tldr;

There’s been interest in diversifying Nouns DAO treasury, specifically stETH => rETH, and we have built a tool that’s tailor-made to help execute these trades: TWAMM. The trade will be executed completely on-chain, transparently with very low fees and minimal gas costs.

The first trade will be for $1M, and after that completes successfully, a larger $14M trade will be proposed.

Background

TWAMM is a concept introduced by Paradigm in July 2021.

It works by breaking long-term orders into infinitely many infinitely small pieces and executing them against an embedded constant-product AMM smoothly over time.

An on-chain AMM protocol to enable large token swaps is essential to increase DeFi adoption and anti-fragility. Some interesting use cases for TWAMMs include treasury diversification, whale liquidations, peg maintenance, etc.

We have been researching and developing TWAMMs since November 2021 and recently launched our protocol: CronFi TWAMM. The code has been audited by SpearbitDAO, open-sourced, and verified on Etherscan. Considerable detail about the protocol is presented on the docs page.

Product Design & Incentives

• AMM: we built our TWAMM as a custom pool on top of Balancer V2 Vault leveraging the security, liquidity, flexibility, and gas advantages of Balancer. Additionally, Balancer has become a Schelling point for protocols that want to leverage their AMM, thus creating network effects & composability advantages.
• Traders: as a long-term trader (Nouns DAO), you only have to pay gas for starting, canceling, or withdrawing proceeds from your order. All the other sub-orders of the DCA are done virtually and cost the Nouns DAO no gas fees. Virtual orders are only written on-chain when the next user interacts with the protocol (generally an arbitrageur).
• Arbitrageurs: as seen on other AMMs like Uniswap, arbitrageurs are important to keep the price of the assets in line with external venues. Arbitrageurs are critical for TWAMMs because trade sizes are significantly larger and last for multiple blocks. Therefore we have built and partnered with dedicated arbitrageurs (BloXRoute) to ensure pools are arbitraged frequently to ensure Nouns DAO gets the best swap return.
• Liquidity: there is currently $30k in liquidity in the pools and we expect that to reach between $50-100k in liquidity before the trade executes. TWAMMs are extremely capital efficient given that the trades are split across multiple blocks and arbitrageurs are consistently bringing new liquidity back to the system to correct price deviations — simulation details below illustrate these efficiencies and swap performance.

Advantages

• Low fees: wstETH/rETH is a stable pair and long-term swappers pay a one-time 0.03% fee.
• Fully on-chain: zero dependencies on off-chain services, oracles, compute etc.
• Flexible: issue, withdraw, and cancel orders with ease.
  • Example new order: sell 7_500 stETH for rETH in 100_000 blocks ~roughly 2 weeks
  • Helpful periphery contract to issue orders
• Full control of orders and assets: non-custodial, cancellable, and withdraw proceeds at any time.
• Withdraw multiple times: users can withdraw once at the end, or every set number of blocks – they just pay gas fees.
• DCA over 1000’s of blocks gas-free: Nouns DAO would only pay gas for starting and ending sub orders; arbitrageurs pay for placing suborders on-chain.