- Edited
Summary
Introduce ETH bonds as a way of accumulating ETH for the Treasury, which we see as the logical next step towards our goal of becoming a decentralized currency.
Proposal
- Add a new bond type - ETH bonds
- Target 5% of Treasury risk free value (RFV)
- Example: If Treasury RFV is 19 million, we would aim to accumulate $950,000 of ETH
- Aim to reach this target over a period of 45-60 days (bonds are not exact science, so we define a range)
Important Notes
- ETH would be assigned a risk free value of 0, meaning we wouldn’t mint against it
- OHM will no longer be backed by just 1 unit of risk free value ($1), but also by the proportional amount of ETH in the treasury. If this proposal passes, you can visualize the new backing of OHM as 1 OHM = $1 + 0.xx ETH (+ a fraction of any other asset we hold in the Treasury)
Motivation
Olympus’s goal from the outset was to become a decentralized currency. In order to embark on that journey we started with DAI, which itself is primarily backed by ETH and USDC. After that, came the partnership with Frax Finance, whose stablecoin FRAX is partially collateralized. We’re pleased to say that this partnership was and continues to be a great success!
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.
As for how to do it, the introduction of ETH bonds makes the most sense, since our bonds are a tried and tested instrument for taking in assets. Continuously taking in ETH through bonds would allow us to effectively dollar-cost average into our ETH position, removing the subjectiveness from the timing of our entries.
Proposal
- Add a new bond type - ETH bonds
- Target 5% of Treasury risk free value (RFV) being ETH
- Example: If Treasury RFV is 19 million, we would aim to accumulate $950,000 of ETH
- Reach this target over a period of 45-60 days (bonds are not exact science, so we define a range)
- ETH would be assigned a risk free value of 0, meaning we wouldn’t mint against it
- OHM will no longer be backed by just 1 unit of risk free value ($1), but also by the proportional amount of ETH in the Treasury. If this proposal passes, you can visualize the new backing of OHM as 1 OHM = $1 + 0.xx ETH (+ a fraction of any other asset we hold in the Treasury)
Using a percentage of RFV as our target allows for a conservative approach, maintaining the stability of our runway and reducing price exposure to ETH. In the case that ETH appreciates in price and goes over the target, we would restrict the capacity of ETH bonds and the growth of RFV will balance it out again.
Currently, we’re sitting at around 19m risk free value, so the target would be 5% of that which is $950,000. As the RFV grows, so does our allocation in dollar terms.
For now, it is more straightforward to set up “naked” ETH bonds, than a new ETH-OHM pool, as well as being more efficient from a bond capacity perspective. While not in the scope of this proposal, an ETH-OHM pool and ETH-backed stables are both areas of interest for further investigation. Introducing ETH into the Treasury will open up partnership opportunities in the future and it showcases that we are determined to have a stake in the chain we live on.
Most importantly, by having ETH in our Treasury, each OHM will be backed by $1 of risk free value as is the case now, but it will also be backed by a certain amount of ETH. While ETH wouldn’t be included in the RFV, it would be included in the intrinsic value (IV) of OHM, which is a metric everyone should watch closely as Olympus matures and transitions towards a decentralized backing.
Vote
For: Add ETH to our Treasury through ETH bonds
Against: Don’t add ETH to our Treasury
Vote is live on Scattershot:
https://scattershot.page/#/olympusdao.eth/proposal/QmdC27BhNKvTqyvtYbR1XyXx4hN9M1hqNRwKhL4U49KGBt