TDP25 - Olympus Pro Treasury Diversification

Summary

The mStable treasury still mainly consists of MTA tokens, and after this successful internal motion, the TreasuryDAO would now like to diversify its treasury by leveraging the Olympus Pro platform in order to sell MTA bonds for Curve mUSD/3pool LP tokens deposited on Convex Finance (cvxmusd3CRV) on the open market.

Specification

This proposal suggests that the Asset Management subDAO allocates 1,000,000 MTA on Olympus Pro in order to sell MTA bonds for Curve mUSD/3pool LP tokens deposited on Convex Finance (cvxmusd3CRV).

These would subsequently be staked on Convex Finance, and accrued CRV rewards from these tokens would be converted into cvxCRV, whereas CVX would be directly staked on Convex Finance in order to be used to vote for the mUSD gauge on Curve in perpetuity.

As an additional change to MDP24, all accrued CVX and CRV rewards from the existing alUSD position would also be handled in the same fashion as described above in order to maximize gauge voting potential on Curve moving forward.

All liquidity rewards will be claimed, compounded, and locked on a regular basis at the discretion of the Asset Management subDAO, which will consider and weight operational costs against accumulated rewards in the contract to make an informed and economically sound decision on the correct timing of these operations.

Since a Gnosis Safe cannot directly participate in Snapshot votes, the resulting voting power from the above deployment would thus be delegated to the Cat Herder of the Asset Management subDAO in order to participate in the gauge votes, and would take a passive stance on all other proposals on the platform.

A successful passing of this proposal will allow the Asset Management subDAO to continue with this operation until the incentivization on Convex Finance ends, or a different proposal replaces the method of utilization of the tokens in question.

Rationale

This proposal aims to:

  1. Diversify the token allocation of the treasury to more stablecoins, and put liquidity into custody of the TreasuryDAO
  2. Create positive feedback effects from the revenue generated in order to constantly increase returns for all mStable Save users
  3. Create a symbiotic relationship with PDP33 to lock in and accumulate as much CRV and CVX tokens as possible to increase voting power for the mUSD gauge on Curve Finance during and after the execution of the bribe centric config
  4. Have a potential say on proposals & the decision-making processes in the suggested protocols by holding their native governance tokens custodied by the TreasuryDAO

Further discussion points

  • It should be noted that the Curve mUSD/3pool is subject to impermanent loss, and in case of a peg failure of any of the underlying 3pool tokens, a complete loss of value is possible
  • This proposed strategy is dependent on Olympus Pro, Convex Finance, as well as Curve Finance. Funds are exposed to multiple different smart contract platforms, and thus, risks
  • Curve mUSD/3pool tokens deposited on Convex aren’t the only option for diversification, as other tokens could also be used for this purpose (like imUSD), and it is encouraged to brainstorm different avenues and their pros & cons here
  • The above is simply a suggestion in terms of pools, amounts, as well as a proposed strategy. Meta Governors are encouraged to provide their own input to help the DAO come to the best possible outcome for the protocol. This does not constitute a commitment to the actions outlined above.

Next Steps

Pending no significant objections or changes to its content, this proposal will be taken to a public Snapshot vote on the 25th of October 2021 and will remain open for 5 days to give adequate time for a concurrent discussion here on the forum.

Given the time sensitivity of the matter, the TreasuryDAO has opted to give less time for discussions in favour of a more agile Snapshot deployment this coming Monday, and the DAO hopes that Meta Governors concur with this decision.

We look forward to hearing what MTA token holders have to say and seeing how they cast their votes.

5 Likes

I think the snapshot should be postponed a bit further into early November. Or at least to start in a week time, 29th.

Besides this, I like idea of diversifying the Treasury funds.

When we allocate 1m MTA and the prices fluctuates, do we adjust? or is it a one time only?

1 Like

I’m very much in favor of adding this (from the DAO-side of the equation), where we increase mUSD minting and gain non-MTA treasury assets. Due to the current tokenomics around MTA though, I’ll be pleasantly surprised if there is a lot of uptake on it.

Down the line, I would really like to see pool emissions reduced as much as possible and mStable move to a bonding model for a majority of MTA issuance.

2 Likes

I am in full support of transitioning to a bonding mechanism for MTA distribution.

Down the road, further diversification of the treasury should be explored via:

  1. Treasury swaps with other DAOs
  2. Avoidance of USDT and other inherently centralized assets whose final settlements occur in meatspace (off-chain). Maybe coming up with a certain maximum weight for that sort of asset, and weights for other assets too.
  3. Focus on assets that bring intrinsic yield-bearing qualities as a way to minimize the number of transactions the Treasury wallet has to perform. Examples, COMP cTokens, Aave aTokens, imUSD. Though, depending on how aggressive we want our treasury to be, there do exist platforms such as mai.finance on Polygon that offer Qi tokens in exchange for staking auto-compounding aTokens, further growing yield (but more smart contract risk due to layering.)
1 Like

I reckon this would be very beneficial to mStable.
Perfect example of a project doing a similar thing with Olympus Pro is Pendle.

1 Like

Thanks for the feedback everyone!

@juan understood, and the reason for the fast acting is mainly around the time-sensitivity of the matter due to deployment timeframes & incentivization of the momentum currently existing on Convex.

Regarding the allocation of MTA, I believe it is all handled by Olympus Pro and dynamic, but don’t quote me on this please :sweat_smile:

As @trustindistrust has noted already, this might not immediately create a massive uptake, but definitely would love for users to have an easy exit strategy back into a more native asset when the time comes to exit for them, and personally, I’d definitely take that option.

Great point as well regarding bonds over pool rewards, and the strategies for other bond issuances down the line. As far as I understood the program from Olympus Pro, we can potentially add more assets to issue bonds against, so please continue to provide feedback, even after this first run has ended :ok_hand:

If more members think we should give this more room for discussion, please let us know today, as otherwise we would move this forward to Snapshot as described above, due to the otherwise very positive sentiment so far.

1 Like

I like this proposal a lot, this is a much more sensible usage of the Treasury and it could have potentially long-lasting benefits for the protocol. I understand that we are currently at an opportune moment, aligning this Diversification with the launch of the bribe config set and increase in TVL.

@juan What open questions do you have that you think needs discussing?

Regarding price, I think it is dynamically allocated. Demand pushes the price up, but if demand is lower it will lower the price gradually until there is another buy order. I think that is how Olympus works.

1 Like

I see, understood.
I’ll get myself more informed about Olympus. Thanks for the info!

2 Likes

I’ve voted in favour of this proposal. Boolish.

1 Like

Voted in favour of this :fire:

1 Like

Great Choice of POL (Protocol Owned Liquidity) mUSD/Curv3. Provide MTA incentives to reward the pool and earn cvxCRV until so much cvxCRV is owned that bribes are no longer needed / are substantially less needed. If the bribe domain does heat up (and it makes it harder to bribe), this would just increase value the cvxCRV earned by the treasury. This could potentially offset increased costs in MTA bribes but at minimum would increase the wealth and diversity of the treasury.

2 Likes

Thanks everyone for your vote! :ballot_box:

This proposal has resolved almost unanimously in favor, and once the deployment on the side of Olympus Pro is ready, we’ll get this show on the road!

1 Like

The Bond program is now live on Olympus Pro! :partying_face:

2 Likes