I’ll give my personal 2 POOL about the Olympus DAO proposal:
There’s a definite benefit of using Olympus Pro for bonds regardless of what anyone thinks of Olympus as a protocol or the OHM token itself. We’re just using a DAO for a service that can provide value to the PoolTogether community.
Bonding vs. Current LM Incentives
We’re currently giving away 100% of the liquidity mining incentives to LPs on Uniswap V2. At 300 POOL/day, we’re giving 2,100 POOL/week to Uniswap V2 LPs.
If PoolTogether were to use Olympus Pro and exchanged POOL at a discount of 5% over a 4-week period with a 1-week vesting period, then:
14k less the 3.3% fee would be 13,538 POOL, which represents an increase of 50.42% of existing monthly POOL distribution to LPs.
20K less the 3.3% fee would be 19,340 POOL, which represents an increase of 114.89% of existing weekly POOL distribution to LPs.
However, instead of giving away POOL at a 100% discount, we’re closing that to 5% in exchange for LP tokens, which provide exposure to both POOL and ETH. And then you can add the 3.3% fee Olympus Pro charges to handle the sale of bonds.
Using bonds would mean we’d earn 95% of the value back in LP tokens instead of giving away 100% of POOL through LM incentives. That is a huge benefit.
Olympus Pro Bonds vs. Selling POOL from the Treasury to Provide Uniswap V2 Liquidity Directly
There’s a couple ways to look at this:
- All things held equal: we’d still be dripping 300 POOL/day AND selling POOL to buy ETH over a period of 1 month.
- Reduce incentives and use POOL to buy ETH: I’d assume we’d see more LPs leave if we reduced incentives significantly all at once. A step down in LM incentives could be done but that would exacerbate sell pressure if we’re assuming all Uniswap V2 LPs are selling POOL.
If we use 20k POOL and bond that over a 4-week period in exchange for liquidity, we’re buying out liquidity and giving LPs an incentive to do so. While the sell pressure could double within a 1-month window, it will likely taper off over time.
Based on today’s volume on Uniswap V2, 4,835 POOL/week represents $68,947.1, or 23.72% of the daily volume.
POOL is up ~30% on the monthly. A 5% discount + Olympus Pro’s 3.3% fee is $13.07, where POOL was trading on 12 October.
If POOL were bonded and vesting for 7 days, which caused 4,835 POOL to be sold every week, we’d see ~$69k in added volume each week if we assume that every single bonded POOL is sold at current prices.
Instead, if we decrease daily rewards for LPs to 140 POOL/day and offering a buyout through bonding, we’re essentially creating demand to sell LP tokens for bonded POOL. It would cost PoolTogether 20k POOL over 1 month, but over the course of the next 6 months, the protocol would save 9,780 POOL given (182 days * 300 POOL/day) - [(182 days * 140 POOL/day) + 19,340 POOL] = 9,780 POOL
That’s a 16.7% reduction in sell pressure over the next 6 months from Uniswap V2 LPs given increased sell pressure over the first month when bonds are sold.
If instead, POOL was sold to buy ETH over the next month, then we’d be selling 10,000 POOL (~$142,600 at current prices) for ETH, everything held equal. If this were in addition to current rewards, then there would be ~19,000 POOL sold within the next month. Given that 660 (3.3%) of 20,000 POOL would be held in the Olympus DAO treasury, we’d only see an additional 340 POOL being sold within the same time frame if we assume every POOL drip to LPs is being sold and every POOL bonded in exchange for liquidity is being sold as well.
If POOL is sold over a longer timeframe, then we run the risk that the price could drop or rise. If the price were to drop by $1.18/POOL or if POOL fell against ETH by 3.3% within 2-3 months, then we’d be in the same place as we would be if we bonded and sold POOL in the short term.
The biggest factor from my point of view: PoolTogether is dripping POOL to Uniswap V2 LPs at a 100% discount; whereas, PoolTogether could sell bonded POOL with a 7-day vesting period at a slight discount with a fee to Olympus and own ~9% of the existing liquidity on Uniswap V2 where the deepest liquidity exists, while closing the existing LM discount from 100% to 8.3%.