OIP-76: Create Inverse Bond Policy Lever

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)

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

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.

In general, I am in favor of this proposal. I wrote the following note to share my thought process about this proposal and share them with ohmies.

Things need clarification.

• Which assets will be used for the inverse bonding? Stablecoin or altercoin? From the perspective of OHM's goal to be the reserved currency of Defi, it makes sense to use stablecoin for the bonding. Given coins are highly correlated right now, when the OHM's price is below the backing price, other altercoin's price are usually tanked as well. If we use stablecoin for the bonding, it's good for users in the downward market, and it will be good for Ohmies from long-term perspective.
• What is criteria to determine the scale or amount of treasury assets to be deployed in this market lever?
• What are the impacts to the regular bonding products?

Pros of the Proposal

• Take away sell pressure and encourage buying activity in the open market, stabilize price and increase investor and partner's confidence.
• Reduce ohms in circulation, and increase backing per ohm.

Cons of the Proposal

• Encourage arbitrage activities.

An interesting observation.

• For a regular "currency", when the market is getting hot, the central bank usually reduce the amount of money supply, and increase it when market is on a downward trend. It looks like, as a reserved currency for Defi, we are doing the exactly the opposite. Can someone explain this?

Wukong Regarding your observation :

Nations print money in economic downturns (Quantative Easing [QE]) to fund recover programmes and stimulus packages. Olympus doesn't have the capacity to bail out the whole DeFi ecosystem and is still in its bootstrapping stage.
Therefore, Olympus is focused on protecting itself, so it can continue to bootstrap once markets stabilise.

However, programmes such as Thecosomata (allowing REDACTED CARTEL to use incur debt to borrow OHM) function much like stimulus deals. Once/if Olympus can become an e.g. top 10 TVL project, it'll be able to use it's reserves to effectively function as a reserve currency that arbitrary projects would choose to submit themselves too.

See this as a minor hiccup on the road to success. If Olympus can grow it's treasury in a sideways market, it WILL be the reserve asset of DeFi come next bull run

cryptok1ng backing is useless if it can't be used to "back" price

@abipup I love you what a great idea.

Ditto to the general sentiment here that this is yet another strong policy OIP to help stabilize things when we dance around backing.

Numerous people here are bringing up the topic of what assets a bonder is going to receive. Please think carefully about this. One practical viewpoint to consider: every potential bonder is going to come to the table with his/her own biases - what is a bonder’s thought process going to be if they happen to not like XYZ asset Policy is offering up?

For example (using the first token in alphabetical order) what if Policy decides to offer up ALCX, and a bonder doesn’t like ALCX, or maybe the bonder loves ALCX but already has a bunch of it. They are going to be looking at this mechanism from the viewpoint of immediately liquidating the ALCX, which is going to effect the dynamic of the discount we end up seeing.

Policy “justification” / Policy communication / Policy analysis / Policy reporting should be a function of the premium over backing. In times like these, where, to put it bluntly, the market/community is skeptical of Policy, extra work should be done to convey your decisions. Please consider providing the community guidance on why a given asset is chosen or not chosen; bonders (and our partners) obv are going to prefer DAI over any other asset.

Case in point: if inverse bonds naturally will increase runway, can DAI be given out causing a net-zero runway gain? At least selling pressure would be reduced. Or maybe this wouldn’t work out due to some advanced analysis. I know it’s a lot of work producing these types of reports, but the transparency is key in sensitive times like these.

Thanks for all the work you and the Policy team are doing!