# **GOV Proposal (v2): Treasury Loan for PEN Liquidity**

*Last updated: 16 October 2025*

***

## **1 | Background**

The Pendulum community has repeatedly highlighted insufficient PEN liquidity on decentralised exchanges (DEXes), which hampers trading efficiency and user access. Trusted community members have therefore volunteered to assume a liquidity-provider (LP) role on selected DEXes (e.g. an isolated pool on **Hydration**).

## **2 | Objective**

Provide a time-limited, collateral-free loan from the Pendulum Treasury to bootstrap deeper PEN liquidity while keeping both the Treasury and external LPers economically whole.

## **3 | Loan Parameters (unchanged unless noted)**

| &#xA;Parameter&#xA; | &#xA;Value&#xA;                                                                        |
| ------------------- | -------------------------------------------------------------------------------------- |
| &#xA;Loan size&#xA; | &#xA;5,000,000 PEN&#xA;                                                                |
| &#xA;Recipient&#xA; | &#xA;Council-approved multisig (address to be included in the on-chain motion)&#xA;    |
| &#xA;Term&#xA;      | &#xA;24 months (from execution)&#xA;                                                   |
| &#xA;Custody&#xA;   | &#xA;Multisig controlled by 2/3 council signatories to ensure community oversight&#xA; |

### 3.1 Repayment Terms — **updated**

1. **No fixed USD buy‑back** — the *“$0.01 per PEN”* option has been removed.
2. **LP‑leg settlement:**
   * Upon exit (or periodically at Council discretion) the LP tokens will be redeemed.
   * **Treasury receives the PEN leg** of the position.
   * **External LPers retain the non‑PEN leg** (e.g. DOT, ETH) that they originally supplied.
   * Gains and losses from price movements are therefore **symmetrically shared** between the two parties.

**Illustration** (simplified USD example):

**Day 0:** Treasury lends **5 000 000 PEN** worth **$500 000** (assume 1 PEN \= $0.10). Community LPers supply **$500 000 USDC**. Pool is now 50 % PEN / 50 % USDC.- **Scenario A — PEN price doubles** to $0.20. Constant‑product AMMs re‑balance, so the pool now holds **≈3.54 M PEN** + **≈$708 000 USDC** (same total value).

* Treasury withdraws the **PEN leg** (≈3.54 M PEN ≈ $708 000).
* LPers receive the **USDC leg** ($708 000).
* **Scenario B — PEN price halves** to $0.05. The pool re‑balances to **≈7.07 M PEN** + **≈$353 000 USDC**.
  * Treasury withdraws the PEN; LPers get the USDC — losses shared symmetrically.
* In both cases, price risk and impermanent loss are split 50 ∶ 50 between Treasury and LPers, matching their original contributions.

The Council will **track, balance and report** the exact amounts used for LPing via the multisig. While the full 5 M PEN *may* not be deployed at all times, the Council will strive to maximise its utilisation subject to market conditions.

## 4 | Community Benefits

* **Deeper liquidity:** Higher pooled liquidity reduces slippage and spreads.
* **Treasury risk mitigation:** The LP‑leg settlement ensures the Treasury recovers the PEN value it supplied, irrespective of price swings.
* **Transparent monitoring:** Multisig control and quarterly reporting keep everyone honest (and let governance sleep at night).

## 5 | Risks & Mitigations

| Risk                | Mitigation                                                                   |
| ------------------- | ---------------------------------------------------------------------------- |
| Impermanent loss    | Even split of gains/losses between Treasury and LPers.                       |
| Partial utilisation | Council mandated to aim for maximum deployment and to report on utilisation. |
| Operational errors  | Multisig with multiple Council signatories; on‑chain transparency.           |

## 6 | Next Steps

1. Voting on the Gov proposal
2. Transfer of funds
3. adding liquidity to DEXes

# **Draft GOV Proposal (v2): Treasury Loan for PEN Liquidity**

*Last updated: 15 October 2025*

***

## **1 | Background**

The Pendulum community has repeatedly highlighted insufficient PEN liquidity on decentralised exchanges (DEXes), which hampers trading efficiency and user access. Trusted community members have therefore volunteered to assume a liquidity-provider (LP) role on selected DEXes (e.g. an isolated pool on **Hydration**).

## **2 | Objective**

Provide a time-limited, collateral-free loan from the Pendulum Treasury to bootstrap deeper PEN liquidity while keeping both the Treasury and external LPers economically whole.

## **3 | Loan Parameters (unchanged unless noted)**

| &#xA;Parameter&#xA; | &#xA;Value&#xA;                                                                        |
| ------------------- | -------------------------------------------------------------------------------------- |
| &#xA;Loan size&#xA; | &#xA;5,000,000 PEN&#xA;                                                                |
| &#xA;Recipient&#xA; | &#xA;Council-approved multisig (address to be included in the on-chain motion)&#xA;    |
| &#xA;Term&#xA;      | &#xA;24 months (from execution)&#xA;                                                   |
| &#xA;Custody&#xA;   | &#xA;Multisig controlled by 2/3 council signatories to ensure community oversight&#xA; |

### 3.1 Repayment Terms — **updated**

1. **No fixed USD buy‑back** — the *“$0.01 per PEN”* option has been removed.
2. **LP‑leg settlement:**
   * Upon exit (or periodically at Council discretion) the LP tokens will be redeemed.
   * **Treasury receives the PEN leg** of the position.
   * **External LPers retain the non‑PEN leg** (e.g. DOT, ETH) that they originally supplied.
   * Gains and losses from price movements are therefore **symmetrically shared** between the two parties.

**Illustration** (simplified USD example):

**Day 0:** Treasury lends **5 000 000 PEN** worth **$500 000** (assume 1 PEN \= $0.10). Community LPers supply **$500 000 USDC**. Pool is now 50 % PEN / 50 % USDC.- **Scenario A — PEN price doubles** to $0.20. Constant‑product AMMs re‑balance, so the pool now holds **≈3.54 M PEN** + **≈$708 000 USDC** (same total value).

* Treasury withdraws the **PEN leg** (≈3.54 M PEN ≈ $708 000).
* LPers receive the **USDC leg** ($708 000).
* **Scenario B — PEN price halves** to $0.05. The pool re‑balances to **≈7.07 M PEN** + **≈$353 000 USDC**.
  * Treasury withdraws the PEN; LPers get the USDC — losses shared symmetrically.
* In both cases, price risk and impermanent loss are split 50 ∶ 50 between Treasury and LPers, matching their original contributions.

The Council will **track, balance and report** the exact amounts used for LPing via the multisig. While the full 5 M PEN *may* not be deployed at all times, the Council will strive to maximise its utilisation subject to market conditions.

## 4 | Community Benefits

* **Deeper liquidity:** Higher pooled liquidity reduces slippage and spreads.
* **Treasury risk mitigation:** The LP‑leg settlement ensures the Treasury recovers the PEN value it supplied, irrespective of price swings.
* **Transparent monitoring:** Multisig control and quarterly reporting keep everyone honest (and let governance sleep at night).

## 5 | Risks & Mitigations

| Risk                | Mitigation                                                                   |
| ------------------- | ---------------------------------------------------------------------------- |
| Impermanent loss    | Even split of gains/losses between Treasury and LPers.                       |
| Partial utilisation | Council mandated to aim for maximum deployment and to report on utilisation. |
| Operational errors  | Multisig with multiple Council signatories; on‑chain transparency.           |

## 6 | Next Steps

1. Gather community feedback on this draft (hint: *this is the part where **you** yell at us* 🚀).
2. Post final gov proposal (we are on it)

***

Loan of 5,000,000 PEN to Support LP Positions on Hydration DEX - Feedback Welcome

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#5 Loan of 5,000,000 PEN to Support LP Positions on Hydration DEX - Feedback Welcome

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