• Proposal
  • OIP-94B Inverse Bond Framework Approval

Summary

Since the first inverse bond Olympus DAO has iterated on the framework by which new bond markets are created. This proposal seeks community approval of that framework. This framework will continue to be used to create new bond markets for the remaining duration of OIP-94A.

This proposal seeks approval to repurpose the purchased OHM through Inverse Bonds to be used for lending, credit, DAO swaps with partners and automatic market operations (AMO) in general. While the first approach was to burn, and when needed re-mint, after speaking with counsel and iterating further we adapted the model and will be keeping the tokens in the DAOs balance sheet.

Definitions

Net Market Activity: Net of the dollar value of all buys and sells within protocol owned liquidity

Organic Flows: Difference between net market activity and bonds sold during the same period. This should allude to market activity beyond what may have been influenced by bond markets. Ex: -$100k Net market activity (more sold than purchased in LP) - $150k inverse bonds sold = -$250k organic flow

Organic Flows 7 day EMA: A 7 day exponential moving average of organic flows.

Liquid Backing: Value of those assets in the treasury that can be immediately liquidated, if required.

Floating Supply: Quantity of outstanding OHM not owned by the protocol.

Liquid Backing per Floating Supply: Liquid Backing / Floating Supply

Discount to Liquid Backing: The % difference between Ohm’s market price and the Liquid Backing per Floating Supply.

Market Configuration

Calculations for new bond markets will be prepared on Wednesdays and markets closed and created on Thursdays. Markets will be created with the following parameters.

  • Market duration:

    • Thursday to the following Friday (expected to be closed on Thursday. Extra day is for a buffer)
    • Intra-week bond market creations that are not 1 day markets should end at the same time as existing markets
  • BCV Tuning: Never

  • Asset: DAI

  • Deposit Interval and number of markets to create

    • Deposit interval is fixed at 10 hours

    • When total capacity for all markets is less than $300k then 1 market should be created

    • When total capacity for all markets is greater than $300k then 2 markets should be created. The first market's capacity should be $150k. The second market's capacity should equal the remaining capacity.

How capacity is determined

The Inverse Bond framework utilizes the current market discount to liquid backing when sizing capacity for new bond markets. There are three scenarios which determine how new bond market capacities should be calculated.

  • Discount to liquid backing ≤ 10% or above backing and at or below 120-moving average

    • Bond capacity is equal to the amount of spending required per day to reach the current 120-day moving average over 30 days or the number of days until the official Ranged Bound Stability (RBS) launch.
  • Discount to liquid backing >10% and ≤25% and at or below 120-moving average

    • Bond capacity is equal to the amount of $DAI required per day to reach the current 120-day moving average over 30 days or the number of days until official RBS launch - Organic Flows 7 day EMA.

    • TLDR: $DAI required - Organic Flows 7 day EMA

    • Capacity should be limited to a maximum of 2x the amount of spending required per day to reach the current 120-day moving average.

    • Example:

    • On June 1, the 120-day moving average was $34.3 requiring an expenditure of $8.25m over 54 days left to reach it, $152.5k per day.

    • On June 1, Organic Flows 7 day EMA was -$190k per day.

    • To reach target net market activity, the organic outflow would need to be counteracted along with an additional $152.5k

    • Total capacity calculated $152.5k - -$190k = $342.5k, however this is greater than the 2x maximum of $305k. New total market capacity will be $305k per day.

  • Discount to liquid backing >25% and at or below 120-moving average

    • A one day bond market should be added, increasing capacity by the $DAI amount required to get back to a liquid backing discount of ≤25% - Organic Flows 7 day EMA.

    • TLDR: $DAI required to reach discount - Organic Flows 7 day EMA

    • Example:

    • Liquid backing per floating Ohm is $14.35. A discount of 25% is $10.76. Current Ohm market price is $10, a 30% discount.

    • Realizing a discount ≤25% would require at least $1.1m DAI added to XYK pools, given current liquidity of $63m

    • Organic Flows 7 day EMA is currently -$567k

    • New 1 day market capacity: $1.1m - -$567k = $1.67m

  • Calculated bond market capacity changes must be greater than a $30k difference to warrant re-issuing markets.

When are intra-week Capacity Changes Considered?

Bond market capacities are calculated weekly. However, there are instances where a change in capacity intra-week may be required.

  • The discount to liquid backing exceeds 25%: in this case a 1 day bond market that increases capacity is required

  • Existing bond markets run out of capacity early

  • Organic Flows 7 day EMA at time of launch vs now have diverged by more than +/- $300k. At this time new bond market(s) with updated capacity will be launched

    • Example: Day of market launch the organic flow 7 day EMA is -$500k. Two days later the outflow increases to -$800k.

Polling Period

The polling period begins now and will end on Friday, September 16th. Afterwards, this OIP will be added to Snapshot for a final vote.

Approve the framework?

This poll has ended.

"Value of those assets in the treasury that can be immediately, if required."

Can be immediately what? Liquidated?

    Why to keep the tokens in the DAOs balance sheet? There is already a lot of $OHM in the DAO wallet that is not being used. "After speaking with counsel and…" can you share your thoughts? It does not seem that there is any use for more$ OHM in the DAO wallet.

      Ahem… "after speaking with counsel [council] and iterating further we adapted the model and [propose to keep] will be keeping the tokens in the DAOs balance sheet."

        Bravo team. You are doing excellent job during this bear market.

        Suggestion #1: Capacity sizing
        Suggest to determine market capacity not in terms of absolutes but rather relatives (or mix of both). Meaning the capacity proposal says like “$1.67m” currently. But there should be a limit such as “max 0.5% of liquid backing to be offered per week”.

        Suggestion #2: Dashboard
        Suggest to remove the greeting screen on “OHM Backing” on the Olympus Dashboard. This is a depressive greeting. Whether OHM or gOHM – its always gonna be pretty depressive. What IB should help with though is that IB really entices sellers to offload at about 20% premium while advertised as 0.8% discount. This gain for the protocol should be the greeting screen. Meaning a greeting screen such as “Market Value per OHM or gOHM” should trend upwards much easier than “Liquid Backing per OHM”. Thats the essence of IB, and should be visualized as a more optimistic greeting screen; getting peeps to offload at LB/unit while visualizing MV/unit. The larger the true gap between LB (or actually, the effective bond price) and MV the better.

        Suggestion #3: Dashboard
        If you don’t want to do suggestion #2, then remove the half of LP’s still included in liquid backing. This value drops together with OHM price and puts a depressing slant on the liquid backing value despite IB working to increase total backing/unit.

        Suggestion #4: Definitions
        Use easily verifiable denominators.
        “Floating” supply is a furbished or cooked number. It adds “trust” into the valuation process. Not good. Do not fall for temptation to cook data. Use verifiable total supply. It is what it is.
        Same goes for “gOHM supply”, which is a derivative value. Use “OHM supply”.

        Do burn and re-mint-- because it cleans up your house – do not just subjectively reclassify it as “out of circulation” when you can anytime bring it back to circulation. Trustless matters.

        Suggestion #5: Definitions
        Be conservative with the valuation of non-liquid backing assets. And be clear with how the valuation is determined and when/how it is to be revaluated. The “vesting assets” (pKLIMA, pBTRFLY and what not) valuation seems to have been stuck for a while at $32.5m despite the general market tanking.

          Mark11 Legal counsel, not to be confused with DAO council

          zachlight16 Olympus DAO legal counsel advised we not burn the OHM. That OHM will not go to the DAO wallet, it stays in the Treasury and may be used in future features or could be used for RBS walls/cushions.

            JFry4

            I understand. Is there any reason? There is already a lot of OHM in the treasury that is not used. What is the point of adding more and increasing supply that might be sold later? It makes OHM even less attractive than it is now…

            The OHM in the DAO wallet is not the same as Treasury OHM. Repurchased OHM will be held in the Treasury wallet for the protocol to use, whereas the DAO wallet uses OHM mostly for operational expenses.

            bubbidubb Thanks for the suggestions as always. Can you expand on the capacity sizing one? The current model does use relative metrics (% below backing) to determine capacity.

              bubbidubb

              Speaking to Suggestion #2 - There's alignment on this internally as well. Working on adjustments in support of this in a future release of the dashboard. RBS is will largely be the focus but there's a general restructuring happening so we'll be adjust metrics accordingly.

              Thanks for the suggestion!

              Hi All.

              I feel this should be two distinct OIPs.

              1. Approval to keep OHM acquired on treasury balance sheet. We already voted to burn.

              2. A framework for the inverse bond markets.

              On the framework, if the framework and decision is known, what are thoughts on price just hovering around the lower end and dipping below 25% liquid before each market opens. if all market timings known, this could also be possibly used via bots to sell and buy back.

                abipup

                I come from the corner where Preservation of Capital is paramount. Hence I would like to see that the dollar amount of Liquid Backing Held follows a curve similar to the look of:
                f(x) = 1 / x
                where f(x) represents dollar amount of Liquid Backing remaining in Treasury and x represents time
                rather than the proposed capacity sizing that seems to follow the linear type of curve such as
                f(x) = a - b*x

                The proposed capacity sizing seems to enable Liquid Backing to linearly hit 0? Game over.
                A 1/x type of curve should ensure there will always be at least some Liquid Backing left.

                So far we have spent (my understanding) $54m on price prop through IB. 54m USD corresponds to 540 man years of highly skilled 1st world engineering labor. We still have about 2,000 man years remaining in Treasury to reach the vision of a decentralized reserve currency.

                🍻

                abipup

                I come from the corner where Preservation of Capital is paramount. Hence I would like to see that the burn rate of Liquid Backing follows a curve similar to the look of:
                f(x) = 1 / x
                where f(x) represents dollar amount of Liquid Backing remaining in Treasury and x represents time
                rather than the proposed capacity sizing that seems to follow the linear type of curve such as
                f(x) = a - b*x

                The proposed capacity sizing seems to enable Liquid Backing to linearly hit 0? Game over.
                A 1/x type of curve should ensure there will always be at least some Liquid Backing left.

                So far we have spent (my understanding) $54m on price propping through IB. 54m USD corresponds to 540 man years of highly skilled 1st world engineering labor. We still have about 2,000 man years remaining in Treasury to reach the vision of a decentralized reserve currency.

                🍻

                  electo I tend to disagree about making this two OIP's; it's the "final" framework before RBS and I think it should pass or fail as a whole.

                  Not sure how successful that attack vector could be. Bots would need to buy their OHM back eventually in this case, so the fees they'd pay on that would need to be offset both ways. Inverse bond discounts have been routinely below 0.6% so it would not be profitable even if they could manage this logistically.

                  bubbidubb Now there's 2 posts lol forum very good.

                  The issue I see here is that the bonds markets work on a linear timeframe so I'm not sure how we can set capacity to function on an inverse proportional basis, other than to launch a new market every day with massive capacity the first day and decaying over 1/x. If that's the only way it can work then it seems like lots of effort for little gain.

                  That's the functional side, but philosophically, what's the purpose of keeping reserves if they never get used? I personally don't see the benefit of never using your last x OHM.