kombu_takana

Reposting this as its own topic since @wishful_cynic proposal was buried in the GSR post.
I feel this proposal is more in line with what would be beneficial for the protocol and reflects Zeus' thinking from the community call the other day:

Summary

Wintermute would like to make a proposal to be a market maker for gOHM. We believe that focusing on gOHM (instead of OHM) as an asset to list makes most sense as it abstracts away rebase mechanics from individual users, while being the token of choice in the multichain world.

TOKEN CONSIDERATIONS

The initial proposal is focusing on OHM as the loan contract. We think it’s a wrong setup for the following reasons:

• For centralized exchanges:

  • Listing OHM on centralized exchanges would continuously dilute cex token holders. Exchanges could of course stake OHM and distribute the proceeds to users, but realistically it would be a massive ask that they are most likely not going to bother with just to list a token 
  • sOHM would solve it, but would face the same issue - too much work on the exchanges side to integrate rebasing properly. Case in point - look at how many exchanges listed AMPL - its only FTX, Bitfinex and Kucoin. And it only happened because the first two have kick-ass CTO’s who don’t mind doing fun experiments every now and then (can’t say anything about Kucoin CTO, as I don't know them, but I’m sure they are great as well)
  • gOHM on the other hand solves all these problems. No dilution, no rebase, pure exposure to market cap which is what most ppl need in the first place. Add to this the perceived “security” of holding your tokens on centralized exchange and you have a good value prop to new user base
  • And then there are perpetuals - making perps on OHM makes little sense - they will trade at a huge discount continuously, providing an opportunity for sophisticated MMs/arbers but not really adding anything value wise. A perpetual on gOHM would make a lot more sense being interesting for both sides of the market

• For defi:

  • gOHM is an obvious choice for multichain experience, because you don’t want to bother with rebase on other chains

• For MMs:

  • Having a loan in OHM is actually not that great as our inventory continuously shrinks and in 6-12 months can go from 20 mil to a few million (even as the overall market cap increases), crippling any market making efforts. I’ve read some comments that staking should be disabled for MMs and it usually would make sense, but not for continuously rebased token like OHM where you actually want the market maker to have undiluted supply.

  • Having an option on OHM as part of a MM contract makes even less sense - yes it’s free but it's the same as writing an option expecting that 1 BTC is going to be worth $10 mln in 12 months time. Possible? Yes. Worth a lot for a market maker? Not really. There is a scenario of course where OHM slowly dies next few months, shrinking the supply and is then resurrected in 12 months time, but it’s probability is not huge likelihood to say the least

  • gOHM solves all this - it gives a stable loan that we can use across cefi and defi, abstracting away the rebasing complexity. It also allows to base the option strike on gOHM, linking it to market cap which makes a ton more sense for MM

Based on these arguments, our proposal would be to borrow (and promote liquidity in) gOHM instead of OHM

GOVERNANCE CONSIDERATIONS

I understand that there are (very valid) considerations about cexes and MMs using their gOHM inventory to vote and I feel a need to address these. In short the best insurance you have is both these actors have a lot to lose reputation wise, so best you can do is to work with exchanges / MMs who cannot be tempted to go to the dark side with even 100 mil payout from doing something dodgy.

First of all, I don’t think there is a difference, governance wise, between OHM and gOHM when it comes to cex listing. They could wrap OHM into gOHM just like any normal user could and you would have no say in it. 

This problem is far from unique to Olympus - exchanges like Binance and Coinbase already hold massive amounts of defi tokens, giving them a free hand on voting on proposals. However they still haven’t used this power (to my knowledge). One of the reasons is most of the proposals currently ongoing don’t really matter to them. Another is - potential backlash from the industry, which would be very real for some of the big names. Exchange wallets are extremely well marked, so the moment they would vote for a single proposal with gazillion tokens they do have, everyone will know. In general I think it’s very unlikely that cexes will exercise this voting power for any one protocol, let alone doing something outright controversial/evil, like changing protocol management or making changes in smart contract to rug pull everyone.

MMs are a bit more tricky. Without cexes it would be trivial to call out a MM who would cast a vote using the token inventory. Once the first cex lists gOHM, a “bad” MM can then deposit to an exchange and withdraw to another wallet they control (exchange playing a role of mixer) without DAO realizing. Same scenario is valid for staking by the way - nothing prevents MM from sending OHM to cex, then moving into a separate account and stake from there receiving free OHM. At the same time, the loan amount is still not significant enough to overwhelm voting. At the end of the day you’d have to rely on MM to be good on their promise not to vote.

Wintermute + Olympus DAO

Wintermute is the leading defi Market Maker, active across multiple chains and instrument types. As such we would welcome an opportunity to link ourselves closer with Olympus DAO and ensure liquidity for gOHM tokens across all relevant markets, whether it is cefi or defi. 

We realize that cex strategy goes beyond listing and supporting the price, but much more importantly should be focused on guiding the exchanges to do right by Olympus in terms of listing the right token and doing governance in the right way. At the same time, we want to focus our resources on what we do best - providing liquidity across multiple chains on defi, making sure that gOHM price is the same on eth, polygon, avalanche or any other chain and seeding liquidity to AMMs where needed

PROPOSAL

To approve Wintermute as an official market making partner of OHM, and to authorize the transfer of 750 gOHM from the community treasury to Wintermute for market-making purposes in the form of a loan

Wintermute will endeavor to:

• Guide the discussions with (pre-approved) centralized exchanges and provide liquidity in gOHM on day one and going forward

• With regards to defi:

  • Ensuring that AMM pools on new chains have at least $3mln in liquidity in a single pair containing gOHM

  • Provide quotes on aggregators (i.e. matcha, 1inch, paraswap etc) across all supported chains

  • (optional) - support listing gOHM perpetuals on dydx and/or perpetual protocol

Wintermute agrees to either return the full 750 gOHM loan amount to the community treasury at the end of the 12 month contract period OR exercise the repayment option, allowing Wintermute to purchase the gOHM token amount specified below on the respective option expiry date at a Strike Price

The Strike Price would be determined as highest of:

• $69,420

• TWAP price during first 7 days of listing on a centralized exchange (list of applicable exchanges pre-approved by DAO) * 1.5

Should Wintermute choose to exercise their gOHM option, the loan balance will be returned to our treasury in the form of either ETH or DAI, assuming DAI price of $1 and using ETH coinbase price at 23:59:59 UTC on the expiration date of the agreement

As always, we welcome community feedback and an opportunity to work together with Olympus DAO!

Would be great to see analysis of the upside as well as risks to adding a new asset to the treasury (not just UST, all proposals here).

I think this is a great idea and it's clear you've put a lot of work into it. Happy to vote in favor of proceeding further.

Some things to consider as you go about ironing out implementation details:

• What would be the 'mimimum standards' a fork must meet?
• To that end, what would be the approval process for a fork? OIP or more of a council type decision?
• For the olympus support, would encourage some sort of auditing process. As we saw with VESQ, audits of forks who are cooperating with OHM can be mutually beneficial as it provides two perspectives on the same codebase.

kombu_takana

1. The treasury, partnerships and policy team along with key strategic advisors (i.e tetra).
2. This only frees up to 33% of the RFV, this does not mean we will cap this at all times. Especially because if the token continues to grow then we cannot do anything further until the RFV catches up. We feel 33% of RFV is minimal enough to mitigate any great impact to the overall protocol and gives us the ability to monitor the performance as we allocate bond capacity to it. Keep in mind this is mostly from bond revenue so it's not like we're spending our treasury/excess reserves. TLDR, we want enough to give us significant growth/protocol influence but not so much so that we become over exposed in any one asset.
3. Reductions will be discussed internally and announced following the decision. The idea is that we want to allocate some bond capacity to allow for flexibility when farming. This is immensely beneficial since there are multiple moves we want to make within the next weeks that it would take many weeks/months to do proposals and discussions for each one to the community. Also, there will be treasury reports in which we can talk about our decisions.

@json support this proposal wholeheartedly.

At this time, may i also suggest that we need to establish a formal "code of conduct" for the policy/treasury team that will be privy to extremely valuable information? This is to avoid conflicts that privileged information might encourage.

I am in support of this proposal, but I would like to know how we as a community can have transparency in asset acquisition while also protecting the integrity of the acquisitions themselves. How do we know, for example, that members of the acquisition committee are not personally profiting from insider knowledge of these trades either by trading in assets they already own or have some stake in, or by front-running the assets themselves?

json I support the proposal but I’d like to see a framework on how conflict of interest will be managed. If a treasury team member has a substantial position in a strategic asset, their thinking will surely get muddled.

Thoughts on that?

Hello everyone. Rocket Pool launched recently, and a few ohmies and Rocket Pool community members have gathered together to draft a proposal for Olympus to invest some of its treasury with Rocket Pool. Before we make a formal OIP proposal, we’d love feedback from the Olympus community and DAO on our draft. Please let us know if this proposal interests you! And please comment with additional information you’d like to see, questions you feel this proposal leaves unanswered, etc.

Overview:

We propose that we stake 5% of our eth reserves, 340 eth at the time of writing, with Rocket Pool.

Rocket Pool is a decentralized, permissionless, community-owned, non-custodial eth2 staking service. Since its conception in 2016, it has remained committed to the principles of decentralization and non-custodial trustlessness that is core to Ethereum and DeFi.  Our networks must not be beholden to any one party - nor only to wealthy participants. By removing technical and financial barriers to staking and validation, Rocket Pool makes these services available to everyone. Of course, Ohmies don’t need to be reminded of the importance of decentralization. Olympus embodies the same ethos, building new community-owned financial infrastructure for the world, and demonstrating the power of trustless, cultural coordination. 

Rocket Pool has held 5 public betas over the life-span of Eth2 development, and completed its 4-tiered rollout on Mainnet on November 21st. The network has since amassed a TVL of over $140 million and is composed of 402 Node Operators registered from 55 different time zones. All signs point to Rocket Pool being a pillar of Ethereum going forward.

Rocket Pool Details:

• Users deposit eth into Rocket Pool’s staking contract, and receive a token called rEth in return.

• This token represents your share of the staking pool. Its exchange rate with eth increases over time as staking rewards accrue. For example, upon deposit, the exchange rate may be 1 rEth = 1.01 eth. A few years later when withdrawing, the exchange rate may have increased to 1 rEth = 1.15 eth.

• When you’re done staking, you can exchange rEth back for eth using the same Rocket Pool contracts.

• rEth is a ERC-20 token, so it can be transferred, swapped, deposited, or used in any number of potential defi integrations

• The site to stake is https://stake.rocketpool.net/ and a breakdown of token addresses can be found in the #resources channel of the Rocket Pool discord, and in this medium article from the Rocket Pool team: https://medium.com/rocket-pool/rocket-pool-rpl-token-upgrade-new-addresses-e96c12c55adf

Returns: 

• ~5%. This is the eth2 staking APR, minus a roughly 10% commission paid to node operators. 

• In the short term, as more people stake on the beacon chain this APR will trend downwards by a percentage point or so.

• After the merge, when priority fees are paid to stakers instead of miners, this is projected to increase to nearly 25% APR.

Risk:

• Eth2 staking itself is a very low-risk investment. Black swan liquidation events you might see in lending protocols, for example, are impossible.

• One potential source of lost funds is from getting slashed, an event where a staker’s funds are taken away as punishment for behaving dishonestly. Rocket Pool places all of this risk on node operators’ shoulders, ensuring that rEth holders will never lose funds during slashing events.

• Rocket Pool is very new, and so its contracts haven’t had the long-term battle testing of other staking providers. However, there are several factors helping to mitigate Rocket Pool’s risk:

  • Rocket Pool has had 5 betas, operates a permanent testnet, and has gone through a total of 5 audits.  Recent security audits include:

  • Consensys Diligence: https://consensys.net/diligence/audits/2021/04/rocketpool/ 

  • Sigma Prime: https://rocketpool.net/files/SigmaPrimeAudit.pdf 

  • Trail of Bits: https://github.com/trailofbits/publications/blob/master/reviews/RocketPool.pdf

  • Rocket Pool launched with a successful several-week staged rollout, letting the team carefully monitor the protocol’s health as they slowly increased the limits on investment.

  • Rocket Pool has established a $100,000 bug bounty with ImmuneFi.

Exit Liquidity:

• Even though Rocket Pool is an Eth2 staking provider, withdrawals will be available before the merge. This is because they have a deposit pool containing eth recently deposited by stakers, which hasn’t been paired with a node yet. As long as there is eth in the deposit pool, rEth holders can burn their rEth to get eth back.

• The deposit pool isn’t guaranteed to have eth in it. In an emergency, rEth is a ERC-20 token, meaning it can be swapped freely in dexes. There is already liquidity on Uniswap to exchange eth and rEth, although this would subject us to slippage and should be used as a last resort.

Future Integrations:

• rEth is an ERC-20 token, so it’s capable of being integrated into defi protocols, bridged to other networks, etc. Proposals are underway to accept rEth as collateral in Maker and Abracadabra, among others. 

• A star example in this case is Alchemix. Alchemix lets users take out risk-free, zero-liquidation loans, which repay themselves over time. Alchemix V2 will support many kinds of collateral, and it is very likely that rEth will be supported as collateral. With this integration, we could take out a loan on our rEth deposit, and use that loan to generate further yield, all with zero risk of liquidation.

Allocation Process:

• Initially, this would be a one-time deposit of 5% of the treasury’s eth: 350 eth as of this writing.

• At some point in the future, we’re hoping to make a proposal to increase this allocation to 10%, but that will be contingent on Rocket Pool establishing itself as a reliable, stable, robust service.

• If Olympus DAO decides it’s a big fan of Rocket Pool, a possible future alternative to one-time deposits is rEth bonds!

Community Growth and Network Mutualism:

• Rocketpool and Olympus communities have little overlap, despite their aligned principles and goals for decentralization. Most likely this is a product of time (Rocketpool conceived in 2016 and Olympus in 2021). This presents an opportunity for our networks to attract investment and participation from each other’s members. This network effect is innately 3,3. A Node Operator with sOHM now has a second reason to hodl their staked OHM.

We also have some final thoughts on some more intangible benefits of staking with Rocket Pool. Olympus DAO is inextricably linked to Ethereum, and Rocket Pool represents an investment in a decentralized future for Ethereum. Rocket Pool is the only staking protocol that supports Ethereum’s vision of a blockchain secured by a decentralized, permissionless Proof of Stake network.

Rocket Pool has already started delivering on its promise of decentralization. 400+ node operators have registered so far from 55 different time zones, and dozens more are signing up every day. By supporting Rocket Pool, Olympus DAO will be directly supporting a secure, decentralized network on which the world’s first decentralized reserve currency can flourish.

kombu_takana

Good question. Only the Olympus team can answer but I would say that it's very difficult for projects that have already launched to switch from being backed by stablecoins to being backed by OHM. They'd have to swap their stablecoin treasury for OHM. And if they do it at the market rate, this would destroy their runway. It might be possible if they were able to swap their stablecoin treasury for OHM directly from Olympus but this would require significant trust from OlympusDAO. In my view, this framework is better applied to new forks that can be 100% aligned with the mission right from the start.

It looks like [Redacted] might be an application of some of the principles above (although not on another chain and with a different ultimate purpose) so it might be an interesting test case.