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Overview***
Tinyman currently holds a number of TINY tokens that are not required for short-term operational needs and are therefore sitting idle without generating yield.
I suggest utilizing a portion of these idle assets by depositing them into our own Tiny-paired LPs. This approach would allow Tinyman to earn yield on otherwise inactive treasury assets while simultaneously supporting liquidity and utility on our own platform TINY ecosystem, creating community-owned / protocol-owned LP assets.
The pilot aims to:
- Generate yield on otherwise idle treasury assets.
- Support liquidity and utility for the TINY token ecosystem.
- Contribute to the growth of our own defi ecosystem.
- Evaluate the effectiveness of treasury participation in LPs.
- Gather data that can inform future governance decisions.
Abstract
This proposal seeks approval to allocate approximately $2,000 worth of TINY from idle treasury holdings into Tiny pairings for a period of 150 days to gather data on the depth of the LP, growth and trade volume, as well as impact on farming voting patterns.
It should be combined with a message highlighting those Tiny-pairings being utilized in the farming rewards UI come voting time, as well as on the LP themselves to help ensure users that are locking tokens in smaller-LPs that the underlying liquidity isn’t just going to be rugged by an individual user.
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To be clear, this is not touching existing allocations of monthly governance or farming rewards allocated, nor is this using assets earmarked for other community uses at this time, but using treasury assets that are not needed for short-term spending on the platform.
This part should be highlighted in the governance proposal should it go on-chain.**
At the end of the evaluation period, the team will publish the results and provide recommendations regarding potential continuation, expansion, reduction, or withdrawal of the allocations.
The proposal is intentionally conservative, allowing Tinyman to explore the benefits of treasury asset deployment, deeping our own LPs, while maintaining a low-risk profile and working to minimize any impact on existing market participants vs as encouraging more individual users into lower-TVL LPs via reducing user risk.
Objective
The primary objectives of this initiative are to:
- Generate productive yield from otherwise idle treasury assets
- Creating income for the platform not depended on trading fees and staking rewards for further development of Tinyman.
- Support LP activity and liquidity for the TINY token in otherwise under-utilized pools.
- Evaluate how deeper liquidity can effect use of an LP.
- Collect operational and performance data before considering larger allocations.
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***Market Opportunity
Supporting Tinyman DeFi Infrastructure
To quote @Goldenalgo
A brand-new pool starts with almost no depth, so any real-sized trade creates significant slippage. That makes the pair hard to use in practice, even if a farm makes the APY look attractive on paper. High emissions on a very thin pool often produce eye-catching percentages, but those numbers can be misleading because the underlying liquidity isn’t actually usable for meaningful volume.
To-date attracting meaningful liquidity to tiny-paired LPs has been a heavy lift for us. Just a casual look at our own tiny pairings showcases this, regardless of APR offered, liquidity just does not flow, even to pairings that most would assume any Tiny-user would be inclined to support:
I have been attempting to collect some data on this and the threads recording it are here, and will continue to do so overtime:
Tiny/usdc, Tiny/wbtc, are both very important to the platform.
The first helps provide support to absorb selling pressure over the long-term.
The second helps soak-up Tiny in the event of a bull run from BTC.
As wBTC’s price rises deep-liquidity in a tiny/wbtc will help absorb tiny from the market. A $1,000 rise in wBTC’s price would pull $500 worth of Tiny into the LP to keep the pool balanced. A similar thing happens with all LPs to some degree, algo/wbtc and algo/gobtc can cause Tiny to rise if BTC is running up by causing Algo to rise and pull up the value of algo/tiny pool, causing more tiny to be absorbed into it, but that’s less effective than a direct BTC-to-TINY LP.
Likewise Tiny/USDC helps absorb sell pressure from price falling. While it alone won’t protect Tiny from downward price action, a deep tiny-usdc pairing is vital to the long-term health of Tiny imo. Further we are FAR under the ideal tiny/usdc liquidity recommended by Folks Finance to remain in their isolated market – while I don’t think they will de-list us, deeper tiny/usdc liquidity would help reinforce our position.
- Productive Treasury Management:
Idle assets represent an opportunity cost for Tinyman and us as govs. A conservative allocation like this allows the team and us as govs to gather more data on LP use, rewards earned, and farming and LP participation among users.
Non-fee related earnings are a large boon to the platform, and Tiny/USDC can have anywhere from 5-20% pool returns depending on volume, as well as 20-40% farming returns that can be used to “auto” build up the LP from the initial investment as well as to recoup the initial cost overtime.
I will personally commit to long-term farming support of tiny/wbtc to ensure a farm is behind it during this period, and I’m relatively sure other govs would not might throwing some tinypower behind a pool to boost the earnings of this pilot.
- Data-Driven Decision Making:
A small pilot allows Tinyman to gather real-world utilization, yield, and risk data before evaluating whether larger allocations are justified.
Proposal Details
Program Structure
- Allocation: Approximately $2,000 worth of TINY.
- Platform: Tinyman LPs
- Market: Tiny-USDC and Tiny/(folks)wbtc LPs
- Duration: 150 days.
- Source of Funds: Idle treasury-held TINY not required for short-term operational needs.
Evaluation Framework
The pilot will be monitored over a 150-day period to evaluate the change overtime in liquidity other than what is injected via Tinyman’s treasury.
The team would evaluate:
- Operational complexity.
- Security considerations.
- Overall impact on the TINY ecosystem.
Following the evaluation period, the results would be shared with the community.
Benefits
- Yield Generation
Idle treasury assets can begin generating yield while remaining under Tinyman’s ownership and control. Further compounding can cause a snowball effect, eventually creating deeper liquidity with minimal treasury assets. Lastly the treasury can simply recoup the initial expense from idle asset use via farming rewards.
- Increased TINY Utility
Additional liquidity creates more opportunities for TINY holders swapping and depositing tiny into our LPs, as well helping manage slippage issues from under-utilized LPs to encourage their use.
- Ecosystem Support
The proposal directly supports the growth and health of the Algorand DeFi ecosystem by contributing liquidity to key LP pairings.
- Treasury Efficiency
The pilot allows Tinyman to explore productive treasury management without making long-term commitments or deploying significant amounts of capital as well encouraging other uses to add to key LPs without inuring significant slippage costs themselves.
- Future Governance Insights
The pilot will provide valuable real-world data that can inform future governance proposals regarding treasury deployment strategies, such as possibly expanding deployment into these LPs overtime, or expanding to other tiny-paired LPs like Tiny/talgo. Should this pilot prove valuable it can be expanded on with another allocation, and/or adding tiny/taglo to the list of protocol-owned liquidity.
Implementation Steps
- Approval
Secure community approval through governance.
- Deployment
Deposit approximately $2,000 worth of TINY into TINY LPs starting with Tiny-wBTC and Tiny-USDC.
- Monitoring
Track utilization, yield generation, and ecosystem impact throughout the 150-day period.
- Review
Publish the results and recommendations following completion of the pilot.
Potential Risks and Mitigation
Smart Contract Risk
All DeFi protocols carry some degree of smart contract risk.
Mitigation: The allocation size is intentionally small, and keeping it in-house negates the risk of third-party security lapses.
Reduced LP Yields
A large deposit could reduce LP yields for existing participants.
Mitigation: The pilot uses a modest allocation designed to minimize market impact, as well as entice other uses to join themselves, strengthening the pool, and possibly encouraging users to funnel rewards to it in farming allocations.
Conclusion
This proposal represents a cautious and data-driven approach to exploring productive treasury management, and strengthening our own LPs.
By allocating a small amount of idle TINY to our own LPs, Tinyman can support our own ecosystem, increase TINY utility, reduce slippage in our own pools, and generate real-world data while maintaining a conservative risk profile.
The proposed 120-day pilot ensures that any future decisions regarding treasury deployment can be made based on actual results rather than assumptions.
Establishing new LPs (esp tiny-paired ones with major assets) is something I feel is pretty perfect for both Governance and our treasury assets. I’m also personally committed to funding Tiny/wbtc via my voting power for the fordable future, so there’s little risk in loss of funds because we can recoup those via farming rewards/compounding.
Making this a net-zero cost to us overtime. Both to reassure governance and in general. Even if, lets say the proposal passed and we modified it later and expanded it, I would stress we should seek to recoup the added investment over time in Tiny as compounding builds. It does not have to be done immediately, but from farming rewards and fees earned, I do think we should refill the wallet with whatever we take out eventually.
Ideally protocol-owned liquidity should reassure users that the pool is not going to be rugged as well as making it easier to flip assets into the pool from the users themselves.
**Summery: Attracting deep liquidity in key tiny-pairing LPs has proved difficult for Governance regardless of rewards offered. As such it falls on us as Govs to help boot-strap and boost these pairings that are vital for the tiny-token overall and deep liquidity in these pools is one of the few direct effects we as users can have on tiny price action.
A small allocation of treasury assets allows these LPs to start compounding and building themselves overtime, while also providing assurances to the community that these small LPs will not be rugged.
This aims to eventually have a net positive effect on the Tinyman treasury as fees and farming rewards compound, eventually positioning Tinyman to be stronger and more resilient to market conditions.**
Discussion form thread:
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Poll:**
- Yes
- No
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