⭕ [RFC] Elastic Finance Purchase

Summary

After this successful temperature check, I suggest to diversify the mStable Treasury with a small allocation of tokens in the Elastic Finance stack in order to gain exposure to this financial primitive, and hedge against the risk of missing out if they become a global standard in the ecosystem and beyond in the coming months and years.

Abstract

Rebasing tokens have long been a great way to get heated discussions started around their elastic nature, and have caused a great controversy in the market as to their use-case, usability, and ponzinomic nature.

Currently, there exist only two tried-and-tested rebasing token projects that also represent a financial primitive in the space, the first one being Ampleforth (the grand-daddy of them all) and the second one being OlympusDAO.

Both of these protocols take a completely different stance on the underlying issue, and both protocols wish to create a base layer reserve currency for the world, AMPL and OHM.

Further information around both projects and Elastic Finance in general can be found here and here respectively. Finematics has also released a great primer on Ampleforth and OlympusDAO.

In my opinion, both primitives can succeed in the future, although currently OlympusDAO has the bigger following and overall support from the ecosystem, so I would suggest to allocate more heavily into OHM at the moment.

I was thinking of an initial amount of around 100,000 mUSD worth of tokens to be bought at an opportune time on the open market, split into 75% OHM and 25% AMPL.

Both tokens can then be further utilized by the DAO, and I would suggest to stake OHM directly on their website, and put the AMPL allocation on Aave.

Funding would be handled differently for each token: OHM would be purchased directly from the OlympusDAO via MTA bonds, adding MTA to their treasury, whereas AMPL would be purchased with DAI currently held by the Asset Management subDAO.

Motivation

Our treasury still arguably has too heavy of an allocation in native MTA, and we’re dreadfully underexposed to the rest of the DeFi ecosystem and the different financial primitives these protocols have on offer.

We’re slowly rectifying this issue, though, and I hope that by owning a small portion of the Elastic Finance stack, we can focus our other liquidity endeavours to more exciting things in the future, without needing to visit this primitive again in quite some time, while enjoying the exposure and big upside these assets offer.

Pros

  • Diversify the treasury with a very bleeding edge technology stack
  • Expose MTA to the OlympusDAO treasury for visibility & for taking them effectively out of circulation, thus benefitting MTA holders in a similar way that our Buyback & Make pool does
  • Open a lending side on Aave, which could become collateral for borrowing in the future (tho we would want a much more diversified allocation first once that happens)

Cons

  • It’s a controversial stack, and many battles have and will be fought over the usability of elastic finance
  • Very high volatility is to be expected when entering the rebasing territory

Next Steps

It is suggested that the community comment on this RFC in the coming days, and bearing no significant opposition or change in ideation, we would move ahead with this RFC in the coming weeks and create a formal draft proposal on Github to be used for review.

Meta Governors are encouraged to provide as much feedback as possible until then, so we can create the best possible outcome for mStable and its users.