• Proposal

  • OIP-76: Create Inverse Bond Policy Lever

  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?

              daRK Inverse bonds as an insurance cover that users can pay a premium which is captured by the protocol as a service fee to be covered by should the backing fall to a certain range is a great idea - the pricing needs to be as non-intrusive as possible (auto-charged during rebases) and I also think it should be weighted based on wallet balance so the premium is captured up front and drops in price as your balance grows…(or maybe is a flat fee across the board regardless of wallet balance but gets more expensive as you near backing and cheaper as OHM builds distance to it)

                  Sadinoel inverse bonds let users get a premium for their OHM - they profit off the transaction, much like how they profit off standard bonds.

                      daRK Gm ser

                      1. Capacity is based on market conditions and the need to manage backing
                      2. Arbitrage opens up as bond premium increases
                      3. I've been thinking of using the concept of "ohmptions" like what Max from FiatDAO proposed in that partnership proposal, for inverse bonds too. It's different than what you've laid our here, but optionality is good imo. Can you clarify in your example what price would be paid out to the options holders, should they decide to exercise?
                      4. Treasury buying OHM from itself is a direct price manipulation (not necessarily a bad thing long term, to have as a tool). It's more capital efficient (no premium, full price impact of the buy is seen) but reduces liquidity as OHM is pulled from the pool during the reweight. Inverse bonds do not directly manipulate price, but can open up arb opportunity to bring price up. IB's also don't reduce liquidity, which is nice.

                        cryptok1ng there is plenty of opportunity for "smart money" to come in and buy OHM back up to at least backing. In cases of extreme sell pressure below backing where that "smart money" is overpowered, inverse bonds allow the market to blow off steam without impacting price.

                        To your other question about how this fits into becoming a reserve currency. For one, the reason I mentioned above contributes to the "trusted" part of "trusted backed reserve currency," where participants in the economy can trust that the treasury will be used as intended to bolster the economy in times when that's needed. More trust = more use cases available.

                        Furthermore, as stated in the proposal, it's critical to for a backed currency to maintain backing in every possible market condition. Standard bonds can't do that in conditions where market price is below backing. So, this tool was developed in part to cover these scenarios.

                            abipup I get that…but the treasury gets depleted with each sell, right?

                            Why is this good?

                            Also, does it effect runway?

                                abipup backing IS maintained…as long as there is $1 RFV for every OHM in existence..

                                  Sadinoel backing per OHM is maintained, buy pressure is generated / sell pressure mitigated, propping the economy up as a signal to partners…

                                  It does impact runway slightly if RFV tokens are sold.

                                    One thing to note is that we have assets in the treasury that we promised to never sell, i.e. quote from the JonesDAO launch post:

                                    OlympusDAO granted 3.3% of the supply if partnership passes governance, and will hold tokens in perpetuity

                                    Source: https://jonesdao.substack.com/p/jonesdao-token-sale

                                    I’m sure other treasury assets may fall under the same category. IMO we should not break that promise and only consider assets for inverse bonds that the treasury acquired through means where there was no implicit or explicit promise of “never sell”

                                    what an awesome idea!!!

                                    This type of innovative incentive design is why OHM will outlast this and many more bear markets to come.