I am against losing treasury assets at all costs - but I think this ammendment to OIP-76 by @ProofofSteveGM is great and should be considered: https://forum.olympusdao.finance/d/1022-a-theoretical-example-for-oip-76-implementation
OIP-76: Create Inverse Bond Policy Lever
Also, to be clear, I think we should stick to the original "buybacks occur if we drop below intrinsic RFV" because Inverse Bonds currently feels too reactive to current market conditions and increases the surface area of any potential attacks on the treasury.
However, I understand some members have lower risk tolerance than others so a solution to offset their current pain is important but NOT to the long-term health of the protocol.
great idea!
Agreed. Inverse bonds potentially allow for a negative spiral mechanic - draining of the treasury. Of course this can be stopped and mitigated with bond budgets etc, but still; should be used carefully. It does not relieve sell pressure, but introduces incentives to sell.
Potentially still a good addition to the system, but I think we're a bit premature for it with the current repricing / revaluation that's on-going.
Great questions. These sparked some ideas:
What happens to runway with Inverse bonds - does it drop?
If we have an token that's constantly increasing in purchasing power, perhaps we can even do away with staking. Why 3,3 when you can just use an ever increasing value ohm?
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?
I think the idea of a speculative premium (above backing) vanishes. Ohm becomes pegged to its backing, and the backing is ever increasing.
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?
I don't think they can manipulate it. The backing can only increase. The total size of the treasury may decrease. Not sure if that's a problem.
Yeah. Doesn't seem like a bad thing at all.
Seems like market making, where value gets accrued to ohm.
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?
Disclaimer: Not sure I am entirely accurate here. Thinking out aloud.
In a downturn, increasing money supply enables the state to sustain demand (through stimulus) and maintain price stability. Most times this prevents the structural issues (in the economy) from self-correcting, and inflates and delays the issues for the next cycle.
But what it also achieves is prevention of panic.
As a central bank of the new world order, we shouldn't have a role in manipulating demand (through stimulus). Instead we can just focus on being the safe haven asset.
When panic happens, Ohm will just absorb it and the economic premium increases. Which can then in due course oscillate back into the ecohnomy, as the panic subsides.
Inverse bonds seem genius.
Also,
Cons of the Proposal
- Encourage arbitrage activities.
Doesn't seem like a con. Arbitrages will ensure things stay efficient.
Mark11 Zeus and his giga brain! Thanks for the reply, happy to know my train of thought is on the right track at least haha.
If you don't have 3,3 you don't have inflation control;
Which means you don't have bond issuance;
Which means you don't have treasury assets;
Which means you don't have expanding OHM supply;
Which means you don't have expanding treasury supply;
Which means you don't have expanding value;
Which means you don't have OHM buy pressure;
Which means you drop below RFV intrinsic value;
Which means treasury burns away trying to maintain above RFV;
Which means OHM dies.
If you don't have 3,3 you don't have inflation control;
Which means you don't have bond issuance;
I am perhaps missing the correlation. Can you guide me to some learning resources to the right mental model?
My current understanding is: As long as there is (positive or negative) delta between market price and backing; (direct or inverse) bonds can be issued. Each bond increases backing.
This proposal does not relieve sell pressure. It actually increases sell pressure. By allowing "an orderly exit", OIP-76 actually encourages exit. This is a free get away pass to the paper handed. Please, Zeus, needs to weigh in on this. The majority of comments are in favor which means some people are just waiting to drain the treasury and dump at "backing price". Please understand that this proposal puts treasury assets at risk. It is negatively accretive in intent. If you are interested in the long term health of Olympus you will vote no and tell everyone else to vote no. Strongly opposed!
Sadinoel gets it. Providing exit liquidity to butt hurt investors who are in panic mode is detrimental to the long term health of Olympus. We need to build the treasury, not shrink it so some people can extract an investment they have lost faith in. Vote No on OIP-76.
Dreamboat I feel you ser, this was my worry - but apparently its being done in a way that shouldn't impact treasury…Still wrapping my smol brain around it but I trust the policy team…just still in the process of verifying…someone like @Asfi or @sh4d0w would be able to explain better than I…or Father @Zeus
- Edited
Demand for an asset is driven by perceived value, not money back guarantees. OHM is currently selling at about 67 bucks. That's your downside risk. Your upside is infinite. If that risk benefit ratio doesn't sound appealing then the buyer should look elsewhere. What other major crypto assets feel the need to offer a partial refund in the form of treasury subsidized exit liquidity? If I buy Tesla stock and the price drops to one hundred do I get a free car? No. People just need to look at the real earnings accruing to the Olympus protocol… the expanding partnerships. We need to market the bull case to a knowledgable audience. Build it and buyers will come.
I agree with dreamboat. There is a huge risk on this proposal. If there is a "big whale" who wants to sell he always has the problem to find buyers in the market. Now he can sell his assets (ohms) for a "fixed" price and at maturity he get's his money from …… the treasury. Normally I would suggest a negative APY to solve the pressure. But then the problem is nobody wants to invest by a negative APY. The risk is that Olympus will die with this proposal and the people who have a lot of OHM's will kill the treasury true inverse bonding, because there is cash to pay out. And what will be the price of the inverse bond in this volatile market? Just when the price is below 1 Ohm = < 1 Dollar then is this maybe a good proposal or a negative APY.