• Proposal

  • OIP-76: Create Inverse Bond Policy Lever

While I love the idea of an inverse bond, I think we need to establish where will the inversely bonded OHM go to? Will it go to the POL or be distributed to stakers as rebases or just burnt off? The latter two option can help reduce dilution and reduce the rate at which we mint.

Another thing we have to determine is when will this feature be available? What are the market conditions that we need to satisfy to have it? If we assume that it is always there, I think it will just end up as a form of deterrence instead and never really see utility because people will know there'll be such a thing and the price where OHM trades at never really dips below backed price. An alternate possibility is that when OHM is trading very near to the backed value, whales or the masses that wants out can sell and tank the price then use this inverse bond with their remaining balance to take advantage of the discount which can hurt the RFV of the treasury.

    Thank you, this is a good innovation because its more structural than crude buybacks, and avoids having the DAO conduct open marker ops directly, which is important for reducing arbitrariness. Gives the market some properly defined expectations to respond to.

    The APY flywheel alone is no longer as psychologically reassuring as investor protection, given the ongoing APY reduction. This would be good.

    One query - Currently when a bond is sold, OHM is accrued to the DAO. How would this work in the case of inverse bonds?

    I agree with everything. I am supporting you from Japan.

    I think worth specifying in a little more detail or precisely when the DAO can initiate these, to provide clarity and remove all levels of vagueness and questions

    So the ohm is not burned, just sent to the treasury without being staked. Should we consider burn?

      Interesting proposal, but a few points come to mind:

      • How long will be the vesting period for the inverse bonds?

      • How much of the inverse bonds will be offered? In case of a sold out bond, they cause more psychologic sell pressure for ohm.

      • The pricing of inverse bonds should be always below backing per ohm to ensure a net positive outcome for the protocol. But with the backing consists of non-stables, it can fluctuate below the already offered bond price in the volatile conditions. This should be carefully taking care of for in the bond mechanism.

      • Direct bonds price can fall below backing and with the existence of inverse bonds, more arbitrage opportunities will be created. It’s not necessarily a bad thing but shifts the focus more away from the holding incentives and (3,3).

      Thanks

      Instinct is I hate the idea, it’s reverse psyops against ohm. How can this be part of the positive flywheel?

        abipup I think the type of inverse bonds that are authorized need to be agreed upon at the outset. I don't think we want to be selling just any treasury asset. Probably just the stables for this

          100% For it. Give the market time to see intrinsic value go up for them to take into account growth into the price, you know the drill…

          1. Can the policy team advise on the capacity of the new inverse bonds? I don't know if this will do what we want it to if the capacity is far below the amount of new tokens issued each rebase.
          2. I have read on discord that turning this on and off will be a manual process? As we have had some issues with bonds being exploited in the past, can the team give us some reassurance that the inverse bond contracts will be audited or better yet automated, to make sure they are exploit free?

          Thanks

          Great idea!

          Dropping below INTRINSIC value is worst case scenario - dropping below "Backing per OHM" has been developed as a sell signal by forks, when in fact (in my mind, happy to be corrected) it's just an indicator as to how well the treasury is doing at amassing value (it fluctuates due to market conditions -- anon, does "Backing per OHM" also include risk-on assets such as ETH or only RFV stables? If risk-on, then wild price swings makes sense, but I'm not sure?)

          We only need to hold the equal amount of risk free units to the total supply of OHM units, to be able to burn if price drops below intrinsic value.

          Inverse bonds, creates an internal exchange market between sellers and the treasury and prevents them from market selling on AMM's which creates more sell pressure in the wider market and pushes OHM price down towards intrinsic value price.

          What happens to runway with Inverse bonds - does it drop?

          What happens if a whale forces price down by market selling - does this action push down "Backing per OHM" or is that only pushed down by wider market conditions on treasury owned assets?

          If its not and a whale IS able to manipulate "Backing per OHM" by market selling, what prevents them from using this tactic to drain treasury?

            bone its necessary to counter the psycops created by OHM forks that "Backing per OHM" is a metric to watch to determine whether to sell.

              In favour as something needs to change. One other question though is will this have protections against the bots? if there is a flaw in the framework believe me they will find it. they are a real problem around buying just before rebase and then selling seconds after distribution. Given that "arbitrage opportunities" are mentioned by OP could bots just sell when inverse bonding carries a premium such as the 5% example. with enough volume this may push normal bonds into positive ROI and the bot just buys back. two bites of the cherry potentially at 5% + 5% = 10% each round.

              interested in the protections here and also even if this is necessarily a bad thing provided treasury benefits.

                Questions :

                1. how would policy decide which assets to sell first? I guess stables won't be touched
                2. has this been war gamed sufficiently ?e.g. if treasury drops too much would Olympus become 'too small to matter' and and as treasury decreases income decreases

                I'm against this. What does this do to take us towards our ultimate goal of becoming the reserve currency?? This just makes ohm more of a trade rather than a currency

                Nuggets the burn idea would be good since it simultaneously helps bring market price back to the backing value

                  This is a bad idea. Period. If you burn it, than you are intentionally shrinking the treasury. Why not just let the market right itself when people realize there is value because it is trading below backing.

                    This is great idea. some thoughts please.

                    1. What will be the capacity of these bonds? Can the system be overwhelmed if used during sharp market pullback?
                    2. Will there be an arbitrage as bond price is > LP market price?
                    3. Isn't it better to: 1) issue options to purchase inverse bonds when Ohm price is well above backing; 2) allow users to exercise those options and purchase the bonds when Ohm is below backing? Allows protocol to generate some revenue and works as an insurance policy. For example: Ohm price $700. Annual premium to participate in inverse bond pool (made available when Ohm price is below backing) say 2%; When Ohm trades below backing open the inverse bond pool and allow for proportional exit based on pool size? Does this make sense? I wanted to float the thought that the system may work better if inverse bonds are treated as insurance cover.
                    4. Inverse bonds vs buying of Ohm directly from treasury when below backing. what are the pros and cons?