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

Informal poll

    At what point would it make sense to consider index tokens like BED (33% BTC, 33% ETH, 33% DPI) or BasketDAO’s BMI index of Yearn interest bearing stablecoins instead of creating individual proposals for every new asset?

      Fully support this proposal. As a growing protocol we need to own a piece of the land we're building on. And to mature as a treasury (plus to diversify our asset base) I also fully agree that we need to start looking at non-pegged assets, and ETH is of course the obvious first choice.

        This is the most important thing in this proposal. "ETH would be assigned a risk-free value of 0, meaning we wouldn’t mint against it"

        It increases treasury value and not supply. Good work DAO TEAM.

          0xFelix 0xFelix: evthing to the point in a nutshell! just to get insight where this clear Ohmie-insight comes from: are you a studied financial economist?

            lejimmy I like the concept but I feel like it introduces too many variables, volatility and smart contract risks by adding BED or index based tokens

              We should support the Ethereum ecosystem by introducing this bond type. The naked asset is most efficient to achieve acquisition and slowly introduce a new volatile asset.

              The timing and allocation is conservative.

              OM0811 Ha, I'm not! But I've been in DeFi for a while so I'm slowly turning into a self-taught defi-conomist... 🙂

              I think there's already a small ETH-OHM pool that we could take over (assuming there isn't utility from founding a new one), and maybe that would even help keep the price more accurate on coin gecko lol

              But I agree that naked bonds to start make the most sense from an acquisition point of view. Glad to see this other foot dropping.

              shadow I fully support this proposal, as DAI is now backed by up to 70% USDC (Circle..) in efforts to further decentralize the soil in which Olympus is growing on, ETH is an absolutely necessary asset to add to the treasury that isn't pegged.

              Brian33 Hey quick question, what would be the smart contract risk by adding eth? Don't we already have the smart contracts deployed for DAI? Wouldn't it be a basic swap in the contract to allow ETH? I'm not very technical so I could be way off. If it does propose a smart contract risk, could you provide some detail so I could better understand?

              Thanks!

                foks Since our RFV/OHM is greater than 1, we can utilize this to back the OHM minted by the ETH bond while still retaining our backed nature

                  Brian33 Would this strategy therefore be unsustainable if RFV/OHM is brought under 1? For example, what would happen when the buyback of OHM (the "floor") is moved up from $1 closer to the RFV? Currently RFV/OHM is ~ 20 so it's not an issue but I'm wondering if this might be a future problem.

                    This is what I proposed a couple of days ago in the main discord channel. I am all for it. Only thing to consider is, whether the bonds should be available only in specific price range or not.

                      shadow 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.

                      Awesome!

                      I’m so glad to see this is up for a vote! This is an important step away from the inherent risk associated with being backed by solely 1 asset. We’re moving at lightning speed here ohmies! Can’t wait to see btc added to the treasury in the future as well!

                      lejimmy I'm a fan of index, but considering the double dipping fees on both BED and DPI, as well as the scale Olympus is aiming for, I think we're better off either managing our own index or negotiating with index to lower the fees 🙂 For now I think we should be good with just BTC/ETH for a while.

                      Very much in favor of this proposal. High time the treasury starts taking in some ETH.