I wanted to gauge the communities interest in diversifying the PoolTogether Protocol treasury using a model similar in concept to BadgerDAO.
Currently almost 100% of PoolTogether’s treasury is held in POOL tokens. This makes the treasury susceptible short term changes in the price of POOL. I believe diversifying this by doing a direct exchange with long term aligned parties could be very useful to:
Boost the protocol sponsorship and thereby accelerate the perpetual growth
Provide stablecoin holdings that could be used to fund future development
Provide a strong foundation in case of any bear market
I’m thinking something in the $5 - $10 million range provided to PoolTogether governance in the form of stable coins. These stable coins could immediately be applied to prize pool sponsorship but also in the longer term used for protocol growth and development. In exchange we could provide POOL tokens directly to interested parties at a rate that is discounted from the “spot price” on the market. By “Interested parties” in this case I’m primarily referring to long term aligned investment funds in the crypto space (again, similar to what BadgerDAO did). We could negotiate a price per POOL for them and do the exchange without using the open trading markets. This is important because an exchange of this size would significantly distort the open trading markets right now.
There are obviously a lot of logistics to figure out here but I mostly wanted to poll general sentiment to see if people are interested in this idea?
I think it sounds interesting. You are putting tokens in the hands of people who most likely will hold for a while. It also adds to the size of the sponsorship that is generating yield for the protocol. Is it possible to stipulate a lock up period? That’s like an instant arbitrage if we sell below spot prices.
Nice insight into setting up PoolTogether for the future, Leighton! It’s an interesting model and something I have thought about a lot. This ties in well to any long term exit strategy and the game theory is interesting due to so many unknown variables.
Regarding #1, do you mean getting PoolTogether to sponsor more programs or getting more programs to be inside of PoolTogether? Both ways are interesting and can help with perpetual growth. Could an endowment be established from the pools themselves to help guide governance into the future perpetually?
Regarding point #2 and #3 above, diversification is good. This is especially true as things are good in the crypto markets but that will come to an end. Ultimately, we’re going to go into another bear market at some point, having stable coins available for the crypto winters is an excellent idea. The question would be: which stable coin or coins? In my humble opinion, that gets into an entirely different argument.
However, what kind of sell pressure would trading the POOL tokens in for stable coins have on the token in general? I’m sure there are some really good ways out there to limit the impact to providing too much sell pressure onto the token.
I’m in high support since I think this is the logical next step to ensure long-term stability. I think we should look into building a DAI and USDC position in the Treasury which would allow us to build the sponsorship tickets in these respective pools (to point #1).
If we do an OTC exchange I think there should be a timelock on the POOL tokens, BadgerDAO suggested 12 months. We should also think about if these exchanged POOL tokens can be pooled in the POOL pool (too many pools lol) while in lock up.
Current spot price of POOL is ~ $28, let’s say we do a 20% discount for $7.5MM that would be about 334,821 POOL which is about 5% of the total Treasury (please correct me if I am wrong). While 5% doesn’t sound like a lot, it is still very much significant. But with that said, looking at the Treasury in terms of a portfolio it is still not very diverse, considering the Treasury would be 95% POOL and 5% stable coin.
Perhaps in addition to an OTC exchange we also bring in stable coin on a regular basis via the reserve rate of the DAI and USDC pools. This could be something like 10% of the reserve is ‘tagged’ as Treasury funds. These tagged funds would stay in their respective pools as reserve tickets helping build the prize but could be utilized by the Treasury if need be. Maybe something like this is already happening but it just came to mind. Let me know what you guys think.
I like the idea of doing token swaps with other protocol treasuries like UNI / COMP etc. I think we should do the swap through a lottery distribution as well. I talked about this idea in another thread in this forum. Might be a bit of work but it’s novel to pooltogether; our reserve takes a cut of another protocol’s treasury funded prizepool and in return their treasury earns a POOL drip. Would also prefer to wait for the POOL token to appreciate before making any swaps. IMO it has a lot of catching up to do. I have POOL marked around $120-$150 in terms of fair value atm. I expect us to move up significantly towards the end of this liquidity mining period.
Don’t like the idea of giving a hedge fund a discount to spot, especially when there’s the possibility they could be up to shenanigans on the spot price to get an even cheaper price. The idea of offering a discount to funds is common but let’s remember that the fund probably really wants the exposure and if they’ve done their research on POOL I’m sure they’re concluding it’s dirt cheap right now. An open auction would be nice I guess, or maybe if we made some sort of bonding curve above spot that we grew into it would give equal opportunity to all market participants to buy a big chunk in one go.
I like the term “bear market survivability” from the Badger proposal. This makes perfect sense and for PoolTogether getting a stablecoin chest is true beauty as it provides for capital to secure further growth, in good times and bad, and in the same time can deployed into the pools to sponsor and drive expected value for players above 1. This is extremely valuable.
The options to utilise POOL from the treasury are limited to:
- selling on market
- selling via block trade
I am also in favor of your proposal to sell it to long-term investors at a discount rate ideally with a lockup. But in any case dumping on the market doesnt make much sense now given the relatively low liquidity of POOL and the severe price impact when trying so. So this risk is rather limited. And buyers should also be convinced about the long term value creation potential of this investment.
Suggest to open up a poll on percentage, I would be leaning towards the lower end. Maybe in the near future there will be more capital efficient solutions available, specifically to borrow USDC with POOL as collateral, avoiding selling the precious POOL of the treasury.
Technically I believe 100% of the reserve belongs to the treasury. It just happens to sit in sponsorship until needed. We already have all of that available to us though.
I really like the idea.
just a thought here but couldn’t the POOL be discounted and sold to any interested party but be put into a contract that enforces a long term commitment via escrow?
I know CREAM has vesting periods of anywhere between 1 and 4 years for their farming programs where a longer commitment has a higher return, CREAMs vesting does not translate 1 to 1 to this situation I guess because of the higher yield on vesting periods, but something like that might be interesting if the discounted POOL were to be opened to a broader market.
Could be more interesting If its discounted ptPOOL - and that ptPOOL did somehow implement a higher drip percentage on longer term vesting commitments - im probably missing something here and could be way off the mark, but I figured Id throw it out there in just case.
Yes, a lock up period would need to be stipulated for sure.
Ah, regarding #1 I was referring specifically to depositing the stable coins into the prize pools sponsorship which increases the effective yield see here for more info: Perpetual Growth. Two important mechanics of the… | by Leighton Cusack | PoolTogether | Mar, 2021 | Medium
Regarding #2 and #2 I was assuming this would be Dai and USDC so we could use them to deposit into the prize pools.
In terms of your last comment. I think think this would be done as an “over the counter” direct transaction rather than selling on the open market so it wouldn’t impact that.
We would need to be careful on how to structure it but assuming 1) we feel it is fair and 2) there is a lock-up and 3) it’s reputable long term crypto investors I think it is preferable to do an over the counter transaction vs. just an open sale. In an open sale we really have no idea who ends up holding the tokens and what their long term alignment is.
Definitely think one way or another we would want their to be a lock up!
I think it can be a good thing to put all these values at work and benefits current price pool and reserves
The diversification of the treasury I think makes a lot of sense. While in a bull I don’t know if I would covert more than a quarter of the total treasury to stable coins in general as I still believe there is a lot of value to be accrued and captured this year.
For OTC trades with strategic partners including protocols, lock up periods make sense but you could also offer the tokens as a discount if they are willing to contribute even more diversified pools, contributions to loot boxes and extensions into key sectors like gaming. Additionally, both pairs and pools can pull the protocol in to key strategic directions such as POOL/AXS, POOL/MANA, POOL/MVI, POOL/VPP, POOL/WHALE, POOL/FWB. Games and social communities that develop a stake into PT helps to drive even more creativity and participation on the weekly prizes.
In general agreement with this proposal. A key purpose of a treasury is to ultimately ensure capital inflows exceed outflows (in the form of open and additional Capex to facilitate sustainable development efforts to grow the base in capital efficient manner). Diversification is a great weapon in the tool yard to enable this - especially as we see monthly price volatility for POOL at 13% and intra-day volatility (monthly) at 21% (for the past 30 days on the day of this post). Might be very cool to see if someone could build this out!
One example I especially like IndexCoop’s proposal on this front (where they seek to increase their treasury allocation of Eth to facilitate the ultimate end-goal of launch a smart Balancer pool) - and would hope that we can get to the same point with Pooltogether shortly.
On (1) - I’m in favour of ultimately boosting sponsorship as that is something that will ultimately lead to network effects in protocol as a short-term goal. What might be more helpful to see is the duration associated with the protocol sponsorship - and if that can lead to more consistent programs in allocating reserves towards this purpose (and thus understanding the cost of capital that we’re dedicating towards growth). If we can also get a broader community of users to contribute capital to yield-delegation vaults (similar to what Rally did) in exchange for POOL rewards, this might be an interesting direction to gauge what form of interest there is in the market - as opposed to going down the OTC route.
On (2) - Happy to consider this as long as there are relevant funding needs that need immediate consideration. Until then, might even consider diversifying holdings by getting exposure to an index product/Eth or some combination thereof which would require very little active monitoring.
But I am 100% onboard with the idea that it would be exceedingly important to have a symbiotic relationship with projects building on/adjacent to Pooltogether - and this is the way sustainable moats develop. There could be treasury needs to fund development of these - and ultimately have some of these projects efforts/capital/community flow back towards PT and bolster them both.
Neat report, we should definitely be inspired by it and write a similar one.
I hope we will be able to tend towards a positive net earning, they seem to spend a lot of money to incentivize LP staking and centralized exchange listing. With our reserve growing, our revenues should be pretty substantial so it should offset all the POOL tokens we will spend to incentivize LP staking.
Additionally, the broader discussion points to be considered are how we deal with the reserves: these include paying for opex, putting these to use as sponsorship capital (to continue bolstering the protocol), holding these towards diversifying treasury and additionally using these to deepen liquidity for POOL.
I think the community needs to ultimately decide the order of prioritisation - and then move ahead with the appropriate allocations.
I like this idea . When can we do it ?
Boy so much activity to catch up on. I’m for this but, I’m also with @ageless, currently POOL seems pretty severely undervalued imo, so waiting until after the currently liquidity mining has completed is preferred. And ideally, after we have a fully liquid LP going on, as we’ve heard in other posts, so actors can’t buy in without moving the price dramatically.
TLDR: Great idea, after we have a solid LP and after our current liquidity mining has completed.
How about if you had a pool of tokenized real estate. Could you pool the “stable” value of real estate (in its tokenized state) and have that add value to the pool? I have been playing around with this “what if” in terms of being able to tokenize real assets into their digital counterparts and offer up liquidity for protocols. Is this a silly idea or? POOL/CASA