- Edited
Summary:
As the macro shifts and rollups gain favor it becomes necessary to once again explore tasteful OHM based POL to facilitate market growth.
In support of these emerging markets, this proposal requests community approval in the creation of the following:
250k of v2/Full Range OHM/DAI liquidity on the Camelot DEX
Formation of this liquidity will create a foundation for third party CL Positions, as well as support for outstanding and growing participants in the OHM based ecosystem.
This can also pave the way for some variant of bespoke liquidity management on a chain by chain basis.
Motivation:
In Q1 FY24, optimistic community members capitalized private liquidity in support of a grassroots partnership with Peapod Finance in hopes of expanding OHM utility to the broader market. 250k of OHM was wrapped as pOHM and paired with 250k of DAI to form the pOHM/DAI Pod at the genesis of their v2 launch. It strategically positioned pOHM as an alternative POD (LP) Pairing to DAI, allowing an arbitrage path against OHM/ETH POL and OHM/USDC liquidity, while also giving pod creators (Protocols) an unpegged, fully backed option to consider.
Following the v2 Launch, pOHM TVL has grown to $3.27m, making it the largest concentration of wrapped OHM liquidity in the market today.
Subsequently, pOHM has found itself as the anchor point for roughly 19 discrete Pods, all of which have been privately sourced by third parties, in the free market, with no direct protocol incentive or inflation.
Source:
https://dune.com/spoysp/peapods
The initial wrapping of this liquidity for the v2 Launch led to a 15% appreciation in OHM Price, triggering the first entry ever into the RBS Upper Cushion. This allowed for the issuance of Reserve Bonds, adding $422k DAI to the treasury’s balance sheet which became a part of backing and was rolled to sDAI.
Source:
https://dune.com/spoysp/olympus-rbs-dashboard
Proposal:
Looking to the future, there are L1’s (Berachain) and several L2’s (Arbitrum One, specifically) that have emerging economies where the presence of OHM liquidity can facilitate synergistic growth. Since there is only a fixed amount of Protocol Owned Liquidity that can be introduced into the market while maintaining existing, immutable dependencies, this proposal seeks to provide a near term framework and open the door for a more long term vision.
Phase 1:
This proposal conservatively considers the covenants and dependencies created by Cooler Loans:
Liquid Treasury Valuation - $188,866,883
5% Not Allocated to Coolers - $9,443,344
Less FY24 Proposed Budget - $8,014,344
Less Proposed Arbitrum One POL DAI - $7,889,344
As OHM in POL is not counted towards liquid backing, the Arbitrum One proposal would move 125k of DAI from reserves to the new v2 LP. This DAI amount creates no material threat to existing covenants and, if Cooler Loan borrow amounts and the DSR rate remain roughly stable in FY24, we could expect a gross inflow of approximately 3.6m DAI to reserves, offsetting this shift. A v2 pool is recommended such that a full range of liquidity can be formed and rewards do not require a discrete multisig interaction to compound (In line with our automated future).
This will create a base layer of OHM liquidity for protocols and liquidity providers to build from, also creating short term, immediate support for efforts in the space. It is also plausible that OHM/gOHM CL will form once again, connecting the existing 138k gOHM/ETH third party liquidity on Sushiswap back to the framework.
Ideally, third party CL will emerge over the top and we anticipate a reasonable outflow of liquidity from Mainnet to Arb One as retail gets priced out of Ethereum and seeks lower friction options. Lastly, this move will meet the anticipated demand created by a partnership that has already sunk substantial supply and created favorable utility for OHM.
Phase 2:
Exploration into more holistic liquidity management at a cross chain scale. If OHM based POL is a finite, but important resource, a scaling solution is needed such that it can be tastefully positioned to facilitate aligned participants.
Baseline Protocol is demonstrating what an opinionated Market Maker can look like but, they have also provided a liquidity tech stack worth exploring from the lens of pool management.
Elastic Finance recently created a $1m EEFI/OHM Uni v2 Pool and it begs the question if additional tooling would be helpful such that interested parties can build.
Ultimately, post Cooler POL is bound by circulating supply and treasury reserves. Since supply is actively managed by RBS but also largely fixed unless we are in either cushion, we are mostly bounded by the treasury growth at 5% (DSR) + 0.5% Cooler Lending Interest. This creates a tangible liquidity budget we can, and should, consider in our future planning.
Summary of Requests:
- Formation of 250k of OHM/DAI POL on Camelot
- Tangible support of synergistic partners
- Individual educational awareness around ongoing business development that has proven successful in increasing OHM Market Share.
Will allow his RFC several days of discussion and subsequently move towards OIP and snapshot.