Summary:
Cooler Loans required that the Olympus Treasury was liquidated to DAI such that 95% of its value was immediately available to meet potential lending demand. To this day, we keep enough liquid DAI reserves to cover any gOHM holder who wishes to take a Cooler Loan.
This proposal seeks to create a new Treasury Framework that defines budget and governing policy around the income that the Treasury realizes above its liquid reserves.
Proposal:
This framework uses a series of ratios that will always equal 100%, ensuring that every dollar earned is accounted for in a budget when it cycles back into the system. It’s important to remember that this speaks to net new income, meaning that backing continues to be defended while allowing controls to drive capital efficiency in the allocation of new dollars.
The recommendation for initial categories and ratios are:
Floor Reserves (33% of Treasury Income) – At time of writing, this is DAI in DSR which earns a variable percentage (Currently 8% APY). As we hold $117m in DAI denominated debt, DAI in DSR will be the most risk off place we can hold reserve. As such, 33% of Treasury Earnings (DSR + Cooler Interest) will just compound in these Floor Reserves, just as they do today.
Buybacks (33% of Treasury Income) – Similar to how the RBS Lower Floor creates a buyer of last resort, this budget allows community to enable some of the Treasury Income to be used to buy back and burn OHM above the lower floor, when it is capitally efficient to do so. In future iterations, this could even be done with leverage (A'la Baseline Afterburner) but for now, it would be a straight buyback.
For launch, recommendation to qualify these favorable states would be done using the following general formula:
Bid OHM until Spot >= Liquid Backing + 10% Premium
When Spot >= Liquid Backing + 10% Premium, Reduce
Income % to Buybacks by 25% every 1.25% up to 15% Premium
Essentially, this gives community controls to allocated income to buy back and burn OHM up to a 15% premium to backing but, with a cliff that spends less and less from 10 - 15% before stopping.
To avoid slippage, these buybacks would be done by building one sided v3 liquidity pools with DAI and with the ticks following the general formula shown above. The pools would also be set to autoexit if they completely convert to OHM. In the event that OHM crabs, it's possible these LP's just farm rewards but ultimately, the goal would be a complete swap from DAI to OHM with the OHM then being pulling from circulating supply.
Stable Risk (33% of Treasury Income) – To even be considered for the Stable Risk category an asset must make a DSR + 10% return. At the time of writing this would be 18% APY and this is intended to create a meaningful, objective hurdle to any centralized risk. With that in mind, this category has several uses. Largely, it empowers holders to direct income to another like kind stable asset over time. For example, if the community wanted to swap DAI for say, USDe or Blueberry (Two recommendations that have been socialized) this would be the path forward, allowing 33% of net new DAI from DSR or Cooler Interest to be swapped.
Motivation:
The motivation behind this recommendation is one of prudence, planning and growth. It empowers the community to drive inputs and outputs which also informs the market what is and is not on the table for Olympus and its treasury. Rather than the current policy of ‘Anybody can propose anything' which results in proposals that may be incongruent with the protocols current configuration, it creates structure and budget that can be spoken to both by community and interested third parties.
For example, if Protocol X would like consideration, under this framework it would know that Stable Risk (33% of Protocol Income) is the only budget that’s on the table that it could speak to. It socializes that the $65m DAI in reserves is not on the table and, if it wanted a larger consideration, it would have to solicit community to increase the Stable Risk Budget and decrease the Buyback or Floor Reserve Budget. This creates meaningful, public, rules of engagement.
To maintain this Framework, recommendations are made to define a voting cadence for changes and to make changes by exception. At the top of each month, if somebody would like to propose an adjustment, they may submit a TAP with the proposed adjustments which can then go snapshot to be ratified. If no changes are proposed, the Framework just carries forward the previous allocations until its voted not to. This will help keep governance light.
To measure the efficacy of this Framework, recommendation is made to qualify, track and act upon the following OKR’s:
- Every month, monitor Treasury Performance of Stable Risk vs. Floor Reserves. If Stable risk did not hit DSR + 10% for any reason, revert it to Floor Reserves.
- Every month, review and report on liquid backing and changes to its trajectory. Increasing returns from Stable Risk and buybacks will have meaningful impact to LB. This should be monitored so that performance is equal to or greater than pre-Framework. If performance is not equal to or greater for a quarter, form a working group to evaluate why and how to correct.
Future:
Though outside the v1 scope, this Framework can also be used to size and budget the launch of future Cooler Clearinghouses at higher LTV's. For example, if the community wanted to do this, it could set the Buyback and Stable risk Ratios to 0% meaning that Floor Reserves would be 100% (Just like today). Stable Risk would then be swapped for Floor Reserve and the existing clearinghouse would be defunded. A new clearinghouse would be launched using a new LTV calculation ((IE: 95% of Current Backing). Users would then refinance their debt into the new clearinghouse and its budget would have been defined purely by adjustments to the Framework. Once launched, Buybacks and Stable Risk would be re-activated for net new DAI and the process continues for the next cycle.
