Buttonwood Proposes Liquidity Seeding of AMPL-SPOT Pair on Button Swap

Documenting AMPL
3 min readJul 7, 2023

Matthew Fisher, the growth lead at Buttonwood, has proposed a strategy to seed liquidity for a new AMPL-SPOT pair on Button Swap. This proposed action stems from the synergy between Buttonwood and the Ampleforth team, with Buttonwood’s founder, Manny Rincon-Cruz, having co-authored the Ampleforth whitepaper and initiated various projects centered around the utility and liquidity of the AMPL and SPOT tokens.

I highly encourage all active members of the FORTH DAO to carefully read through the proposal at the link below:

Key Highlights

  1. Liquidity Protection: The proposal suggests a new model that mitigates impermanent loss for liquidity providers, a critical issue that affects their potential earnings.

2. AMPL-SPOT Pair Creation: The plan calls for using 25,000 SPOT and 25,000 AMPL from the FORTH DAO treasury to establish the AMPL-SPOT liquidity pair, a new market opportunity on Button Swap.

3. Economic Benefits: This proposal is expected to increase liquidity, reduce losses, and generate fees for the FORTH DAO treasury, contributing positively to the ecosystem’s financial health.

Scope of the Proposal

Buttonwood’s proposal presents an innovative solution that mitigates two significant challenges faced by Decentralized Autonomous Organizations (DAOs) — the need for DAOs to diversify their treasury without adversely impacting their token and to utilize their treasury assets for earning effectively.

Buttonwood proposes to seed the AMPL-SPOT pair pool on Button Swap using the FORTH DAO treasury. The rationale behind this strategy is to earn fees from swaps, thus, not only putting the treasury assets to work but also supporting the growth of Button Swap, a newly minted Automated Market Maker (AMM) for rebasing assets.

The unique design of Button Swap is vital to the proposal’s success. Unlike existing AMMs, Button Swap introduces a novel mechanism known as “reservoirs,” which mitigates the impermanent loss often incurred by liquidity providers (LPs) due to rebasing in existing AMMs. The reservoirs act as placeholders for “excess” tokens, allowing the liquidity pool to maintain a stable marginal price despite rebases. This translates to increased earnings for LPs as additional token incentives would translate into lucrative rewards rather than compensation for predictable losses.

Specific Proposal Details

The proposal involves the allocation of 25,000 AMPL and 25,000 SPOT from the FORTH DAO treasury to seed initial liquidity for the AMPL-SPOT pair on Button Swap. This move is not just about earning fees from swaps but is also strategic for several reasons:

  1. Enhanced Liquidity: A deep AMPL-SPOT pair will improve price stability and reduce slippage for traders.
  2. Mitigated Impermanent Loss: Button Swap’s unique mechanism to handle rebasing events will reduce losses for LPs. This feature should attract more LPs to this pair, enhancing its depth and stability.
  3. New Market Opportunities: A successful AMPL-SPOT pair opens the door for additional rebasing pairs in the future.

The Buttonwood team invites FORTH DAO members to explore this proposal, express concerns, and offer suggestions. They also intend to add more liquidity to this pair, propose adding token incentives to attract more LPs, and discuss adding support for additional pairs if the proposal is passed and proves successful.

Community Feedback and Comments

The proposal received an overall positive response from the FORTH DAO community, with members expressing enthusiasm about the potential benefits of the AMPL-SPOT pool. Many acknowledged the unique opportunity for AMPL and SPOT tokens, given Button Swap’s dedicated support for rebasing tokens.

Several community members put forth constructive suggestions, such as introducing a variable incentive system for liquidity providers based on the pool’s valuation. They also showed interest in understanding the nuances of Button Swap’s design, specifically in comparison with other existing platforms like ElasticSwap. This was addressed with clarifications around Button Swap’s robust design and mechanisms to prevent exploits commonly associated with other platforms.

To learn more about Buttonwood, please check out their website and documentation below:

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