This proposal is interesting, but to truly be viable, it should be accompanied by a scheme for eventually selling ETH for stable assets to raise the RFV of the treasury. If the OP intends for ETH to never to be sold, then ETH bonding can only drive RFV/OHM down and there's no upside to it from an OHM holder's/appraiser's POV. Arguments about the increase in IV are meaningless if the non-stables are never sold. If the OP does intend for ETH to be sold at some point, then a concrete plan for selling non-stables should accompany this proposal.

Ideally, such a plan would limit the value of the non-stables held to a small fraction of the protocol's RFV. That's because a proper appraisal of the risk reward ratio of OHM becomes difficult when the value of the non-stable assets is of the same or greater order as the the treasury's RFV. One would need to become an expert on all the non-stable assets in the treasury to do a proper appraisal of this ratio. Compare this with the simplicity of the present, where all that's needed is knowledge of the RFV, the runway at the current reward rate, and an understanding of the prevailing appetite for risk. Such simplicity is highly desirable and a crown jewel of the protocol. A legitimate case for forking OHM to maintain this simplicity could be made were it to disappear. I’d hate to see that happen.

Whatever plan to sell non-stables for stables gets hatched out should also apply to any non-stable rewards in the treasury (e.g. Sushi). I don't see the point of accumulating such non-stable assets if the protocol never intends to sell them to raise the RFV.

At any rate, July 27th is too early for a scattershot vote on this, IMO. Too many outstanding questions that require careful deliberation.

    occam

    occam Arguments about the increase in IV are meaningless if the non-stables are never sold.

    I don't see why this follows. Holding ETH in the treasury contributes to net asset value/treasury market value regardless of whether the ETH is sold or not. We don't mint off of net asset value, but the market may well use this number to price OHM.

          mudshrk
          Not sure why the market would use the value of non-stable treasury assets to price OHM if there's no explicitly stated (and to be honest, codified) scheme for selling non-stable assets. For example, the OHM protocol could hold billions of dollars in ETH, but if the prevailing policy is to never sell non-stables, what good is that ETH to OHM holders/appraisers?

              occam
              Occam, having non-stable treasury assets is fine even without a defined divestiture plan. The value added is there, this OIP is just contemplating it’s exclusion from the RFV figure.

              Assuming Olympus Treasury eventually holds a basket of multiple non-stables, will the market factor that in to the price? Definitely.

              What I think your alluding to, something that I think is important, is that what we are creating is theoretically elegant but we need to make sure it’s clearly conveyed.

              If we eventually incorporate more and more non-stables, everyone will have different levels of comfort with each of them…meaning * by default * you need to model out all the non-stables with your own haircuts for each.

              Everyone who goes to app.olympusdao.finance is going to see a RFV that implies the value of ETH is $0 because that technically is its RFV. BUT is that helpful?

              With the addition of non-stable assets, I’d propose we need another quasi-RFV metric that includes non-stables with community defined haircuts.

              kRFV
              kinda Risk Free Value 😂

                  occam I agree with Occam in that I don't see this as being an accretive action to the value of OHM if there's no plan to realize appreciation of a non-stable treasury asset.

                  Long term unless ETH can solve it's network cost issues it will likely continue to loose ground to alternate low transaction cost networks like Substrate/DOT, Polygon, etc. ETH is currently viewed as a "blue chip" coin, but not sure about long-term prospects, nor does it have negative correlation to BTC.

                  Seems like there are lots of open details to try and have a vote on the 27th.

                  Has the DAO investigated other projects that are philosophically more aligned with Olympus like SORA or even Tinlake?

                  https://medium.com/sora-xor/sora-the-new-economic-order-3ec3f0327e5a

                  Just a noob and opinions are my own - your distance will likely vary.

                    So here's the thing. I purchased OHM because Olympus is a well defined and fascinating money experiment. So far it's worked out great! If I want to speculate on any non-stables, I just do it myself. I really don't need the protocol to speculate for me. IMO, such speculation would be a big departure from OHM's fundamental charter and would significantly increase the protocol's governance surface area and change its risk profile. Personally, I'd be far less interested in Olympus if that were to happen.

                    Now, I'd understand if Olympus DAO members are looking to diversify the DAO's OHM holdings---selling them to build up a rainy day fund. That makes sense to me, but it's not what's being proposed here.

                      occam I understand your general concern. Perhaps it may help to think about it like this.

                      Why does anyone ever value anything based on nonstable assets? E.g. a central bank might have gold on the balance sheet, or corporate bonds, etc. A company like MicroStrategy has lots of BTC on the balance sheet. In none of these cases does the institution have any codified plan for how to sell the nonstable asset into something stable. And yet the market clearly takes net asset value into account when pricing e.g. the bank's currency or a share of MicroStrategy. Why? Answer: because net asset value has the potential for productive deployment. E.g. the bank has the potential to use their gold to buy back their currency if price slips. Same with MicroStrategy and BTC. Or maybe MicroStrategy decides to increase dividend if BTC moons.

                      The situation is the same for us and ETH in the treasury. We don't need some codified plan now. What matters is just the potential for productive deployment in the future. E.g. suppose we decide to stake the ETH and sell our staking rewards for stables to increase RFV. Or suppose we decided to institute an ETH dividend for sOHM holders. Or suppose we use ETH to buy back OHM (this would be a natural move if ETH price rises so as to overshoot our 5% allocation target). There are all sorts of possibilities out there and that explains why it makes sense for the market to trade net asset value. Some of these possibilities involve selling ETH for stables, some don't.

                      Are we now engaged in ETH speculation? Well, capping our exposure at 5% and not minting off ETH means the degree of speculation is quite low.

                          mudshrk

                          1) "Are we now engaged in ETH speculation? Well, capping our exposure at 5% and not minting off ETH means the degree of speculation is quite low."

                          *** Everything about OHM has seemingly been well thought and moved forward cautiously - with treasury acquisitions providing ongoing return, not speculation. It feels like the Simpson monorail sales man stepped into Ohmville and said, "You know what you need, ETH..."

                          *** As Occam states, he, I, or any Ohmie can, and likely does, speculate in a variety of ways. Should our treasury speculate? Should we buy magic beans that be worth something, or nothing, and we don't yet have a plan, but we will figure something out and just owning beans is cool and other people place some value on beans, so gotta buy beans...

                          2) "Stablecoins have worked out fine so far, but in order to move forward, an introduction of a non-pegged asset as backing is necessary. The asset we choose should be something that adds value to the whole ecosystem, irrespective of its price.

                          With that in mind, and given that our fates are already intertwined as we live on its chain, acquiring ETH seems like a logical first step towards our vision. This would also be a way for us to reduce our dependence on USD and USDC, as well as to demonstrate the alignment of our values with those of the Ethereum community."

                          *** What quantitative evidence do we have that buying ETH will "move us forward" or "add value to the whole ecosytem"?

                          *** ETH price seems like it is supported by inflationary USD and USDC so how is buying ETH reducing OHM's dependence on USD and USDC? Does buying ETH protect Olympus from USD inflation?

                          *** How does buying up to $950,000 USD worth of ETH bonds (around 450 ETH which wouldn't even qualify for whale status) "demonstrate the alignment of our values with those of the Ethereum community"?

                          *** Can someone tell me what are the values of the Ethereum community to which Ohmers are supposedly aligning?

                              billygoat33 I think the plan has always been to eventually add BTC, ETH. Even back in Zeus' first medium post.

                                mudshrk

                                Thanks for your comments. Thing is if I wanted to invest in a holding company/DAO, I would invest in a holding company/DAO. While I trust the Olympus DAO to make make good decisions about the Olympus Protocol, I have no reason to trust that OHM holders have the expertise necessary to make good decisions about which non-stable assets to buy, when to buy and at what price, when to sell and what price, etc. I say this as someone whose ETH holdings are orders of magnitude bigger than his OHM holdings. So it's not that I dislike ETH. It's that I dislike complexity and governance sprawl.

                                Right now, the Olympus protocol is simple, and governance minimized. These are highly desirable qualities in a protocol and should not be discarded lightly.

                                  Brian33 I like this proposal, and I like the idea of increasing our intrinsic value. I will be voting for this proposal. That being said, how does minting Ohm against Eth affect the APY and the runway? I assume, all else being equal, it will slightly reduce them?

                                      occam If I'm understanding you correctly, it seems your concern is that this proposal might be a slippery slope toward adding increasingly speculative assets to the treasury. That's a reasonable concern, and an outcome we should guard against. I assume that the logic for holding ETH is similar to the logic for the DAO holding LP tokens. The intrinsic value of the LP tokens is currently much higher than the RFV assigned to them, but they are productive assets, and ensuring liquidity is directly linked to the DAO's health. Similarly, ETH is a productive asset that is necessary for the the DAO to function. I would be more inclined to share your opinion if the proposal were to put BTC on the balance sheet, because I don't see any synergies between BTC and Ohm. But, for better or worse, Olympus DAO's fate is intertwined with that of Ethereum.

                                          BrianPeace yeap runway will get eaten since we're not minting against ETH. Though given the current pace of bonding, and the fact that max ETH bonds is 5% of RFV, this shouldn't be a big issue.

                                              FluctusLux yeah I would hardly call it eaten in this case, since it will be such a small impact.

                                                Dropkickdarren

                                                This would completely change the risk profile of OHM and would be a betrayal of the Olympus protocol's original promise that 1 OHM is always backed by 1 DAI. If ETH backing is indeed the end game, why not launch a separate OETH token that's like OHM in all ways, but is backed by ETH instead of DAI. (For example, Alchemix has alUSD and alETH). That way the Olympus protocol's ETH reserves would count toward the RFV (of OETH). This would be simple, and governance minimized, and would give users a choice (between OETH and OHM).

                                                    On second thought, perhaps OHM could become a governance token, with a claim on the DAO's holdings and the token that's currently OHM could become ODAI. Just brainstorming here...

                                                    BrianPeace

                                                    I would be more inclined to share your opinion if the proposal were to put BTC on the balance sheet, because I don't see any synergies between BTC and Ohm.

                                                    By "balance sheet", do you mean the protocol treasury, or the DAO treasury, because I think there may be some conflation between the two going on. I have no issue with some small fraction of the DAO treasury being converted to ETH, though we should have a discussion about how to do that (hopefully one not as dragged out as the one on Sushi's forum https://forum.sushi.com/t/sushi-phantom-troupe-strategic-raise/4554).

                                                        shadow

                                                        I am piping up a little bit about this in the Discord. I am not that active unless I think something is a mistake.

                                                        IMO, adding ETH to the treasury at this point is a mistake. Market-buying ETH is a pure beta strategy. During this expansionary phase we should be pursuing alpha strategies for the treasury via partnerships that bring both revenue and stability to the treasury. Buying ETH at market does neither.

                                                            occam Sorry if I was unclear. I believe OIP-15 is in regard to the bonding of ETH to the protocol treasury. That's what I was referring to. Perhaps you could clarify something for me too: When you call ETH a speculative asset, what metrics do you use to determine if something is speculative? Volatility? Risk profile? Something else? If the proposal were to actively trade ETH rather than DCA into it and hold it long term, then I would agree that would be speculative activity. Though since I consider ETH to be a safe and productive asset, I make a distinction between it's volatility and it's risk profile.