✖️[RFC] Utilize Solv Finance for Community & Long-term MTA Bonds

Summary

In order to continue with the treasury fundraising for 2022, this RFC would like to gather feedback surrounding the utilization of Solv Protocol in order to create a MTA Bond market on their platform, which offers more flexibility for long-term bonds than our current endeavour with Olympus Pro does.

This is due to their permissionless creation of different types of bonds, as well as varying durations and additional features. We would like to initially earmark 400k MTA for their upcoming Convertible Vouchers product and observe the results.

Furthermore, we’d like to earmark at least 100k additional MTA for a special Metanaut Bond Program that is to launch in tandem with the above, and sell MTA Vesting Vouchers at a heavily discounted rate to existing Metanauts (thinking around a 50% discount for these) in return for a longer vesting period as a thank you for loyalty and support throughout the last year. These vouchers would be made available with the announcement of mStable v2.

Abstract

Solv Protocol is a project that issues financial NFTs in form of Vesting Vouchers, which can be loosely compared to Olympus Pro Bonds, but with some added flexibility. They recently announced to us their intent to release a Convertible Voucher product as well, and the TreasuryDAO believes that this product strikes a solid balance of risk vs reward for both the bond issuer and the bond buyer, and we would therefore like to continue the remainder of our ongoing funding with Solv Protocol in order to hedge risk and protect the MTA token from immediate sell-offs and reward long-term believers in the project.

Another benefit of issuing bonds with Solv is that their nature is that of an NFT, which means that it can be easily sold and traded on their native marketplace and offers additional functionality like transferring, splitting, and merging (see this screenshot).

More information around Solv Finance can be found here, and as their Convertible Vouchers product is not yet live, the closest equivalent is the UMA Range Token that was released a few months ago.

Motivation

The mStable Treasury currently has not yet achieved enough runway to fund core contributors and protocol expenses on their own, and additional means to raise capital are required to ensure smooth sailing for the upcoming year.

With this raise we wish to fund the operations for mStable for the upcoming round this summer, as well as earmark a small portion of the sale to promising ways of creating a redundant stream of funding for the long-term.

Since we do not wish to rely on fundraises forever, we need to think long-term and allocate a portion of the raise to strategies that will ensure that eventually we can divert more protocol fees to governors and can fund core operations out of the yield generated from the Asset Management subDAO.

Initial ideas for this are to allocate the earmarked amount to an Alchemix Vault once their v2 ships, hedging stablecoins in structured option protocols like Ribbon Finance to compound a portion of the raised amount, or simply open up a position in a lending market like Compound, Aave or Euler Finance to allow for small leverage to be driving the treasury growth forward.

Pros

  • More flexible bond issuance
  • Different kinds of bonds to suit our needs
  • Bonds are issued as NFTs and can be treated as such
  • Long-term alignment to MTA price appreciation

Cons

  • Need to design the visuals around the bond
  • Might take longer to sell bonds due to finality of price at the issuance level
  • Low current price of the MTA token

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.

3 Likes

I am for this, as the USD raised from the bonds will come in handy for the Treasury DAO’s purposes down the line.

I am hugely in support of this.
Bonds will help us raise capital without exercising sell pressure on the asset This capital is of the highest importance as it can be then utilised to grow the treasury and give long term sustainability to the protocol and its contributors.
As well SOLV mechanics seems to be more flexible than Olympus ones.

Thanks for the good work @mZeroNine

I support this as well.

As @mZeroNine calls out, it’s important to use the funds for core operations but also keep some for the treasury to help bring it closer to becoming self sufficient (so it can fund core operations without need to sell MTA). As a concrete example, suppose the raise is $400k mUSD, I would recommend at least 25% to be kept aside for the asset management subDAO and 75% flow through to fund core operations.

With Olympus Pro, the Olympus team does do some co-marketing / AMA for their community to know more about each project. If using Solv Finance, beyond designing the visualization of the bond, mStable may need to do more heavy lifting with marketing, though if I had to guess, I bet that most people that bought the mStable bond on OP knew mStable from before. If this assumption is true, that suggests that mStable-led marketing/announcement efforts will yield favorable results in terms of getting the word out to the community and strategic partners.

Is there a proposal for how long the Convertible voucher vesting period will be?
Could you comment further about finality of price at issuance level? What is the specific restriction?

Thanks again @mZeroNine for all your efforts and great initiative

I am fully supportive of this. Interested to hear more thoughts on how these should be priced, what vesting period we might use and what upper and lower bounds on MTA price might be used for convertible bonds. If I understand the product correctly, the number of bonds that could be sold within the 400k MTA allocation would be limited by the lower price limit for MTA. In in a scenario where the MTA price depreciated, this would dictate the maximum MTA to be issued to bond holders. This would mean less raised in the short term, but more of the MTA back to the treasury long term if MTA price increases, right?

2 Likes

Thanks everyone for the great feedback around this RFC. I’ll take this forward and schedule a meeting with Solv next week to think around some numbers regarding these bonds and then get back to you all with some examples and figures before moving this towards a TDP! :sunglasses:

1 Like