DAOs and Liquidity


Decentralized Autonomous Organizations (DAOs) are at the forefront of the digital economy. A DAO is a community-governed entity with a core mission and shared treasury. The DAO landscape is diverse; they can operate DeFi protocols, pool capital to invest as funds, and collectively own art. Many of these projects choose to issue tokens for governance and utility purposes.

Current State of Liquidity for DAOs

Achieving significant liquidity remains a major pain point for tokenized DAOs. Poor token liquidity leads to a vicious cycle of token volatility, deterring new community members with high entrance costs and little incentive to participate.
Current liquidity structures exacerbate the issue further; they drain treasuries and shrink market caps. The most common solution today, pool 2 liquidity mining, forces DAOs to deplete their treasuries to mercenary capital that yield farms projects to extinction. Both the size and value of DAO treasuries decrease as a result, because these mercenary liquidity providers (LPs) are profit motivated, rather than being community-focused and aligned with the long-term success of the DAO. These solutions are unsustainable and put these DAOs at great financial risk.

What is Rift?

Rift allows DAOs to achieve sustainable liquidity in decentralized exchanges without resorting to harmful alternatives. DAOs should focus their token incentives on promoting the DAO's goals, rather than auxiliary requirements like DEX liquidity management. The Rift Protocol allows DAOs to deploy governance tokens from their treasuries to pair with tokens from liquidity providers. By working together, DAOs receive the liquidity they seek and LPs receive double returns and reduced risk. As a result, both parties are able to achieve their goals in a way that they would not be able to alone.
Rift creates a simple, passive experience for both DAOs and LPs by abstracting away the complexity of DEX positions for both sides. DAOs can deploy their treasuries to achieve their liquidity goals. Liquidity providers can earn high returns. Both can do so without needing to reason about the complexity of DEXs such as impermanent loss, variable rates, or secondary asset exposure.