PTIP-26: Llama 
PoolTogether: Tokenomics Research and Exploring Alternative Capital Structures
Simple Summary
Llama DAO plans to create a report that outlines treasury management approaches PoolTogether can use to add balance sheet assets or utilise existing reserves (protocol revenue). The report will include actionable solutions the PoolTogether community can use to attract depositors and deliver value to POOL holders. We will also review possible changes to the POOL drip, current incentives, and tokenomics. To complete this report, we are seeking a grant from PoolTogether (more details below).
After the report is complete, Llama hopes to work with the community and identify the most promising approaches in the report, draft up a detailed implementation strategy, and then ultimately help to facilitate the strategy’s execution.
You can read more about Llama, our existing partnerships and our working group members here.
Abstract
PoolTogether is working to achieve $1B TVL and further increase the price of POOL.
Llama DAO strongly believes in PoolTogether’s business model. The Llama working group is seeking a grant to create a comprehensive report that will review different strategies PoolTogether can utilize to grow prize pool sizes and attract more depositors. Specifically, Llama’s report will include an array of treasury management approaches to increase balance sheet assets through debt instruments and protocols, as well as the possible use of derivatives. These balance sheet assets can then be used as sponsorship capital, used to finance POOL buybacks, or deployed for other uses. The report will also consider how existing reserves can be used, as well as other tokenomics-related questions such as changing the POOL drip rate and different ways to return value to tokenholders (e.g., dividends, burns, buybacks).
During the drafting process, we can submit regular updates to the community directly or through a Community Review Board. This ensures all of the work and reporting Llama conducts is in line with the interests of the PoolTogether community.
At the conclusion of the grant period, the report will be presented to the community for review, with the intention that Llama will then make a further proposal to Governance to request funding for Llama DAO to explore some of the avenues presented in the report in greater depth and eventually help facilitate its execution (e.g., conduct a debt raise/sell derivatives for PoolTogether).
Motivation
The ultimate goal for PoolTogether is to realise $1B in TVL. To date, the protocol has seen significant growth, but total AUM has started to level off.
PoolTogether saw a dramatic increase in AUM at the end of February 2021. This coupled with PTIP 5’s increase of the reserve rates for governed pools drove substantial growth in protocol revenue.
While the USDC pool has grown over time, it is hitting a plateau. The USDC pool saw 45.67% growth from the all-time high on 4/15 to 7/17.
On the other hand, the DAI pool has seen a 63.59% decrease from the all-time high on 4/15 to 7/17.
Notably, the all-time high deposits were within the original 14-week POOL drip schedule, where 2,295 POOL/day were allocated to both USDC and DAI pools. PTIP-15 adjusted the rates by reducing POOL drip allocations for USDC and DAI pools. The USDC pool saw a 39% POOL drip reduction; however, the DAI pool saw a 69.5% POOL drip reduction. It’s likely this reduction in POOL drip affected the AUM within these two pools.
Specification
Overview
Llama wants to partner with PoolTogether to drive growth within your protocol. Llama recognises that POOL is currently undervalued given the current FDV is $82.30m and TVL is $183.5m; the FDV/TVL ratio is a paltry ~0.45x.
Through extensive review, members within Llama can identify various approaches PoolTogether can take to drive growth within the protocol while delivering value to POOL holders.
Llama is already working with other leading DeFi projects such as Uniswap and Aave Grants on asset management strategies. Llama is also developing an Index Coop product for DAO treasuries.
To begin what Llama DAO hopes to become an ongoing partnership, Llama is seeking a grant to create a report on treasury management approaches with actionable solutions PoolTogether can utilise to add balance sheet assets that can be used to increase sponsorship capital and/or conduct POOL buybacks for the PoolTogether community. We will also review and provide possible changes to tokenomics (e.g., POOL drip, staking rewards, periodic buybacks, etc.).
Given the PoolTogether community has already divested a portion of POOL from their treasury into stablecoin assets (PTIP 13), any further sale of POOL assets from the treasury would not be advantageous to the protocol given the resulting dilution it would cause. The protocol has steady revenue inflows, which make other approaches that do not require any sale of POOL more advantageous.
Currently, PoolTogether has weekly inflows from reserves rates of ~$29,432. As more users deposit capital into the various governed prize pools, especially USDC and DAI pools, more revenue flows into treasury reserves. By adding debt to the DAO’s capital structure, the community can pull forward future revenue to be used today as part of POOL buybacks, or as sponsorship capital in stablecoin pools to accelerate deposit growth. These approaches all center around the views @Leighton outlined in his Perpetual Growth framework.
Therefore, Llama DAO believes it would be prudent to explore alternative strategies to increase the amount of assets on PoolTogether’s balance sheet.
Over a 5-7 week period, Llama DAO will review various approaches to increase balance sheet assets, complete relevant high-level calculations for each of the approaches, and think through basic feasibility/implementation analyses for each of the approaches as part of the report for the PoolTogether community to review. This report will present each of the treasury management approaches that are available to increase balance sheet assets; for each approach, the report will provide a corresponding Overview, Calculation, Risks/Considerations, and Feasibility/Implementation section. At the end of this report, Llama’s recommendations will be included along with the estimated work, time, and resources necessary to implement these strategies. In addition to various approaches to increase balance sheet assets, Llama DAO will also review PoolTogether’s current tokenomic incentives, as well as provide recommendations on additional ways to return value to token holders to better align incentives (e.g., comparing regular buyback, token burn, and “dividend” programs).
While Llama is working on the report, our working group will provide weekly updates to the PoolTogether Community to keep the community updated on our work. An open, transparent process will give the community insight into our process and how we use the grant funding to deliver the most value for the PoolTogether community. We think the best way to do this would be to create a “Review Board” consisting of a number of community volunteers with relevant domain knowledge. Llama can share findings, strategies, etc., with such a Review Board. Alternatively, Llama is also happy to engage with the community at large during, e.g., the weekly community call to solicit guidance and provide updates.
After the report is completed and shared with the PoolTogether community, Llama DAO hopes to receive feedback on the most promising treasury management approaches to add more balance sheet assets. Should feedback be positive, and with guidance from the community on the most promising avenues, it is the intention of Llama DAO to request further funding to draft up a detailed implementation strategy and ultimately help execute/facilitate any relevant transactions.
Grant Requested and Milestones
For this grant, Llama is seeking $12,000 in USDC and $18,000 in POOL. These funds will be used to compensate Yuan Han Li (@yuan-han-li), BraveNewDeFi (@BraveNewDeFi), and Accelerated Capital (@AcceleratedCapital), who will be the primary contributors to this exploratory report, along with other supporting members within Llama DAO who will contribute to the report.
Llama proposes that $12,000 in USDC be paid at the start of the grant period. Once the report is delivered to the PoolTogether community at the end of the 5-7 week grant period, the remaining $18,000 in POOL can be paid to Llama. The $18,000 in POOL will be deposited into the POOL pool, and the pPOOL will remain locked within Llama DAO’s treasury for 1 year.
Throughout the duration of the grant period, @BraveNewDeFi will provide weekly reports on the governance forum outlining Llama’s progress on the development of treasury management approaches.
Rationale
Llama aims to set the gold standard for DAO treasury management.
We want to form a strategic partnership with PoolTogether and work to increase depositors and help move the needle closer to the $1B TVL goal. As members of Llama DAO and the PoolTogether community, we don’t want to work for PoolTogether: we want to work with the community to grow AUM and increase revenue.
To kickstart the working relationship between Llama DAO and PoolTogether, we wanted to put together a report with actionable treasury management approaches the community can use to deliver value to POOL holders and increase the number of unique depositors.
The Llama working group first brought this idea to PoolGrants, but after meeting with the committee and discussing our strategy, PoolGrants did not feel it was within their mandate to provide funding for the creation of such a report. Instead, they advised that we bring our proposal directly to governance given it is Llama’s desire to establish a long-term strategic partnership with the PoolTogether DAO.
Status
- Yes
- No
- Abstain
0 voters
