💉Open Market Operations

Protocols might want to buy undervalued assets or diversify overvalued assets into stablecoins. Today, the options available to them in order of best execution are OTC, Aggregators, DEXs, and custom scripts. Each option has corresponding pros & cons listed in the Competition section.

What is the problem?

The problems for open market operations are similar to the ones DAOs face, see the DAO page for more details:

DAOsTWAMM

Some well-funded DAOs have the engineering resources to put together tools to address the poor execution on-chain. However, this diverts valuable developer time, incurs audit costs, and is generally not as efficient or flexible as TWAMMs.

Imagine re-building a DEX every time you needed to swap tokens instead of plugging into Uniswap.

Why TWAMMs are superior?

Beyond the development costs, these one-off tools have 3rd party dependencies and rely on keepers paying the gas to execute the trades. Additionally, they are subject to MEV attack vectors based on the size of sub-orders.

A side-by-side accounting comparing the surplus buffer signal request in DSSKiln vs. TWAMM appears below. This analysis doesn’t even account for the fill improvement that would result from the finer grain DCA of 2160 vs. 100 orders.

[Signal Request] Deploy a Trial Permissionless Open Market Operation & Resurrect the BurnThe Maker Forum

TLDR; TWAMM would cost ~50% less!

DAI <> ETH
Swap Amount:  $3M
Time Period:  90 days
Num Orders:   100
Sub Orders:   $30k => $3M / 100
Avg Swap Gas: $50 // uniswap v3 30-day average
Avg Slippage: $50 // uniswap v3 quote
Uniswap Fee:  0.3% // can be lower/higher depending on route/pool

----------------------
Swap fees:  - $9k
Gas fees:   - $5k
Slippage:   - $5k

Total Fees: - $19k
----------------------
Eth Return:   $2.981M
Net Cost:     -0.633%

TWAMM DAI <> ETH interval 1 hour, $1M ETH/DAI liquidity
Swap Amount:  $3M
Time Period:  90 days
Num Orders:   2160 // 1 per hour for 90 days
Sub Orders:   ~$1400 ~> $3M / 2160 
Avg Swap Gas: $0 // sub orders are not written to the chain
Avg Slippage: $0 // negligible slippage for $1400 trade in a $1M pool
Swap/W-draw:  $100 // gas for opening & closing position
TWAMM Fee:    0.3%
----------------------
Swap fees:  - $9k
Gas fees:   - $100
Slippage:   - $0

Total Fees: - $9.1k
----------------------
Eth Return:   $2.991M
Net Cost:     ~0.3%

Examples

Here are just a few DAOs that have built one-off tools for TWAP-style market operations.

GitHub - banteg/yfi-buyer: buys yfi at current priceGitHub

GitHub - nounsDAO/token-buyerGitHub

GitHub - makerdao/dss-kiln: Slow burner for protocol assets.GitHub

GitHub - charlesndalton/milkman: A smart contract system which allows smart contracts, including Gnosis Safes, to route their order flow through the CoW protocol with market orders.GitHub