POOL token holders currently control a significant treasury of over 50% of all POOL tokens (valued around $100 million). However, because this treasury is almost fully denominated in POOL it is highly volatile. Additionally because the POOL tokens are simply being held in the treasury it is not contributing any value to the perpetual growth machine of the protocol. Diversifying our treasury will provide some stability and improve the effective APR and expected value for the USDC prize pool.
This proposal will transfer 538,461 POOL tokens (5.38% of total supply) from the treasury to ParaFi, Galaxy Digital, Dragonfly Capital, and Nascent. In exchange these parties will transfer $7 million of $ScUSDC to the protocol treasury (this is USDC deposited into the prize pool sponsorship). This method will ensure the USDC instantly is creating value for the protocol. The protocol will completely control this USDC and can use it for other purposes as needed in the future.
If passed, this arrangement provides POOL tokens to the investors at an effective price of $13.00 per POOL. A 35% discount from POOL’s 14 day average spot price (calculated as of April 30th using CoinGecko’s data).
POOL tokens acquired will be locked with a 1 year cliff and an additional 1 year weekly unlocking schedule after the cliff.
PoolTogether is highly reflexive. Larger prizes drive more deposits, more deposits create larger prizes. Keeping a positive feedback loop is crucial in the early stages of protocol growth. Diversifying the protocol treasury to include stable coins used to sponsor the prize pools helps jumpstart this growth. As outlined in the perpetual growth mechanisms.
Outside of helping jump start growth, diversification of the treasury makes sense to ensure long term protocol sustainability in the event of any major 2018-style bear markets. 538,461 POOL tokens represents 5.38% of total supply and 9.4% of the current POOL held by the protocol. Diversifying ~10% of the current treasury into stablecoins is a reasonable target.
It would be possible to diversify the treasury through either direct sales on the open market or other mechanisms. However, this has a few downsides. Doing a direct sale would likely take much longer to distribute this amount on POOL into the market effectively. This would delay the start of the reflexive growth loop. Additionally distributing on the open market would mean we have no idea who is acquiring the POOL and what their long term intentions are, this method enables us to work with trusted names in the DeFi investment space who are proven to be long term aligned. ParaFi and Nascent are both existing POOL token holders while Galaxy and Dragonfly Capital are new.
The governance proposal will be as simple as possible. The proposal will transfer the amount of POOL tokens to addresses the parties verify ownership over. After the 5 day voting period, if the proposal passes, the counter-parties will transfer the $ScUSDC to the protocol controlled “Time Lock” contract. They will do this during the 2 day delay before execution. After the 2 day delay, the proposal will be executed and POOL will be transferred.
This does present a minor risk that the counter-parties could fail to meet their agreement and we could not stop the proposal from being executed. Given the highly visible nature of this proposal and the damage this would do to their reputation. This risk is not viewed as material.
Please vote in the poll below. If the overall sentiment is positive an on-chain vote will commence in 3-7 days
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