We support the POL (Protocol-Owned Liquidity) strategy for several reasons.
- Securing initial liquidity is a critical challenge, and this strategy effectively addresses it.
- The cost to the protocol is less than that of a liquidity incentive program, making it a more efficient option.
- As @Gauntlet mentioned in their response, pairing with ETH to establish a Uni v3 pool is a reasonable and practical approach.
Regarding @GFXlabs’s comments, while we understand their concerns, we believe it is essential to discuss this proposal and decide on a concrete direction. The token launch presents an effective opportunity to bootstrap initial liquidity, as it naturally attracts attention and higher trading volumes. By gathering sufficient liquidity from the outset, it can be sustained more easily over time. Conversely, if the initial liquidity is significantly lacking, Morpho would have to start by recovering it, which raises concerns about needing to implement additional bold measures. Compared to liquidity mining, the cost borne by the protocol is relatively small, making this a risk Morpho should be willing to accept.
We would also like to raise some additional questions and suggestions.
First, what is the current status of the Morpho Association’s assets? Even if this contribution is not considered a direct cost, we should understand the scale it represents for the entire DAO. As of the end of June this year, 125 million MORPHO tokens were under the association’s management, and although there were reports of fundraising, we do not know the actual holdings in terms of USD, ETH, and MORPHO that they currently possess.
We believe it is advisable to establish a review cycle for this strategy, such as every three months. This would serve as a mitigation against the concerns regarding the partial trust in the Guardian and seems reasonable as a review period that includes considering other approaches.
The discussion on liquidity mining should be designed to build upon this proposal once it has been finalized, with an awareness of synergy. We feel it is meaningful to share this here as well as in this thread. Both strategies aim to deepen liquidity. As Gauntlet’s comment suggests, it seems appropriate to start with the POL strategy and begin a liquidity incentive program at a timing when appropriate effects can be expected. Therefore, it is important to consider how Morpho can maximize liquidity while leveraging the POL strategy decided here.