We want to enlist the help of a market maker, and this requires ~$2.5M in liquidity. This liquidity needs to be half PNG and half US dollars. To fund this liquidity we will
- Transfer 2.5M PNG to a new multisig wallet
- Turn on the swap fee switch that routes 1/6 of swap fees to another multisig wallet
A market maker is required for
- Listing on large Centralized Exchanges
- Supporting market depth
- Qualifying for a Chainlink feed
We also need to convert ~1M of that PNG into US dollars, and we will outline a process for how we will do this below.
Most reputable Centralized exchanges require that you have a reputable market maker before listing. It’s one of numerous requirements they have. For example if we wanted to list on Kucoin and BitMart and potentially others, they have a requirement that we have a market maker.
To quote the ever helpful Investopedia:
Market depth refers to a market’s ability to absorb relatively large market orders without significantly impacting the price of the security. Market depth considers the overall level and breadth of open orders, bids, and offers, and usually refers to trading within an individual security. Typically, the more buy and sell orders that exist, the greater the depth of the market—provided that those orders are dispersed fairly evenly around the current market price of that security.
Market depth is one of the biggest requirements for Chainlink and with very good reason. Having market depth on different exchanges will help alleviate malicious actors trying to manipulate price.
Having PNG as a Chainlink price feed will allow us great flexibility in adding extra utility to PNG. For example if we wanted to add PNG to the upcoming lending solutions such as BenQi and Vee Finance, having a Chainlink feed will allow that. This will greatly increase the ability of PNG to be leveraged across the multiple DeFi lego blocks within the ecosystem.
For the keen eyed amongst you, you’ll have no doubt realised that Pangolin doesn’t own any tokens barring PNG. This presents us a unique challenge to raise the 1 million USD without negatively impacting the price of Pangolin and in a sustainable manner.
First we’ll setup two separate multisig wallets. The reason we’re doing this is to ensure the addresses are easier to audit and to ensure separation of concerns. The wallets are for:
- Swap fees
- Working capital
The Swap fees wallet will contain 1/6th (0.05%) of swap fees from trading volume on Pangolin.
We don’t have an exact quote from our market maker on how much USD is required, but I think a safe number to aim for is 1 million USDT. So let’s look at the last 7 weeks volume on Pangolin and how much money we can expect to make.
As you can see, we’d end up with approximately 100K USD over 7 weeks. This means we’ll need to pad out the USDT via swapping Pangolin on the open market. For this we propose a second multisig wallet which 2.5 million PNG will be transferred to. That wallet will then swap approximately 10K PNG daily into USDT. Then when the Working Capital wallet has the required working capital in both PNG and USDT tokens to satisfy the market makers requirements, we will transfer those funds across.
It’s at this point that the Swap Fees multisig will be revised. This will align with Leo’s post on Tokenomics https://gov.pangolin.exchange/t/improving-pangolins-tokenomics/1598
An important point to note here is that this working capital still belongs to Pangolin. Our market maker holds it on our behalf, but it’s still ultimately our money.
There’s a lot to unpack within this post and I’d imagine you may want to delve deeper into our thinking or some of the implementation details. Please don’t hesitate to ask questions, looking forward to hearing them and providing answers.