Summary
As ratified in TIP-05, TreasureDAO is executing its strategy towards sustainable liquidity management. Current emissions of 50,000 MAGIC per day to incentivise MAGIC-ETH SLP are not sustainable long-term. Over 30 days, this equates to 1.5m tokens and $1.5m USD (average $1 price) for transitory and, in part, mercenary capital.
The next phase of sustainable liquidity management will execute actions within the ratified framework of TIP-05:
- Progressive tapering in MAGIC-ETH SLP emissions
- Introduction of MAGIC-gOHM SLP rewards
- Introduction of MAGIC-ETH SLP and MAGIC-gOHM SLP bonds under the Olympus Pro bond programme
- Intrinsic ‘SLP token sinks’ into Bridgeworld v1.0 and partner projects (covered in a later TIP).
Rationale
The next phase in sustainable liquidity provision will see a further tapering of emissions, together with the introduction of Olympus Pro bonds to allow the DAO to build protocol-owned liquidity.
Reward programmes will be released in 30 day tranches to allow the DAO to closely monitor liquidity and make dynamic decisions as required, armed with sufficient data. As mentioned previously, the DAO views LP rewards and bonds as complementary strategies which can be flexed in line with a macro framework (TIP-05), together with broader LP abstraction.
Olympus Pro Bonds
The Olympus Pro bond programme provides the DAO a proven framework to ‘buy-back’ liquidity from the market / community in exchange for discounted MAGIC tokens, subject to 7 day vesting. The user can claim any percentage that has vested at a point in time.
The discount rate is set dynamically based on supply / demand, and will be informed by the experienced Policy team at Olympus DAO. Discount rates will be a reflection of point in time pricing, and can be subject to material volatility. The level of rewards (ie. size of the bond programme) will be flexed to ensure there is sufficient demand for the bonds.
Big picture, the OlympusDAO bond programme enables us to own a material portion of our liquidity. This achieves multiple objectives:
- reduces reliance on transitory and mercenary capital
- grants projects greater control over liquidity provision, and by extension, gives greater confidence to the community
- creates an ongoing mechanism to bolster and diversify the treasury (ie. LP fees and rewards).
Proposal
Proposed changes include:
Arbitrum MAGIC-ETH SLP
- Shift from 50,000 per day to 33,333 MAGIC per day once the current programme ends on the 26 December. On a $7m USD liquidity pool (current average), a 1% contribution would yield 175% APR which would be the highest APR on Sushi’s Farm page.
- This will be supplemented by Sushi rewards via their Onsen programme. Treasure DAO has no control over the level of Sushi rewards, however, increased liquidity and volume gives greater weight to increase Sushi rewards. Further, elevation of the MAGIC-ETH pair on the Onsen dashboard should increase exposure of liquidity to a broader set of users.
- Bonds for MAGIC-ETH SLP will also be offered as an option for community members to access vested, discounted MAGIC in exchange for their LP.
Arbitrum MAGIC-gOHM SLP
- Introduction of a 30 day reward programme to incentivise a MAGIC-gOHM pair at 10,000 MAGIC per day. This will yield 120% APR on a 1% position excluding gOHM rewards.
- It is hoped the above will be supplemented by gOHM rewards provided by Olympus DAO as part of their cross-chain incentive programme, Proteus. The exact size and nature of these rewards are to be confirmed.
- The creation and management of this pair, together with the Olympus Pro programme and strategic partnership with Olympus Odyssey, showcases our ongoing commitment to working with the industry's pioneers and innovators.
- We will monitor the uptake of gOHM liquidity, together with feedback from the community and interaction with the bonds below to inform future rewards.
Olympus Pro | Arbitrum MAGIC-ETH SLP and MAGIC-gOHM SLP Bonds
- A 6 month bond programme is proposed at ~$160k USD per week (or 3.5m MAGIC). This will be split across:
- MAGIC-ETH SLP: 2.5m MAGIC
- MAGIC-gOHM SLP: 1m MAGIC
- The initial pilot will be tested for 30 days. If this is fully subscribed, the DAO could own up to $590k USD liquidity after 30 days assuming an average 10% discount and $1 average token price (before discount).
- This equates to ~$3.5m USD of protocol owned liquidity after six months (at an average $1 price) - including a material share of both the ETH and gOHM pools. This adds immediate confidence to liquidity depth (ie. will not be pulled), reduces the need for ongoing high LP reward emissions and introduces a new revenue stream for the DAO.
- The Olympus Team have agreed to the following terms given our strategic alignment:
- MAGIC-ETH: 3.3% fee on bonds
- MAGIC-gOHM: 1.1% fee on bonds with a condition that the DAO retains any gOHM related protocol owned liquidity for a minimum of 6 months
- The OlympusDAO Policy and TreasureDAO teams will monitor the performance of the bond programme closely to flex the size of rewards accordingly to drive active participation. This may result in shifting rewards from other incentive programmes.
Polling Period
The polling process begins now and will end at 4:00am UTC on 14 December. If quorum is reached, a Snapshot vote will be put up at 4:30am UTC on 14 December.
