We are excited to support the strategic partnership proposal between Balancer and Cow DAOs, as it promises to create a powerful synergy that will enhance both protocols. Given the history of collaboration between these two DAOs, advancing to this next step is both promising and exciting.
As the treasury manager for both DAOs, and having initiated this idea and drafted the first proposal a few months ago, karpatkey is uniquely positioned to act as an impartial third party. We can coordinate efforts around this initiative and play a key execution role on behalf of both DAOs.
We would like to specifically address the section on incentives alignment. The proposed COW/BAL liquidity pool (LP) is likely to generate low organic volume, primarily coming from rebalancing activities. This setup would function more like an ETF, aligning the incentives of the two DAOs but only to a limited extent given the pool’s relatively small size for both tokens. In contrast, a direct token swap would immediately and significantly align the incentives of the two DAOs. We believe this initial swap should be the first of many, with further exchanges planned once a clear strategy is established.
In light of this, we propose that the token swap involving $1M worth of native tokens from each DAO (totaling $2M) be executed at the outset, rather than waiting until the total value locked (TVL) in all CoWAMM/Balancer pools reaches $50M. This early swap would cement a stronger alignment between the DAOs and contribute to diversifying their respective treasuries. Additionally, Cow DAO could lock the received BAL with ETH in the veBAL contract, enabling it to direct incentives to these pools, thus unlocking a positive flywheel.
Secondly, we see significant value in launching CowAMM pools from the beginning. Testing this technology in a live environment signals the serious commitment of both DAOs to this partnership. We propose starting with a pool that is likely to attract more organic volume, such as WETH/USDC. karpatkey is prepared to help seed this initial pool achieving $1M in liquidity, providing $500k from GnosisDAO, while Balancer and Cow DAOs would each contribute $250k.
In addition to the WETH/USDC pool, we suggest creating two more CowAMM pools: COW/WETH and BAL/WETH. Each pool would be seeded with $500k in total, with each DAO providing the initial liquidity for the pool that includes its native token. After these initial pools are launched, we can evaluate further stages of liquidity seeding as needed.
As the treasury manager for both DAOs, karpatkey is ready to assist with executing these actions, allowing both teams to concentrate on the technological integration.