OIP-76: Create Inverse Bond Policy Lever

Sadinoel

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.

Platinum_Duck

Yeah. Doesn't seem like a bad thing at all.

Seems like market making, where value gets accrued to ohm.

Wukong

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.

Baitfish

IMO the fear of treasury shrinking may be unfounded.

As the defi currency, we are only as valuable as the ecohnomy. When it shrinks, the size of ohm must shrink with it. As long as the backing per ohm increasing, all should be fine.

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.

aazaad

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.

Sadinoel

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.

aazaad https://olympusdao.finance

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 …also, I think giving investors a "potential" escape hatch gives them more confidence to take a larger risk - so on a psychological level, KNOWING that there is, in essence, an insurance policy on their OHM should be beneficial for the protocol in the long-term

Dreamboat

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.

abipup

abipup

We should use recently price fall down testing this idea, and see what happen.

We have to remember we still survive because we have strong and stable treasury.

Now that ‘Inverse Bond’ is being proposed and likely goes through, the holy cow question of ‘ohm has RFV backed bt treasury, but treasury is not redeemable’ will be squashed to death. My question is , wont this publicly know floor price of Ohm encourage degens to take Leverage and do (9,9) with full confidence than ever before? What could be the consequences of this?

BowTiedTigris

Fully agree…locked staking that correctly incentivises long-term behaviour is missing from the ecosystem. The 3,3 meme could use a policy lever that explicitly rewards 3,3 behaviour, with long-term staking contracts quantitatively superior to unlocked sOHM.

The proposal that I had in General was to have an OTC mechanism to avoid the large holder exit through market sell… the Inverse Bond is a good solution however we have to set some rules, some are mentioned in the OP but I see one is missing:

1. The idea is not to allow everyone to sell and exit, only larger bags that would affect the liquidity and perhaps this number can increase in relation to the existing liquidity… for example the inverse bond has to be at least 5,000 ohm transaction.. you cannot inverse bond less than that .. if you have less just market sell for example… and later when Ohm has deeper liquidity this number can go up as a percentage?
2. We should never ever have a declining RFV total value .. so the blackhole of stables should never change... therefore, no one can inverse bond and take stables out of treasury only risk-on assets ..
3. We should never allow partner tokens to be taken out (CVX, ALCX, etc.) as that will also harm their PA since the person inverse bonding CVX or ALCX will likely dump it immediately in a market sell ..
4. This leaves us with ONLY a few select assets that we can inverse bond .. TBH I think the ONLY asset that we should allow to be Inverse Bonded is wETH and possibly wBTC .. that is it… these two have deep liquidity and during a downtrend when their price is declining letting them out of treasury could be desirable to tilt the treasury towards more stables less volatile assets …

i think is a great idea to keep the bond program alive during down trend other wise customers who rely on this passive income stream will go somwhere else a may not return