reduce incentives is because the current volume & TVL we are getting are ~way~ too expensive. We believe we can …

Though it was to incentivise ISC/INF liquidity, some key takeaways that happened in that experiment was:

1. CLOUD price goes up post-Incentive plan occurring
2. LPers tend to NOT be sticky post-incentive program

So voting “YES” as a general plan for incentives is a good thing - but the long-term effects is much to be desired as LPers might not be “sticky” in keeping their TVL in CLOUD/USDC.

In general, I’d like to also ask if we are going to build a POL for all the Option 1 and 2 LP and was would definitely vote yes if those fees generated goes back to generating more LP size within DEX.

To your points @Bengshark and @Azrangar, I agree, that those firms can just easily DCA into position - however, look at it in an instos perspective… the more liquidity a token has onchain, the more attractive it becomes in buying it.

With that in mind, I worry if we do put in more CLOUD as one-side supply - it’ll be much harder for price to appreciate - assuming no firm is buying CLOUD.

Additionally, I’d like to raise whether it might be a good idea to do a CLOUD/INF LP position instead of a CLOUD/INF position, as that will also aim to increase the participation rate of INF adoption. - something to consider as a “two birds with one stone” situation.

One other consideration is possibly adding Staked Cloud as a requirement to receive these cloud incentives? Like in order to get the 3M incentives, users must be providing CLOUD/USDC (or INF) + have a # sCLOUD available in their wallet to qualify for the incentives (if that’s possible).

Maybe that’ll somewhat loop out the issue that @TDegen has pointed out in point no.3 of his post:

@TDegen

LPing with incentives is good… until I’m forced to choose between staking $CLOUD and LPing $CLOUD. Liquidity providers, from my personal experience (many friends are LPers), only really seek to gain fees / dump rewards, which is NOT what this proposal has in mind. (and a large majority will just dump the rewards, I’m just saying it straight).

Overall I think this is definitely a bullish proposal and we should continue to discuss - prolly get an additional option 3 of:

• Using the Option 2 Structure
• Add sCLOUD as incentive unlock requirement
• Consider CLOUD/INF instead of CLOUD/USDC

[Halfa]

Adding to your last summary on this:

@TDegen

not enough benefit to Sanctum itself (if the buys end up moving price drastically, not only will Sanctum have less $CLOUD for the future, you will possibly have lost a lot of potential treasury power to IL AND the rewards will most likely not make up for the losses, leaving Sanctum in an overall worse spot than previously).

I think this is a very fair food for thought to bring up as we might have if these new entities do come in.

[Alex]

And to use the meteora m3m3 system for this liquidity problem? With a 30 day cooldown? This way stakers (we) provide the needed liquidity though meteora vaults? Might be enough to allow bigger buys and m3m3 system is actually a form of vault technology but shares revenue with stakes but is not necessarily so I guess? This way the staked cloud can help and is working for helping to earn the asr?

[Bizarrebra]

I’m for LPs. I think they incentivize having your $CLOUD “locked in” somehow while getting rewards in the form of ($CLOUD) tokens for it. It’s a good trade-off.

Now, my issue is WHERE. Let me break it down:

• METEORA: A YES to Meteora for me. I don’t use the platform much myself because I don’t like the UI, but that doesn’t mean I don’t see the value of the platform itself, and how they’re contributing to the Solana ecosystem. Therefore I’m in favor of Meteora LPs.

• HAWKFI: That’s a big NO for me. I’ve been in the platform for quite a long time. The LPs with them is the toss of a coin. I have good experience with some LPs, with others the incentives fail to come randomly, sometimes for several days, and the worst part of it is that they don’t seem to care. As a personal experience, I had a ticket open with them for 3 months (yeah, read that again), because the incentives for a couple of LPs were not coming. They never proposed a valid solution nor fixed the issue. I don’t think it’s an isolated issue because I’ve been there for almost a year in LPs, and they always have issues with an LP or another in terms of distributing the incentives in a timely manner.

• ORCA: I don’t see it in the list, but I think it’s the other “big” one that is missing, along with Meteora and maybe Raydium. I like Orca LPs. I think they’re reliable, even tho the UI might not be top-notch, but that’s secondary to me, at least. I believe you should consider including Orca in the list.

• RAYDIUM: The other “big” I leave in the air because I’ve used them also a bit, I like how they’ve revamped the UI, they’re reliable, but they’re not as big as Orca or Meteora, or so I think, so I leave this one to other people’s judgment, but at the very least I think it should be considered.

As a final note, I don’t know where to put KAMINO in all this, because they’re not strictly an LP provider, but I’d love for KAMINO to add the LPs we might set up. Kamino is a huge hub that people trust without having to deal with the LP platform itself. I, personally, like to put in money in LPs in Kamino that otherwise I would not get involved in if I had to go directly to Meteora, Orca or Raydium, so I believe it’s a very cool way to attract people that are loyal mainly to Kamino. I don’t know if that’s something that could be discussed with them, tho.

Sorry about the long post

[Blackshibawolf]

Please forgive my poor English, but I’m trying my best to keep up with everyone.

Based on the assumptions above, if institutional investors can enter the market steadily and hold long-term, their participation is likely to help boost the token price and market stability.

Is there a way to think in reverse? That is, could institutional investors engage in short-term trading while still contributing to price appreciation and market stability? Or, even if their participation does not directly benefit the token price or market stability, could it still be beneficial for Santum in some way?

Is it possible for us to design a transaction fee-sharing or liquidity incentive mechanism? This would allow frequent short-term trading to generate stable fee revenue or incentive distribution. Even if these funds are not intended for long-term holding, they could still provide a steady financial resource for the project.

[Frangan]

First of all. I and I think can say we, appreciate the transparency.

Now you like to say how fair you are and that you don’t do private sale, and I think that is good. And that you should keep not giving advantages.
They have other ways to buy, dca is a good solution to price impact. They might even get more cloud DCAing, dca manually or with jup for example.

That’s where Futarchy reaches its limit imo

Futarchy is money only, of course this proposal is good for the price, but I don’t agree with it, but it will more beneficial for me to vote for it.

[Bengshark]

Sir can you explain what do you mean by POS?