Cardano Defi Liquidity Budget - Withdrawal 1
## Executive Summary For the last year, we have engaged the Cardano community to discuss deployment of treasury funds into the DeFi ecosystem to boost liquidity. Under the old constitution, we received broad support (more than 67%) for a budget info action to deploy 50,000,000 ADA into the ecosystem. While we acknowledge a budget info action is not required under the current constitution, we feel encouraged to submit this withdrawal action to setup the legal and on chain components needed to carry out the liquidity deployment. For a detailed overview of what we are aiming to accomplish more broadly, we invite people to read the budget info action (gov_action1u4jrcvlkppjzuv5j9z5ksacwtvv77h6glu0knpcjut8gvjjfu0cqqt3alsy). In this Withdrawal Action, we propose withdrawing 800,000 ADA to setup a legal entity and audit the smart contract that will be built free of charge courtesy of Lucas and Kasey from UTxO Company. The user interface will be contributed by Hinson from Sidan Labs.
Reasoning
Written after the vote was cast
What this asks for, and from whom
800,000 ADA as the first withdrawal under the Cardano DeFi Liquidity Budget.
What would have to be true for this to be a good use of treasury funds
Cardano DeFi is small compared to comparable ecosystems and thin liquidity keeps it that way. Users will not trade where slippage is punishing, and builders will not build where users are not.
What specifically concerns me
I have voted no on individual protocols asking the treasury to fund their launch liquidity, and I want the distinction on the record: I am against the treasury taking a market position in one company's leveraged product, and open to ecosystem-wide liquidity programs with oversight. This was the smaller, first tranche of a governed program rather than a bet on a single venue.
What I am asking of the proposer if this passes
It was enacted. Report whether the liquidity stayed after incentives ended. Rented liquidity that leaves the moment the program stops is the failure mode of every DeFi incentive scheme ever run, and it is the number that decides whether the rest of the budget deserves to flow.