CIP-51: Wintermute <> COW Liquidity Provision Partnership

Governance Closed Proposals
, ,
1 
CIP: 51
title: Wintermute <> COW Liquidity Provision Partnership
author: Wintermute
status: Active
created: 2024-08-09

Simple Summary

Wintermute is requesting a loan of 7.5M COW tokens from the DAO’s treasury for liquidity provision purposes across various decentralised and centralised exchanges. The 7.5M COW tokens will be transferred from the DAO to a grantee’s wallet before being subsequently transferred to Wintermute wallet.

Motivation

The CoW DAO has recently been exploring efforts to increase COW’s onchain liquidity (CIP-37) through its novel FM-AMM mechanism. We’d like to complement these efforts by doing what we do best and provide liquidity for COW across major centralised and decentralised exchanges (including our 1800+ OTC clients).

Currently, the only way to acquire COW is through decentralised channels with the largest pool being Balancer’s ETH/COW on Ethereum Mainnet. With only decentralised venues available, a lot of users and institutions are unable to access COW.

With our partnership, we aim to make COW more accessible to gas-sensitive users, institutions, whales, and potential investors who are deterred by the lack of liquidity and subsequent price volatility.

Lastly, this partnership would further develop our relationship and alignment with CoW DAO. Wintermute (Rizzolver) has recently integrated as a Solver on CoW Swap where we plan to offer COW liquidity:

Chart1378×794 32.2 KB

Source: Dune (@cowprotocol), Dated: June 10, 2024.

Wintermute’s Basic Background:

Wintermute Trading is a leading crypto-native algorithmic trading firm, specialising in creating efficient markets across centralised and decentralised exchanges. Wintermute was founded in July 2017 by three Optiver veterans. Evgeny Gaevoy, founder and CEO, was previously head of ETFs (screen and OTC) at Optiver Europe, one of the largest ETF market-making desks. Since our inception, we have traded over $4.9T USD in volume and expanded our presence across 80+ (de)centralised exchanges and various (non)EVM chains, continuously supporting the ecosystem for our partners and their communities.

Alongside our trading arm, Wintermute Ventures and Wintermute Governance support and work with leading crypto projects with the goal of truly adding value, enabling partnerships, and helping shape a positive outcome for the ecosystem. Importantly, we do not target large ownership stakes; decentralised ownership is an important prerequisite to transitioning to a robust future.

Specification

Our Ask:

Wintermute is requesting a loan of 7.5M COW for 1 year from the CoW DAO Treasury for liquidity provision purposes.

Wintermute’s COW Loan Plans:

  • Proactively guide discussions and support listings of COW on key exchanges on day one and going forward.
  • Provide liquid markets across major centralised exchanges (once listed).
  • Provide liquidity across DeFi aggregators such as CoW Swap, UniswapX, 1inch, Bebop, Airswap, and Hashflow.
  • Be the go-to liquidity provider for any OTC & Institutional flow, providing competitive prices for tickets $100k+.
  • Borrowed COW will be used exclusively for liquidity provision purposes. No farming, lending, governance, etc.

Loan Return:

Wintermute Trading will return the full 7.5M COW loan amount at the end of the 1-year loan term OR exercise the repayment option below.

Ecosystem Grant and Ownership:

For the purpose of this proposal, CoW DAO shall allocate the requested amount of COW token to a designated service company (the “Grantee”) as an irrevocable and unconditional grant. Subsequently, the Grantee shall provide the requested loan to Wintermute Trading under the terms of this CIP.

The allocation of COW tokens to the Grantee is non-repayable and any financial gains resulting from the Grantee’s collaboration with Wintermute Trading or repayment of the loan shall be allocated towards CoW ecosystem marketing and development as determined by the respective teams.

Note: the starting date of the arrangement will begin on the first day (UTC Time) COW is listed on a reputable centralised exchange. The arrangement will then end 1 year from this date.

Repayment Option:

The repayment option allows Wintermute Trading to purchase COW from the loan amount on the respective loan expiry date at the strike prices specified below.

Loan Strike Prices:

  • 3.75M COW @ $0.40 ($400M FDV)
  • 3.75M COW @ P + 50%

*P = VWAP (Volume Weighted Average Price) of COW over the first 7 days of trading. The price of COW will be sourced from an unbiased third-party website.

Should Wintermute Trading choose to exercise our repayment option, the value of the loan at the strike price will be returned to the Grantee in the form of USDT or USDC assuming a USDC/USDT price of $1.

Transaction

Transfer 7.5M COW from CoW DAO (0xcA771eda0c70aA7d053aB1B25004559B918FE662) to

the Grantee’s wallet (0x63b7734Ce21c2e2a19ef4cD3C301c64F8faBd336) to

Wintermute Trading (0xdCa72c1558ae5B8787744F8025d8b2eF7E87cCdb)

Snapshot

Phase 2 proposal: TBD

9 Likes
2

Following CIP-47 which approved a budget for CEX listings, I think it is natural for CoW DAO to get a service provider for facilitating market making services.

Wintermute is well respected in that regard, I’d personally support this proposal and hope it further accelerates the listing COW token on CEXs, followed by increased visibility and adoption of COW token and CoW Protocol.

1 Like
3

I am also supportive of this initiative. The plan is well-reasoned and encouraging healthy tokenomics is in the interest of CoW DAO.

1 Like
4

Thank you for the thoughtful proposal. I fully agree that increasing COW liquidity is an important step in making CoW DAO successful. I also believe that the strategy proposed is sound.

However, I was wondering if could provide more details on how you plan on market making. In particular, if you can specify a minimum amount of COW you plan to hold as inventory (perhaps specified in usd value) during the duration of the agreement.

Also, it is unclear how the “p” in the repayment formula is calculated. Is it based on the first days of trading on a CEX? And if so, which CEX? The first one in which COW trades or the first top-tier CEX?

1 Like
5

Thank you Callen and Wintermute.

I am supporting this proposal as it represent a strategic move that will significantly enhance the liquidity and accessibility of COW tokens across both centralised and decentralised exchanges.

This initiative not only supports the growth of the CoW ecosystem but also strengthens the partnership between CoW DAO and Wintermute, aligning both entities towards a common goal of fostering a robust and accessible market for COW tokens.

I also believe that it will certainly further help the CoW DAO’s mission to develop the most user-protective products int eh DeFi industry.

1 Like
6

We support this proposal for the Wintermute <> CoW Liquidity Provision Partnership.

Currently, COW tokens are primarily accessible through decentralized channels, which can be a barrier for institutional investors, gas-sensitive users, and large-scale traders. Wintermute’s involvement would alleviate these challenges, making COW more attractive to a broader range of participants.

This partnership with Wintermute is a clear enhancement in the efforts to strengthen the CoW token’s market presence, increase its accessibility, and foster sustainable growth within the ecosystem.

2 Likes
7

Thanks everyone for all the support!

And thanks @andreaC for your questions. We always intend to hold the full amount of COW as inventory as we use our capital (stables, eth, etc.) to quote the other side of the book. But as you can imagine inventory can fluctuate slightly over time due to regular trading flow and when we receive OTC requests. However, please note that Wintermute trade in a market neutral capacity and as such, the COW loan amount should remain the same throughout the duration of this agreement.

“P” will be calculated starting from the first day COW is listed & starts trading on a reputable centralised exchange (this is also the date at which the agreement will start as indicated in the forum post). The price data will then be sourced from Coingecko as an unbiased 3rd party website.
Please let me know if anything is still unclear!

8

The proposal is now live on Snapshot! Snapshot

1 Like
9

Hi @Callen_Wintermute,

Thanks for your answers! I understand that the inventory will fluctuate, but it is still useful to know that the loaned amount should remain roughly constant.

With these clarifications, I’m strongly in favor of the proposal.

1 Like
10

Thanks for your support :slight_smile: