So far we have focused on building out our system. We have rolled out staking, liquidity bonds, and reserve bonds. We have tested different system parameters. We have overhauled our contracts in V1.1.
I believe that we are at the point where we should stop looking inward to build, and start looking outward. We should set protocol features and parameters static, and work to integrate and partner with the rest of the industry. I propose the following plan:
There are a few different pieces to it
- Liquidity Incentives
We help other projects build liquidity, while building our own, through dual-incentivized $xx-OHM pools. Unlike most pools, where one side pays the entire cost (i.e. OHM-DAI, where Maker has pure benefit and no cost), we can create these pools in a much more collaborative and symbiotic manner.
- Bonds
As liquidity forms with OHM pairs, we can accumulate pool ownership. This: locks in that liquidity; converts liquidity from a perpetual cost to a revenue producing asset; increases the value of the treasury, as well as our ownership of our ecosystem, and; drives demand for both OHM and the counter asset.
- Locked Staking
Locked staking would offer OHM holders the ability to lock in a return for a three-month term. This reserves high returns for those committed to their job: keeping supply off the market. This would offer a final opportunity for, and smooth transition from, the six-figure APYs we have today. You can read more about this here.
The goals here are to:
- Increase liquidity for OHM and partnered tokens
- Increase demand for OHM and partnered tokens
- Increase use of OHM as a denominating currency
- Increase size and diversity of the treasury
- Increase alignment of incentives for participants
- Develop valuable relationships with other protocols
- Develop an ecosystem/economy around OHM
How it would work:
Step 1: The Partners
We create a short list of initial projects to partner with for new pools. We should use this as an opportunity to develop relationships with protocols that we can grow with. Additionally, we should ensure that the tokenomics are sound and the valuation is within a reasonable range, since the treasury will be taking on exposure to their token.
Step 2: The Pools
They deploy $xx-OHM pools, and we provide incentives to add liquidity to those pools. This step is focused on building baseline liquidity that we can build on. Preliminary trading activity would be measured during this phase, allowing us to start gauging the long term viability of the pool.
Step 3: The Lock
We deploy locked staking for OHM, and provide a final opportunity to lock in six-figure APY. This would be paired with decaying rewards for unlocked staking.
Step 4: The Squeeze
Where there was once lots of supply and high inflation, there would now be very little. New pools are already driving demand to add liquidity, and suddenly there’s no one to sell. That’s where the treasury steps in.
Step 5: The Bonds
The protocol will accumulate pool shares by offering OHM for LP. This increases the pool, increases the treasury, frees up capital for more LP, and drives volume through the pairs.
Step 6: The Unlock
6 weeks past the launch of locked staking, supply will slowly start coming back online. The goal of the previous steps were to make OHM the base currency of its pairs; if that goal is achieved, new supply will boost the prices of paired assets more than drop the price of OHM. Think of this like lots of ETH coming into the market and buying tokens; do the tokens go up or does ETH go down?
Step 7: Repeat
The first cycle will likely be the most poignant, with the initial staking lock serving to put supply in a vacuum. However, the same relationships should persist over time. Additionally, the larger these pools get, the strong the network effect. As we go, we should expect to stop having to incentivize the creation of new pools at all: rather, projects will pair with OHM on their own, and then lobby our DAO to add bonds for their pair.
Considerations:
- Exposure: This requires taking on exposure to the counter-asset of each pool. This is not a bad thing per se; we maintain the market value of the asset at all times and mitigate it with exposure to our own market. However, which assets we pair with must be carefully considered.
- Backing: Since the counter asset of these pairs will not be USD, we must re-evaluate of how we mint against LP. We can either 1) not mint against them at all, and buy them with future rewards, or 2) determine a comfortable markdown valuation and mint at that rate.
- Cost: There is a cost behind every token we mint. However, considering the lower rate of inflation and locked supply relative to today, these costs should be manageable given bond capacities remain within reason.
