[Asset Hubs] Polkadot and Kusama treasuries fund DOT/KSM pools on Asset Hubs

[acatangiu]

DOT/KSM pools on Polkadot and Kusama Asset Hubs have very low liquidity.

We should use the Polkadot and Kusama treasuries to bootstrap this liquidity, but we have a chicken-n-egg problem: neither Treasury has access to liquidity of the other's token to be able to add DOT/KSM pair liquidity atomically.

Possible path forward:

1. We get KSM liquidity in Hydration Omnipool (or some other DEX) over the bridge: Kusama treasury funds one or more Polkadot DEXs with KSM liquidity polkadot-fellows/runtimes#514,
2. Polkadot Treasury uses Hydration (or other ecosystem DEX) to swap some DOT for KSM and provides DOT/KSM pair liquidity to Polkadot Asset Hub,
3. Kusama (or even Polkadot) Treasury uses Hydration (or other DEX) to get DOT/KSM and provide the pair liquidity over the bridge to Kusama Asset Hub.

Once we bootstrap these pairs, ecosystem arbitrage should naturally keep the pools alive and funded/balanced.

[xlc]

Isn't Kusama treasury already owns some DOT (allocated by W3F)? So it can just add both KSM and DOT?

[acatangiu]

I’m not aware of this. Where are the DOT owned by Kusama Treasury (which chain+account)? How does it access/control them?

@joepetrowski you might know more?

[xlc]

I can't find the source anymore but when Kusama launched, W3F promised that 1% of the initial supply of DOT will be reserved for Kusama. There is also a later post somewhere stated that those DOT will be transferred to Kusama treasury after P<>K bridge is alive. Maybe W3F people knows more about the details.
Not sure if it is transferred yet but this seems to be a perfect use case for those assets.

[bkchr]

W3F promised that 1% of the initial supply of DOT will be reserved for Kusama.

Yeah that is right. I reached out to them to try to find out where they are.

[GlobalSG]

A must have thing!
KSM and DOT can be more resilient and powerful together.
It can give the example of scaling with multiple relay chains onboard
Hope Web3F can keep the promise regarding DOT><KSM liquidity pool.

[green-jay]

We're planning to propose listing KSM in the Omnipool asap but before we need to make sure the proposal will be constructed and executed correctly, so having the P<>K bridge support in Chopsticks would be helpful.

[bkchr]

Something I thought about, could the Polkadot & Kusama governance not just "gift" tokens for each side of the bridge? So, Polkadot governance is sending 100000DOT to Kusama and Kusama is sending KSM worth the same amount to Polkadot? Then each side can open the pools?

[acatangiu]

Something I thought about, could the Polkadot & Kusama governance not just "gift" tokens for each side of the bridge? So, Polkadot governance is sending 100000DOT to Kusama and Kusama is sending KSM worth the same amount to Polkadot? Then each side can open the pools?

Yes, they could. We need a temporary recipient though to be able to do these asynchronously - let's take Polkadot side as example:

• Kusama treasury sends 20k$ worth of KSM to account X on Polkadot AH (over bridge),
• Polkadot treasury sends 20k$ worth of DOT to account X on Polkadot AH,
• Account X injects 40k$ worth of DOT/KSM liquidity on Polkadot AH DOT/KSM pool.

The question is what is best X we can use? should we use Polkadot Treasury SA on AH? or root? or some other governance controlled account?

If we use Polkadot Treasury SA on AH, do we have a way to instruct that account to put up the liquidity (Transact on AH)? Or do we do it through Root execute_as()?

(the equivalent can be then done for Kusama, with both treasuries paying again 20k$ worth of DOT/KSM each)

[olanod]

The "gift" is a good an simple thing to do but it would also be good if W3F gives a statement about the 1M DOT allocation to Kusama. The topic has been brought up several times including governance but W3F has remained silent about it.

EDIT: A related topic is this WFC looking for ways to add one sided liquidity in asset conversion pallet, a suggested implementation is to have the pallet act as an escrow account that adds liquidity to the pool once there's a matching amount of the other token, this can simplify the way Kusama and Polkadot contribute liquidity to their KSM/DOT DOT/KSM pools.

[bkchr]

The question is what is best X we can use? should we use Polkadot Treasury SA on AH? or root? or some other governance controlled account?

Yeah the Polkadot treasury account sounds about right. The proposal that transfers the funds, can also setup on its side a scheduled call that will then move the funds to the pool in X days. So, we only need one proposal on each side.