Market Making Proposal from Wintermute

Winter mute is one of the best market makers out there if not the best
Im really keen on this proposal <3

also the whole proposal on gohm makes sense
but zeus did mention having sohm trade on cex rather then g ohm to prevent governance attacks?

@Zeus would you like to expand on this? v2 will have gohm + sohm still right?
@dr00

Cross posting from the GSR proposal here.

Hi all,

Derek from Reverie here. While I’m supportive of this proposal broadly, I think running a more structured vendor selection process will ultimately result in better market-making services for Olympus. I will start with some initial thoughts on the importance of Market-Makers (MM), and then propose a new approach for picking between the various proposals. 

Why hire a Market Maker?

Increasing accessibility and liquidity across DEXs, CEXs and the global OTC market can have a tremendous impact on allowing new entrants into the community. New listings on popular CEXs and higher volumes are important factors in furthering retail adoption. OTC adoption is equally important as it tends to minimize price swings with MMs working large orders through low impact algos (TWAPs, VWAPs etc..) and improve accessibility to institutions. All of these are important steps towards the maturation of OHM. In short, I’m fully supportive of MMs taking the lead to get us there quicker.

How to evaluate Market Makers?

While there are different metrics to evaluate MM by (maker volumes, spreads, duration, live quoting), the data needed to evaluate this work is difficult to access. As such, it mostly comes down to a MM’s reputation, as well as the proposal’s specific terms (loan terms, asset choice, strike price, additional services). GSR and Wintermute’s proposals are meaningfully different here. As a result, it’s worth doing a thorough analysis of the pros and cons of their approach. 

How should the community make a selection here?

As of now, Olympus DAO does not have a clean and efficient process for evaluating several vendors. This thread is chaotic: it spans hundreds of comments and includes debate around specific proposal terms, which MM is most qualified, and whether this service is required at all. As a result, tokenholders and vendors aren’t sure what happens next. 

This is problematic for all the parties involved: Olympus needs to get a MM, and the MM firms have a business to run and need to assign resources to their customers ahead of time. An open-ended process where various MM post their proposals in a disjointed manner is probably not ideal. We need a process for picking the vendor of choice. 

A formalized, competitive process is necessary

We think there’s a better way for vendor selection. There should be a formal, organized RFP process that solicits various proposals on a deadline. Compound recently went through a vendor selection process for smart contract audits. Multiple auditors (OpenZeppelin, Trail of Bits, ChainSecurity) were interested, and had a chance to go head to head, answering questions on community calls, forums, and in various calls with stakeholders. This process was productive - while it’s still ongoing, it’s likely to result  in a lower final price tag ($8m → $4m a year), more optionality, and additional clarity on what services would be provided. 

We think a similar process can be used here. The community should have an opportunity to review both proposals, offer feedback on scheduled calls and discussions, and allow the MM a chance to iterate as needed before submitting a proposal on a pre-agreed upon date. 

A formalized vendor selection process also allows new options, such as working with multiple MMs. MM are not mutually exclusive in their operations. In fact, increasing competition across multiple MMs in the market could arguably improve the benefits even further. Also, MMs usually have their own dedicated OTC relationships that should widen market growth. Going with multiple MM’s may be a better approach here. 

To summarize, running a formalized, competitive process has several benefits:

• Offers a clear process for all parties involved

• Creates more negotiating leverage for the DAO

• Allows vendors a chance to improve and iterate on their proposal

• Creates new options (e.g. going with multiple MMs)

Conclusion

We think it’s a no-brainer to use a formalized RFP bidding process for the selection of a market-making vendor. This competitive process will result in better terms and services for Olympus. An example of a formalized process we are running for Compound can be found here. We are happy to work with the community to create a structured process best-suited to Olympus.

Derek I like where this is going

Derek Thanks for this response! Let's chat more - I sent you a Discord friend invite as glueeater#0638 - pls accept or DM me!

@Derek really like this idea of a structured, competitive RFP bidding process.

I also agree with Wintermute's proposal for gOHM to be the listed asset and ultimately the reserve currency for DeFi.

Look forward to seeing the next iteration of the MM proposal. Great work and input from all the OHMies on this!

SYoung Hi, we did not trade it most of the year. A lot of wallets in defi are being labeled Wintermute by mistake and that's one of these cases

Not really sure how having sOHM instead of gOHM would prevent from governance attacks since you can easily convert one into another

This is a better proposal than the GSR one.

Using gOHM instead of OHM is also quite the obvious choice, and it would be easy for exchanges to integrate gOHM withdrawals on different chains, greatly benefitting Olympus multichain experience.

Thinking about RFP's as i deal with alot of that as part of my work, we'd need to break down what is most important to OHM holders and have a weighed decision making process like Derek is saying. And probably include 3-4 proposals for the final round, then 1 more round with the last 2. That's how it works in my field below is an example of how a weighted decision could look like

Example: MM Weighted Decision making Template

Reputation: 60%

Volume: 15%

Terms:25%

MM X, MM Y, MM Z

CtrlAltElite Agree. Similar experience in my line of work too. Mainly on the responding side, but I've been a buyer before and set the ground rules. For us, it's Management, Technical, Schedule, Cost, and Terms being the three biggest scoring sections, with subsections between depending on what technicals are important to the engineering team. Technical and Cost are usually the biggest swingers at ~40% with cost/schedule/terms making up the delta. Since it's mainly Government contracts, the terms issue is low because the construct everyone operates in is similar and non-distinguishing so it usually is a pass/fail if there's unreasonable exceptions.

Establishing a select committee to develop the RFP and make that a community vote arguably makes more sense than soliciting unstructured offers that don't conform to what the DAO wants, because the DAO doesn't know what it wants, because there is no RFP.

1. Wintermute borrows from us interest-free, this is a great avenue for shorting
2. The call of $69,420 is there to cap our growth, from which they can take profit into DAI/ETH
3. As far as market-maker go, Olympus DAO already have 9-figs of protocol owned liquidity
4. The mention of DyDx is a tell, because it's used to naked short
5. Show me the incentives and I will show you the outcome
6. Given the above, I find the CEX market historically -EV for onchain protocols

OHMies, let me ask you this: what's stopping market makers from having actual skin in the game and market buying like the rest of us?

Forgot to add: how can they call it a partnership when they borrow our DAO interest-free?

A REAL PARTNERSHIP is a DAO-swap

For example: FRAX Finance and Olympus DAO swapped FXS for OHM, ensuring that both protocols have skin in the game and not just lip service

OHMies: market exposure is double-speak, DAO swaps are not… #skininthegame

BTW this is Tetranode, the Olympus Treasury Advisor

Ask me how I know a thing or two about being a market maker…

I heard GSR and Wintermute said at the end of the call that a 'Both' option wouldn't work. Needs to be either or neither but not both.

That's a tell, they're trying to move the price as they please, and they don't want another trading desk to upset their operation.

IDKFAIRL given the current APY, there is little point for MMs to use their OHM for anything but staking if they bought OHM themselves (we know cause we did)

wishful_cynic

Suppose that you gave me staked OHM for free, it is possible for me as market maker to short the position without ever directly selling it…

I know the tools of the trade well, and I implore OHMies to think long and hard about this proposal before we give our DAO away for free

in my opinion:

wrapped centrifuge and wrapped luna is not seen on Coinbase by retail investors.

those small letters in front of a project hurts the buying power. I know this is just optics and sounds ridiculous - I believe though that asking anyone to buy gOHM or sOHM on centralized exchanges instead of OHM is my real issue here. I know the power of the word OHM - I have studied it now for 20 years straight and we saw what kind of a project this is and how much attention and success this had - please consider me being a very experienced meditator by telling all of you - whatever the utility will be and however the rebase model is structured - I care for you all keeping a clean OHM token that can be bought on exchanges! I've been thinking exchanges should be incentivized to buy Ohm simply because the price goes up and it's a sought after project. Most retailers don't care about utility nor staking - once they dive deeper in the projects they are actually holding on exchanges then they can move it off and stake it. Ankr and Curve is also held by all exchanges - why would they not do OHM? Could someone share why OHM has really not been listed much? Is the team uncooperative? Is it because the treasury holds liquidity? Is it because the exchanges couldn't interfere as much as they would like?

I also do think they would at some point misuse governance - we are talking people like CZ, CEO of Binance and other people like that.