Hello everyone,
Very busy week on my side but I'm happy that there has been some discussions on this topic!
Let me try to respond as best as I can.
0xRusowsky Such a system offers cheap leverage for those who want to lever up when they are bullish ETH (buy OHM, borrow ETH backing, and repeat), and it would also be great for those who are bearish ETH and want to short (buy OHM, borrow ETH backing, swap to stables, wait for price dump in USD terms).
One challenge which people have relayed to me privately is that you again add some contract/organisational risk on top of it. (Much like why people still want to hold stables instead of OHM despite its great on-paper features.
0xRusowsky this proposal loses the reserve currency narrative
I sadly indeed think we should part with this ambition. The landscape has significantly changed and the world is simply not ready for this at the moment.
0xRusowsky Why would ETH maxis sell their ETH for ETH-backed OHM?
Mainly to let OHM be the vessel which brings more ETH exposure over time as opposed to just holding ETH or Staked ETH. The DAO should try to create products which make this possible (as it has done with RBS already)
unbanksy33 This asset uses RBS mechanics to dampen ETH’s volatility and it reduces ETH’s volatility by 75%, in USD terms. This means that, in USD terms, when ETH drops 10%, newOHM drops 2.5%. When ETH goes up 10%, newOHM goes up 2.5%.
With a true 1 to 1 backing the 'dampening volatility' part is not very true (at least compared to ETH). Imagine RBS pegging OHM to 1 ETH, for the sake of simplicity. OHM would very likely lag behind most major ETH movements, yet it also can add volatility since it's not super closely pegged. So therefor there will be situations where ETH drops 10% and OHM can drop even more (10% ETH drop + RBS cushion). This will become especially the case when OHM and ETH are seen as equal.
To me personally this is a faulty comparison since USDC is a currency and newOHM (I like the ring of this ticker) is an asset. I strongly feel we should step away from any currency ambition since this already has been done many times (DAI can be created w stETH, LUSD is a superior decentralised currency with v minimal opex, Dinero brings an extra twist to the currency game etc).
unbanksy33 While this index token has a similar target volatility as newOHM, it lacks the value accrual that comes with RBS mechanics. In particular, newOHM stabilizes against OHM using RBS which effectively is a series of price auctions that grow/deplete treasury. So while the average volatility is equivalent to that of an index token, RBS mechanism yields higher returns (in ETH terms) that an index token cannot compete with.
This I agree with. In my discussions over the past week some have pointed me to the fact that if you hold a basket of LSD's, it is a double edged sword where the risk of ruin might be lower (if 1 LSD protocol get's exploited, we will never hold 100% of it), but you increase the chance you'll be hit by a potential exploit by exposing yourself to multiple protocols. The yield from those options + RBS + newproject should offset this imo.
unbanksy33 RBS simulations will need to run to confirm this.
Super hard, especially since we don't know the liquidity that will be out there. For RBS to work, you can't have an newOHM/ETH pool on-chain for example. If you have this + a stablecoin pool, your delta between OHM and ETH (on which RBS operates) will be arbed away by MEV bots, negating any effect RBS will have. By monopolising that redemption against ETH you can extract that value from the inefficient market.
unbanksy33 Your proposal mentions a basket of LSTs yet such products have seen limited adoption
There is also UnshETH (https://unsheth.xyz/) with 31m in assets. I agree that just being a basket is too light, but this would also allow for potentially a gov token to have some utility. I can foresee a situation where an LSD protocol would want to bribe to include their asset in the index to boost adoption, much like stables have been doing for years with Curve/Convex.
I have to think more about this but think it adds some extra risk. Could be interesting as a v2 + diversification option.
unbanksy33 Idea: OHM as liquidity rails for all LSTs
My initial proposal (which was way too long) went way deeper on this front. I think there could be an interesting avenue to pursue here that makes things way more robust for all LSD's (much like frax's LSD pool attempt). BLV's could bring additional yield opportunities to current LSD holders who want to earn extra yield while providing liquidity. When I find the time I will go deeper into this.
unbanksy33 A comment on token design
Given where Cooler Loans proposal is at, I don’t see how an ETH-backed future can co-exist with a fully consolidated treasury in DAI (at least this is my current thinking; curious to hear other takes). One way forward would be to create a new protocol with newOHM (need new name) and allow users to participate by exchanging their OHM for newOHM. Innovative bootstrapping mechanisms (e.g. reserve bonds) can be explored. Implicit in this is that those who take out a Cooler Loans must repay to participate in this new future.
I think a better question is to think about the general organisation of the DAO. With a smaller treasury and less overhead, the OPEX should be something which could be decreased significantly without compromising on innovation. So ideally there would be an opt-in procedure with newOHM and OHM co-existing.
z_33 Have decided to reject this proposal:
a) this isn't the right time for this.
When would be the right time in your view?
