WAGMIcapital

  • 4 Oct
  • Joined May 29, 2023
  • This post is a follow-on to TAP-27, contingent on a “Reject” vote passing. It looks to provide a passable, holistic Cooler loan proposal, with no necessary subordinate amendments. It will describe each step and process for implementation, to be followed verbatim unless and until a future proposal affects changes.

    The vote to be conducted is the following:

    • 90% consolidated backing lent per collateral token; 0.5% interest per annum

    • 95% consolidated backing lent per collateral token; 0.5% interest per annum

    • 95% consolidated backing lent per collateral token; 3.3% interest per annum

    • Back to the drawing board

    Loan values are referred to relative to “consolidated backing” rather than discrete values. This avoids a repeat of TAP-25, where 95% represented ~3,000 DAI per gOHM at the start of the proposal and ~2,850 at the start of the vote. A discrete loan value would be set following a passing vote and subsequent consolidation of treasury into non-volatile assets (stable coins). I suggest a mix of DAI and LUSD, based primarily on their censorship resistance and the yields they offer today (FRAX is no longer competitive relative to the DSR or stability pool at this time). Should backing per token grow in the future, an amendment proposal could pass raising the loan value; until that point, loan values would remain the same.

    Loan tenures are 121 days (four months) at a time. Users should understand that they can roll at any time in advance — you do not need to wait until your loan is near/at expiration to do so. The largest downside of a shorter tenure is an increase in gas expenditure, but benefits to the protocol regarding finality and interest accrual seem to make this worthwhile.

    Clearinghouse capacity are handled via rolling top-ups to the facility. At the start of each week (the first day of the week dictated by the first day the clearinghouse is live), the clearinghouse is topped up or drawn down to hold a liquid balance of 18m DAI. If the preceding week saw more loans than repayments, a top-up would occur, adding DAI liquidity for loans. If the preceding week saw more repayments than loans, a draw-down would occur, removing DAI liquidity. Pending technical viability, any balance in excess of 3m DAI held by the clearinghouse at the start of the week will be held in the DSR. Rebalancing of the facility’s liquidity occurs in perpetuity.

    RBS will be retuned so that its lower cushion sits at a minimum 2% margin to loan value. This ensures against arbitrage through the clearinghouse facility. This is a minimum because RBS remains dynamic and subject to rise above its floor value.

    Regarding the recent Phaeton proposal, we suggest that if it proceeds, it is implemented with a separate token and a conversion of backing upon migration. Users should opt-in rather than having a conversion of all users via majority rule. In this case, Cooler does not interfere; a user moving to the all ETH protocol would repay their OHM loan and migrate. Cooler also removes opportunity cost while that proposal proceeds and protocol is developed, allowing all time needed. We view these two proposals as symbiotic in many regards, though certainly separate.

    This proposal has a tentative vote date of Friday, June 30, given forum rules have been met. As with TAP-25 & TAP-27, it will run one week. Should it look likely to pass, author will enter an audit with Sherlock, fronting costs to be reimbursed upon the passage of the proposal.

    To summarise the timeline of this proposal:

    • 00:00 Tuesday, June 27 posted

    • 00:00 Saturday, July 1 to snapshot

    • Week of July 3 code into audit

    • 00:00 Saturday, July 8 snapshot concludes

    • Week of July 10 audit concludes + treasury consolidated

    • Week of July 17 code is deployed and clearinghouse is funded

    • Weeks of July 24 onward, clearinghouse is topped-up or drawn-down

    • My considerations are as follows:

      1. Interest rate:

        -It seems to me the justification for 3.3% comes from that if there is finite amount to borrow i.e. $33M - then those who borrow can get the benefit of the cheap loan and also the benefit the invested underlying treasury. Holders who do not borrow (or do not get to because of capacity) miss out with no benefit. The particular decision for 3.3% seems to be based on the recent updating of the proposed DSR rate - the mantra 'why shouldn't the treasury just put the DAI in the DSR and then we can all enjoy the rate together.' In the medium term the DSR rate will come down and we will agane have to come back and discuss rates - which will be irritating. If we are to adopt the logic of the 3.3% rate we should consider what a ongoing rate is appropriately adapted to meet the concern of the borrowers free lunch maybe 1.1% or 2.2% would serve better in this role. With that said the 3.3% rate will be better than the current situation of paying other protocols for something we can do ourselves - but would not move the needle on mind share, building or OHM as a desirable treasury asset.

        -Unsurprisingly then I support 0.5% rate. The main reason for this is that in order to win we need others to build on top of OHM. This low rate in the current climate will make it irresistible to build on top of and integrate OHM, it makes OHM a unique asset in defi and does this by leveraging our competitive advantage - our treasury. The most popular building blocks for Ohmies will be OHM compounding - lead to trading above backing (monetary premium) and network growth. No one is building or indeed is planning on building on top of OHM - this has the potential to change that calculus. In terms of the borrowers vs non-borrowers arb, I actually see this as a positive because it will compel participation in the econOHMy and if you don't want to then big deal you lose 1 or 2 percent when rates come back down (sooner than you think). The rate also compounds for example if my product is 2x OHM exposure and pay down my debt with alUSD 0.5%x2 is 1% and 3.3%x2 is 6.6% (as Potted points out https://twitter.com/pottedthings/status/1669720228337442816). If you must justify it to ourselves in another way then we should see this as the best marketing budget you could ever buy, because if the objective is to trade above backing then it is symbiotic for non-borrowing holders even if they get a technical clip.

      2. I don't have strong view on the tenor arguments either way but 12 month seems to have been strongly supported

      3. The $3000 LTV will make a lot more sense once we have completed migration imo and I would support it if we can get clearer data (ETH pumps in the interim). If my choices are more builders on top of OHM or less exposure to ETH upside I will choose the former.

      4. Capacity I am agnostic we can always increase as high as it needs to go

      Finally fwiw (and those who have been around for a while will come as no surprise), I think this really all does highlight that we could have our cake and eat it too from the upsides and downsides of this (as much as one can) if we used our treasury & resources to standup a LST/gOHM backed stablecoin…

    • Since discussion has died down with some apparent consensus and a date has not been set, I propose a vote period from Wednesday, June 7 to Wednesday, June 14.

    • Background: This is a formal proposal version of a previous RFC you can find here. Proposal options have been structured taking debates into account.

      Proposal: Conduct three votes (seen below) and initiate a moratorium on re-locking of any assets while proposal remains undecided.

      Vote One:

      • Offer Cooler Loans with capacity for all tokens

      • Offer Cooler Loans with 69m DAI capacity

      • Offer Cooler Loans with 33m DAI capacity

      • Do not offer Cooler Loans

      Vote Two:

      • Offer Cooler Loans at 3,000 DAI per gOHM

      • Offer Cooler Loans at 2,850 DAI per gOHM

      • Offer Cooler Loans at 2,500 DAI per gOHM

      • Offer Cooler Loans at 2,000 DAI per gOHM

      Vote Three:

      • Offer Cooler Loans at 0.5% P.A.

      • Offer Cooler Loans at 1.1% P.A.

      • Offer Cooler Loans at 2.2% P.A.

      • Offer Cooler Loans at 3.3% P.A.

      Timeline: These three votes should be held in tandem in coming days (I defer to the DAO here). If vote one does not conclude with option four, the following steps would be taken:

      1. Cooler Loans enter a second audit.

      2. Volatile assets are reduced in proportion to capacity (i.e. 33m DAI would be capacity for 18.5% supply, so 18.5% reduction); illiquid assets prioritised for reduction over ETH.

      3. RBS is tuned to ensure lower cushion >= loan-to-collateral.

      4. Simple front end is developed.

      5. Cooler Loans are deployed.

      6. Clearinghouse is deployed and installed to kernel.

      • 0xRusowsky .5% is what liquity is at and it's best in class for borrowers as far as im concerned. With that said for a non liquidatable loan I think the % could be higher. But we should be trying to make OHM the best collateral with the best borrowing opportunities. Right now ETH is still better when it comes to borrowing efficiency but not stability of course. If we can bridge these two areas into one solution we have a very powerful product.