Proxyswap DAO

Discussion Period: 48 hours
Voting Period: 24 Hours

Proxyswap launched on Degen Layer 3 on April 22nd, 2024. Since launch, a core group of contributors, primarily from Proxy Studio and Farcaster Builders of India, have continued to develop the protocol. We’ve launched an updated frontend, added support for LP locks, ERC20  airdrop & claims, and token creation. Proxyswap also deployed our full protocol to Ham Chain to support Deployer and the /lp community. With our ALM partner Rivera, we introduced incentivized liquidity for PROXY/DEGEN, PROXY/WETH, and DEGEN/WETH vaults. Proxyswap has consistently been the dex with the most volume on Degen Layer 3, and is currently the only dex deployed to Ham Chain, following BBQswap’s exit. 

For the past month and half, the core team has focused on building a radically different product, which we refer to as a ‘social dex’. This product is entirely distinct from Proxyswap v1, which launched as a 1-to-1 fork of Uniswap V3. We will be launching the social dex with a new (though familiar) name, and an updated brand. The social dex will launch first on Base.

Proxyswap’s core contributors believe that the health of the protocol is closely linked to the health of the $PROXY token. $PROXY has enabled us to secure funding via a DAO-to-DAO token swap with Degen DAO (“The Haberdashery”). This funding (provided in $DEGEN) has paid for all development post-launch, as prior to launch all dev work was funded with proxystudio.eth’s personal ETH, and DEGEN Tipping Allocation. Using $DEGEN and $PROXY from our treasury, we’ve incentivized liquidity, and Proxyswap is currently the only protocol incentivizing the $DEGEN / $WETH pair, for example, on the L3. 

The core team proposes to fully migrate the $PROXY token from Degen Layer 3 to Base prior to the launch of our social dex product. Weighing this proposal, the team considered the following:

1. Token Denomination & Liquidity

   At present, our token is denominated in $DEGEN. While we have attempted to incentivize users to bridge ETH and provide liquidity to ETH pairs on DL3, in part hoping to migrate our own token’s liquidity to ETH denomination, there is currently less than 20 WETH bridged to Degen Layer 3. The lack of ETH liquidity means that DEGEN is the default token of denomination for any token on DL3, including $PROXY. 

   Many traders prefer to denominate their portfolios in ETH or USD. Denomination in a volatile currency like DEGEN exposes tokens like $PROXY to DEGEN price action, both its upside and, especially recently, its downside. Without sufficiently liquid DEGEN/WETH pools, traders are less likely to hold or trade DEGEN-denominated token pairs. 

   Migrating $PROXY to Base would allow us to denominate our native token in ETH, a more conventional token of denomination with much deeper liquidity on Base. 

2. Security 
   
   The lingering impact of the Conduit Downtime incident continues to affect Degen Layer 3. Volume & trading activity has not recovered since the incident. Additionally, the L3 has seen significant outflows of Degen liquidity and a general loss of user trust. 

   Both users and Proxyswap DAO were impacted during the downtime, with a number of users suffering lost funds due to failed transactions and failed replayed transactions. Trades on Proxyswap that ‘disappeared’ during the downtime likewise resulted in ‘missing’ funds from the associated Proxyswap pools. Thankfully, the number of users affected was not too large and Degen has assured us they will support refunds for all affected users.
   
   However, just the process of identifying users with lost funds has proven extremely difficult. Without a centralized refund process, proxystudio.eth used personal assets to hire a developer to investigate the downtime incident and reports of lost user funds. Our investigation is ongoing - we just recently had to get additional information from Conduit to check the accuracy of our initial findings. While we are close to a resolution, users have still not received refunds and the entire process has reminded Proxyswap’s core team of how vital it is for our native token to have a home on a secure network one that will engender trust from users who want hold for the long term.

3. Incentives

   Proxyswap’s next major product update, the social dex, is launching on Base. Having our token on Base would enable us to incentivize & reward users and liquidity where we will be building. 

   While it is important to the core contributors that we remain Degen aligned, our token plays a role in enabling us to fund development - on Degen Layer 3, on Hamchain, and on Base - and reward users. On Base, there are more projects that we can partner with to provide support & rewards for LPs, and stable infra that will ensure that no additional user funds will be lost on Proxyswap.  

4. Users

   Our social dex product will connect Farcaster’s open social graph with onchain trading. Our users will be active traders on Farcaster, and these users overwhelmingly trade on Base over other networks.

We have considered this proposal a great deal as core contributors. We understand that a token migration is a significant step, and may cause confusion among holders and the Degen Layer 3 community at large. 

Please note that if the proposal is approved by the DAO, we will continue to support DL3 via Proxyswap v1 and with future deployments. We believe that the best way for us to support Degen is to grow as a project, and our token is an important part of that growth. 

If the proposal is approved, we will provide a follow-up post with specifics on the token migration process itself. The token migration would optimize for simplicity and user safety, there would be no changes to the token supply, and users would receive 1-to-1 $PROXY tokens on Base that they hold on Degen Layer 3. 

Please feel free to ask any questions in replies to this cast. Thank you for your consideration and continued support! 

• Proxyswap Core Contributors