- Edited
Summary:
Diversify treasury holdings by implementing liquidity bonds with Synthetix sUSD
Background:
Currently, the Olympus treasury primarily holds OHM-DAI liquidity pool tokens. DAI was chosen for the initial integration due to its status as the longest-standing, algorithmic stablecoin. Part of DAI’s stability is derived from its over-collateralization (130-175% for ETH).
Abstract:
Olympus DAO can diversify integrations by accumulating OHM-sUSD liquidity pool tokens on Sushiswap. This would create an additional source of liquidity on Sushiswap and avoid fragmenting liquidity across different protocols. A key synergy for this proposal is that Sushiswap already has the highest liquidity for sUSD-ETH ($11.9M).
Synthetix staking requires users to stake their SNX in order to be compensated with the weekly 1.25% emissions rate. Stakers receive sUSD in return at a collateralization ratio of 500%, which is set high due to SNX’s volatility. Staking rewards are claimed weekly at the same time that the collateralization ratio is maintained. OHM-sUSD bonds can be pitched to the Synthetix community based on the following merits:
• SNX Stakers – gain access to OHM’s high APY in between staking rewards
• Synthetix Protocol – lock up sUSD, which effectively increases protocol collateralization
Motivation:
As several ohmies have pointed out, the Olympus treasury will depreciate long-term if it is based solely on the US dollar. Accumulating sUSD will allow the treasury to diversify its holdings by leveraging zero-slippage trading on Synthetix and its wide range of investments including:
• Fiat currencies: sAUD, sCHF, sEUR, sGBP, sJPY, sKRW
• Commodities: Gold (sXAU), Silver (sXAG), Oil (sOIL)
• Index Funds: DeFi (sDEFI), FTSE 100 (sFTSE), Nikkei 225 (sNIKKEI)
Recent proposals to diversify the treasury are targeting protocols with similar entry-level risk profiles to OHM itself. Synthetix is widely considered a blue-chip protocol, as well as having one of the strongest communities in DeFi.
Risks:
• Intermittent (-1,-1) sell-pressure on OHM when sUSD weekly staking rewards are claimed
• sUSD breaking peg, low risk with $230M in the sUSD Curve pool
• Synthetix migration to Optimism L2
• Synthetix protocol risk