GIP-25: Partner with Tornado Cash to increase GNO:TORN liquidity in Uniswap V3
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GIP: 25
title: Partner with Tornado Cash to increase GNO:TORN liquidity in Uniswap V3
author: Karpatkey
status: phase 2
type: Meta
created: 2022-02-01
Simple Summary
This is a continuation of F117’s post.
Tornado Cash’s mixer protocol is very popular in the DeFi ecosystem for providing a means of carrying out transactions anonymously, while allowing users to be compliant with tax regulations if required. This is aligned with our industry’s ethos and a major asset in the Gnosis Chain.
In order to lay the groundwork for its expansion, we can partner with Tornado Cash to help the protocol thrive, develop new features and expand their user base (by drawing more users to the Gnosis Chain by making it feature-rich). In order to do so, an important pillar is to provide liquidity of both Gnosis’ and Tornado Cash’s tokens, and we propose to do this in Uniswap V3, due to its unique feature set.
Abstract
Tornado Cash has strategic value for the Gnosis Chain, allowing its users to make anonymous transactions using Tornado Cash Nova. They are now working on the third version of the protocol.
Currently, there is no significant liquidity pool in the market which holds GNO and TORN tokens, so we propose that one is created on Uniswap V3, gradually adding tokens to the pool, aiming for a 0.1% slippage to further strengthen the bond between GnosisDAO and Tornado Cash protocol.
We would transfer circa 13,000 GNO and they’d transfer around 165,000 TORN to the pool, in several iterations to keep the slippage at bay.
Motivation
Gnosis DAO is hand picking several protocols and DAOs to partner with, based on usefulness, vision alignment and strategic value, to foster mutual growth, strengthen the DeFi ecosystem and make the Gnosis Chain the network of choice of an increasing number of users, by improving its functionality and security and attract best-in-class protocols to it.
Tornado Cash is very well known in the industry, and we need to ensure that there’s sufficient liquidity of both our tokens in our network. This constitutes one of the main axes of the mutual collaboration between our DAO and their protocol.
Specification
The Tornado Cash team would receive the GNO tokens in their multisignature wallet and carry out an iterative process to create and expand in batches the liquidity pool in Uniswap V3 keeping the slippage at bay (targeting 0.1%).
The process would be as follows:
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Create liquidity position on GNO/TORN pair:
a. Determine market GNO/TORN price from GNO/ETH 0.3% and TORN/ETH 1% (using TWAP Uniswap oracle).
b. Fix slippage from market price no more than max slippage (from params to agreement section).
Technically by amount0Min/amount1Min params of addLiquidity function.
In case of max slippage exceeding the contract reverts. An executor should wait for GNO/TORN pair price stabilization and try again.
c. Use all approved GNO tokens and a TORN equivalent.
d. Full range liquidity position. -
Send half of received LP tokens to Gnosis governance contract. In fact, the contract would create two equivalent LP positions - one for each DAO (because each position is non-frangible).
Rationale
Tornado Cash has an experienced team that can take care of the liquidity pool constitution. Slippage minimization is time consuming and has certain technical complexity. If the pool is created uploading 100% of the tokens in a single transaction, arbitrage bots would make significant profits from it, and high slippage would create economic inefficiency detrimental to our DAO and Tornado Cash, which would translate into capital loss for both parties.
GnosisDAO Snapshot
Phase 3 Proposal: Snapshot