KIP-7: Olympus Pro Bond Program Trial

KIP Olympus Pro Bond Program Trial

kip: TBD
title: Olympus Pro Bond Program
author: lapras lapras@keeperdao.com
status: pre-draft
created: 2020-10-19

Preface

Proposal

Enter Olympus Pro’s Bond Program with 5,000 ROOK on a 15-week trial.

Background

Despite continued fundamental strengthening within the DAO (inclusive of the launch of governance), the ROOK token has faced inclement price action that leaves it undervalued (this is still evident, despite some recent recovery). This has been exacerbated by a lack of token liquidity.

Olympus Pro offers an appealing resolution to this illiquidity.


Analysis

Olympus Pro bonds offer governance tokens at a discount in exchange for liquidity. Implementing ROOK bonds would provide a sustained source of protocol-owned liquidity for the treasury (ROOK:wETH Uniswap v2 tokens and Sushiswap).

Ultimately, owning productive liquidity with the treasury is a scalable, multi-beneficial adjustment.

Benefits

• Permanent liquidity floor supports investors and minimizes down side risk
• Token liquidity is an important factor many Price Oracles require
• Minimizes Volatility
• APY from trading fees
• Additional DEX liquidity without having to commit treasury ETH reserves

Downsides & Risks

• Discounted ROOK tokens open some surface area for arbitrage. The thesis is the bond period, with anticipated appreciation, would make it non-trivial to execute on the arbitrage. Bond vesting periods are configurable; the default is 7 days.

Why do this instead of putting up LP ourselves

• Opportunity to distribute ROOK to a wider group of committed users
• Discounted price for new ROOK buyers
• Bond period briefly locks up ROOK
• Relationship with a project with a strong community and potential for future synergies

Strategic Choice

• We should not add additional emission sources by minting new ROOK tokens to commit to a bond program.

Instead, we have a few choices. The most appealing option is to use Strategic Reserves ROOK. The founding team agrees this is an apt use for Strategic Reserves and would be happy to use 5,000 ROOK for this.

Status

Team members have had preliminary conversation with OlympusDAO and both teams are aligned. The DAO needs to converge (via rough consensus) on a few decisions:

  1. A binary decision if we pursue this arrangement (suggestion: yes);
  2. ROOK allocation amount (suggestion: 5,000 ROOK - currently agreed upon by all parties involved);
  3. Duration of trial (suggestion: 15 weeks);
  4. ROOK Source (suggestion: Strategic Reserves);
  5. Bond period (suggestion: 7 days)

Olympus Pro Resources


Specification

  1. Enter Olympus Pro’s bond program with 5,000 ROOK (from Strategic Reserves) to last 15 weeks. This will yield us ROOK:wETH liquidity to support long term price stability and health on Uni v2 & Sushiswap.
8 Likes

I am in support of this. Great synergy with a fun and productive protocol, gives us better utility.

2 Likes

What is in it for OlympusDAO? What fees do they charge?

LFG! (3,3)

Endorsing all suggestions

I back this…great thing to do.

3.3% is the target for now

from medium announcement: The Olympus Treasury will take a fee on all volume. For the sake of our pilot cohort, this fee is a flat rate 3.3% applied to bond payouts. For example, if an Abracadabra bonder receives 1 SPELL for a bond, the Treasury receives 0.033 SPELL. These are more than fees to “charge” other protocols to build with us — rather, the transfer into our treasury represents our skin in the game. The success of our partners is the success of Olympus.

i support this proposal

hello gasless bonding in the future

1 Like

I support this proposal. These seems more like a promotional event that supports the ability to grow the KeeperDAO community. We should ask Olympus to promote/explain the ROOK products as a part of this.

I am doing a deep dive into OlympusDAO.
Although I do see the value of Olympus Pro, I am worried about the main OHM play.
The deeper I dive into it, the more I see the pyramid characteristics. Essentially, the protocol is redistributing value from the lower levels of the pyramid (the ones who are stepping in now) to the higher levels (the ones who stepped in first). The ones who stepped in first are getting a fixed percentage of all investment that comes in after them, without dilution (through staking). It is cleverly disguised, but openly disclosed in the docs and contacts, so it is not a scam in the sense that it is misleading. And there is always an end value, the protocol value will not collapse to zero (but it might reduce to 1 USD per OHM), so in essence their goal of creating a stable coin will actually succeed. However, the latest joiners will not recover their investment, and the early joiners are making an awful lot.
I know that many things in crypto have these type of characteristics, but still, i am not sure that the positive marketing effect of associating with OlympusDAO will last long. And it might even turn against us.
Also see the 30+ forks - are they all seeking to create their own pyramid?

May be wiser to just take their bond idea and implement it ourselves.

Undoubtedly the Olympus community is strong, while I don’t think they are target users of KeeperDao. The logic of KeeperDao is a little bit complicated compared with OlympusDao, and the APY is too low for them.
However I do think Olympus Pro definitely has its value. I support this short period of experiment. Especially there is TokeMak for similar purpose, no need put all eggs in one bucket, right?

Correction: I did some more digging. Short term OHM can drop only to 50 USD, which is its current Risk Free Value. (dropping closer to 1 or 2 USD will take at least a year) The premium of 1100 USD that people are paying for OHM right now is going almost completely to the existing stakers. A new buyer of OHM is only getting (1 divided by a circulating supply of 3,3 m) = a share of 0,0000003 of all future protocol revenues. The other 0,9999997 of future revenues go to the OHM holders before him (just as the premium he just paid) (this assumes that all existing OHM holders will continue staking - which they will not once price drops; if people stop staking his share may go up to 0,0000006 or so - it will be a 2x larger share of a pie that is 10x smaller…). Which means essentially that he needs another 3,3 million people after him to buy OHM for 1150 USD. But for each of those buyers the odds reduce even further. The last one gets only 1 / 6,6 m = a share of 0,00000015, so he needs 6,6m suckers after him to break-even, the last of whom needs 13,2m suckas etc…
Probably within a year the price of OHM will drop much closer to its Risk-Free-Value (currently 46 USD) and then all the latest buyers (probably including everyone who is buying now) will start to realize that they stepped in too late… People will start blaming, “Pyramid Game!” (which you can argue about - but it certainly looks and smells much like it…) and gone is the positive publicity.

Having said that, as a participant of the Pro program we are not exposed to that risk. (Let us please sell any OHM we might get right away!!). A positive spin-off for a couple of months may well be enough for us , it may bring in more positive buying pressure for ROOK, who knows. OHM may be a pearl in the crypto world for quite some months still - as the community is strong and maximalist - so they currently keep reinvesting and therfor sustain the high price (for them it is easy to reinvest, as 0,9999997 of their premium paid is going to themselves - obviously this is a lower share for each one individually, but you get the idea - they try to keep the price as high as possible)

So, although I would not propose this, I am also not objecting.

I think the costs associated with OlympusPro Bonds are best thought of as a marketing expense. The network effects around Olympus are tremendous at the moment and this could be just the thing to improve ROOK liquidity.

I’m in favor!

2 Likes